The central bank is concerned over commercial banks' reluctance to pay $161 million in due bills in inter-bank transactions for both domestic and foreign trade.
Bangladesh Bank (BB) conveyed its concern to the chief executives of the banks at a meeting on Sunday, as the issue might scar the country's image internationally.
According to statistics, BB found 3,457 such unpaid bills worth $161.26 million as of December 2009, of which $142.87 millions is involved with domestic transactions and $14.11 million in international trade. Nearly $5 million remains stuck in pending court cases.
“Commercial banks have shown several reasons that seem unacceptable,” said a senior BB official. Failure to pay the money is a complete violation of guidelines, he said.
After settling back-to-back LCs (letter of credit) against exports, the commercial banks have to settle inter-bank payment in line with the guidelines for foreign exchange transactions set by BB.
Generally, four parties -- the exporter, LC issuing bank, importer and beneficiary bank -- are involved in both national and international trade through banks. When an exporter opens an LC in a bank, the bank is called the LC issuing bank, while the importer's bank is called beneficiary bank.
In most cases, commercial banks are used to showing legal restrictions for not paying due bills to the beneficiary banks. LC issuing banks traditionally think that if they pay money against the bills, it may create forced loans.
Sometimes, if importers receive substandard products, they also request the banks not to settle the bills.
However, the central bank is not ready to accept these reasons. In a report, BB clarified that the reasons do not match the laws and the deals between the banks and traders.
Against back-to-back import, LCs should be settled at maturity even if the export did not take place, said the central bank report.
It also said inter-bank payment must be settled, even if the export proceeds were not realised or the value addition requirements were not met to cover the back to back import payment.
Referring to a court order against a case in 2003, the BB report says: "It is now the settled principle of law that no court can pass any restraining order on any issuing bank from making payment under letter of credit."
The BB report said court orders do not restrict the payment against LC. The report said as per law, banks have no bar to settle the LCs as the deal between the beneficiary banks and exporters is completely independent.
If the banks have valid documents, LC issuing banks must pay money against bills in time to the negotiating banks.