The rate of cancellations of import-related letters of credit increased in the first two months of the current financial year because of disagreement between importers and exporters and the country’s dull business situation amid political unrest, Bangladesh Bank officials said.
BB data released recently showed that the rate of LC cancellations increased by 12.60 per cent in July-August of the FY14 from that of the same period of the FY13.
The LCs for import of items worth $231.77 million was cancelled in the first two months of the FY14 from $205.86 million during the same period of the FY13.
A BB official told New Age last week that profit earning of the scheduled banks from LCs would shrink due mainly to scrapping of the import orders.
‘The banks usually get a robust service charge against the LCs if the import orders were not cancelled by importers and exporters. For this reason, the banks’ profit from the area will decline’, he said.
LC cancellations occur due mainly to faulty agreements and loopholes in conditions agreed upon by the buyers and the sellers, he said.
A number of LCs against various items were also cancelled in the first two months of the FY14 because of the recent spates of the political violence, he said.
Some businesspeople have recently cancelled their import orders considering the dull business situation against the backdrop of the existing political unrest.
The BB data showed that the LC cancellations for textile fabrics and accessories for garment sector had increased to $22.87 million in the first two months of the FY14 from $15.44 million during the corresponding period of the FY13, that of the pharmaceutical raw materials to $1.31 million from $1.24 million, that of the pharmaceutical machineries to $1.13 million from $1 million, that of the thermoplastic moulding compound to $2.35 million from 0.28 million, that of the machineries for miscellaneous industries to $10.95 million from $10.45 million.
The rate of LC cancellations for petroleum products
also increased significantly as the products registered a cancellation figure of $89.66 million in the first two months of the FY14 against $9.84 million during the same period of the FY13.
The rate of LC cancellations will increase in the coming months if the existing political unrest persists, said another BB official.
He said that the rate of LC cancellations had significantly decreased in the last financial year than that of the FY12 due to a favourable business situation in the country.
The BB data showed that the rate of LC cancellations had declined by 46.86 per cent in the FY13 compared with that of an increased rate of 35.95 per cent in the FY12.
The LCs for import of items worth $1.35 billion was cancelled in the FY13 against $2.55 billion in the FY12. Such cancellations were worth $1.88 billion in the FY11.
-With New Age input
