Bangladesh Bank toughens rules for luxury item import

Bangladesh Bank today instructed banks to take up to 75 percent of payments in advance from businesses during opening of letters of credit for import of luxury and non-essential goods.

On April 11, the banking regulator asked banks to impose a margin of at least 25 percent on the opening of LCs for non-essential consumer goods, but this failed to contain a rise in import payments.

Against the backdrop, the central bank today took tougher decision to contain imports by imposing high margin for LCs.

As per the BB notice issued today, banks will have to impose a margin of at least 75 percent on the opening of LCs for electronic goods such as air conditioners, refrigerators and washing machines.

The same margin has to be maintained for sedans and SUVs.

Importers have to keep a margin of 50 percent for LCs of non-essential items like clothes and other goods.

The central bank, however, did not impose any margin on essential commodities such as baby food, fuel oil, lifesaving drugs, and the products for the farm, export and local industrial sectors.

For these items, banks can maintain margins based on their relationship with the customers.

The country's foreign exchange market has remained volatile due to an incessant rise in import payments and declining inward remittances in recent months.

The country's import payments increased 44 percent year-on-year to $61.5 billion in the first nine months of the current fiscal year. Exports grew 33 percent to $36.6 billion during the period.

Against this backdrop, the trade deficit rocketed to an all-time high of $24.90 billion between July and March.