Bangladesh Bank Issues New Guidelines on Payments to Foreign Airlines and Shipping Companies
Bangladesh Bank has issued a fresh clarification on the issuance of bank guarantees, standby letters of credit (LCs) and other forms of payment commitments to ensure the settlement of dues owed to foreign airlines and shipping companies.
The central bank has clarified the rules for providing payment guarantees based on whether the foreign airlines and shipping companies have business operations in Bangladesh.
On Wednesday (November 11), the Foreign Exchange Policy Department-1 (FEPD-1) of Bangladesh Bank issued a circular in this regard. It instructed the head offices and principal offices of all authorised dealer (AD) banks across the country to circulate the directive.
According to the circular, under paragraph 8(5) of Part A of FEPD-1 Circular No. 32, issued on September 2, banks were allowed to issue bank guarantees, standby letters of credit or other forms of payment commitments on behalf of agent customers against outstanding amounts owed to foreign airlines and shipping companies.
The new directive states that this facility will apply only to customers acting as agents of foreign airlines or shipping companies that have no business operations in Bangladesh. The provision will be determined in accordance with Section 18B of the Foreign Exchange Regulation Act, 1947.
On the other hand, payment commitments for foreign airlines and shipping companies that have business operations in Bangladesh must be issued in favour of their local operations and denominated in Bangladeshi currency, or taka.
The clarification from Bangladesh Bank has made the rules clearer regarding the types of payment commitments that can be issued to ensure the settlement of dues owed to foreign airlines and shipping companies through their agents.
