Cancellations of the import-related letters of credit increased by 16.90 per cent in the first half of the current fiscal year because of disagreement between importers and exporters and dull business situation in the country amid political unrest in the period, Bangladesh Bank officials said. The BB data released recently showed that LC cancellations rose by 16.90 per cent in July-December of the FY 2013-14 compared with that of a negative growth of 30.05 per cent in the corresponding period of the FY 2012-13.
LCs for import of items worth $728.71 million were cancelled in the first six months of the FY14 while the figure was $623.34 million in the same period of the FY13. LCs for import of items worth $891.21 million were cancelled in the first half of the FY12.
A BB official told New Age on Thursday that earnings of the scheduled banks from LCs would shrink due mainly to cancellations of import orders.
‘The banks usually get a robust service charge against the LCs if the import orders are not cancelled by importers and exporters. So, banks’ profit from the area will decline due to the cancellations in the first half of this fiscal year,’ he said.
LC cancellations occur due mainly to faulty agreements and loopholes in conditions agreed upon by the buyers and the sellers, the official said.
He said a number of LCs against various items was also cancelled in the first six months of the FY14 because of the political violence.
Some businesspeople cancelled their import orders amid dull business situation in the country due to the political unrest, he said.
The BB data showed that cancellations of LCs for petroleum and petroleum products increased to $94.32 million in the first six months of the FY14 from $18.03 million in the corresponding period of the FY13, that of LCs for the pharmaceutical raw materials to $9.62 million from $3.06 million, that of LCs for chemical fertiliser to $56.80 million from $51.51 million, that of LCs for scrapped vessels to $29.43 million from $14.08 million, that of LCs for fabrics to $12.02 million from $5.13 million.
The rate of LC cancellations will increase in the coming months if the businesspeople do not get an investment-friendly business situation, said another BB official.
He said that 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 LC cancellations had declined by 46.86 per cent in the FY13 compared with that of an increase of 35.95 per cent in the FY12.
LCs for import of items worth $1.35 billion were cancelled in the FY13 against $2.55 billion in the FY12. The figure was $1.88 billion in the FY11.
-With New Age input
