Bangladesh Bank has taken initiative to settle the overdue inland bills against letters of credit by deducting fund from the indebted banks’ current accounts maintained with the central bank. The central bank’s direction came at an executive management team meeting held on December 7 with BB governor Atiur Rahman in the chair. BB deputy governors and senior executive directors attended the meeting.
A BB official told New Age on Sunday that the central bank had earlier taken a number of initiatives to settle the overdue inland bills but the attempts virtually failed.
Bills of acceptance for inland bills are used to settle exports and imports. An importing bank gives bill of acceptance to an exporting bank to ensure an import. After taking the bill of acceptance the exporting bank makes payment to client. But some banks in the country usually do not settle the bills of acceptance with creditor banks in due time.
The central bank earlier issued show-cause notice to a number of banks and imposed financial penalty on them as the banks did not settle the bills in due time, the BB official said.
But, the BB is yet to bring discipline in inland bills settlement in the banking sector as banks are still maintaining a large amount of overdue bills, he said.
For this reason, the BB has taken move to cut the overdue amount from the indebted banks’ current accounts to pay the creditor banks, he said.
According to the BB decision, creditor banks, however, will have to return the fund which will be deducted from the indebted banks’ current accounts if their (creditor banks’) inland bills become disputed.
The BB official said that the new decision would not be applicable for the Hallmark Group scam-related disputed inland bills as some creditor banks were also involved in the financial corruption.
The country’s banking sector faced a serious indiscipline situation in settling the inland and foreign bills after the Hallmark Group and Bismillah Group scams had been detected.
The mutual trust among banks also decreased after the financial scams and huge amount of funds of some banks are still pending due to the overdue acceptance bills.
At one stage in 2013, the overdue inland bills stood at around Tk 4,000 crore in the banking sector.
The BB official hoped that the discipline in the overdue bills in the country’s banking sector would return when the central bank would implement its new decision.
Eastern Bank managing director Ali Reza Iftekhar told New Age on Sunday that the central bank should have taken the initiative five years ago as the country’s banking sector had already faced different types of problem due to indiscipline in the overdue inland bills settlement.
He said, ‘Mutual trust among banks over the overdue inland bills is the backbone of the country’ banking sector as we make payment to clients after receiving acceptance bills from the indebted banks.’
But, the existing indiscipline in the area of the banking industry will damage the soundness of banks’ regular operation, said Iftekhar, also the chairman of the Association of Bankers, Bangladesh.
-With New Age input
