NBR against back-to-back LCs for firms without bonded warehouse.
The National Board of Revenue has requested the Bangladesh Bank to order banks to refrain from opening back-to-back letters of credit for factories that do not have bonded warehouse licences.The move has stoked concerns of increased working capital cost among 500 export-oriented factories. Still, NBR officials say the agency is open to granting the licence to factories so that they enjoy the benefit while buying raw materials for exports from both domestic and international markets.
As per rule, an export-oriented factory with the bonded warehouse licence is entitled to open back-to-back LCs — a financing facility that is extended by a bank to enable an exporter to purchase raw materials against an export LC and enjoy the zero-duty benefit.On the other hand, a firm without a bonded warehouse licence does not have permission to get the back-to-back LC facility.
A BB official said the central bank was working on the issue following the letter from the NBR.
Firms without the back-to-back LC facility have to pay an LC margin while opening it, which will raise the cost of working capital for businesses.
Source: The daily star, details: https://www.thedailystar.net/business/economy/news/nbr-against-back-back-lcs-firms-without-bonded-warehouse-2173911
Bangladesh exports $1.94 billion more in RMG products than Vietnam.
Bangladesh exported knit and woven products worth $18.80 billion in total in the first seven months of the current year. Bangladesh earned $1.94 billion more in apparel exports than Vietnam in the first seven months of the current year. Bangladesh exported knit and woven products worth $18.80 billion during the period against the textiles and garments worth $16.86 billion exported by Vietnam, according to the official data released by the two countries. Both countries, however, witnessed a negative growth during this seven-month period with 7.66% and 7.30% negative growth respectively recorded in Bangladesh and Vietnam.
Expert said that by the end of 2021 we can confidently say that Bangladesh will be the second largest garment exporting country. they also pointed out that the Vietnamese government aggregated their textile export with garment while publishing the data.In recent times, Vietnam has given Bangladesh tough competition in the RMG market.According to the World Trade Statistical Review 2021, Vietnam knocked Bangladesh out of its second position earlier this year.
Source: The Business standard. Detail: https://www.tbsnews.net/economy/rmg/bangladesh-exports-194-billion-more-rmg-products-vietnam-301015
Rate cap keeps private credit growth down: Bankers.
The credit growth started to dip after the lending rate had been capped at 9% from 1 April last year:
- Achieving credit growth ceiling will be challenging in the current fiscal year: Ali Reza Iftekhar, chairman of ABB
- Credit growth slowed down because of the same pricing for all kinds of loans: MashrurArefin, managing director of City Bank
- Credit guarantee scheme for SMEs is inoperative: BRAC Bank Managing Director and CEO Selim RF Hussain
- Relief from provisioning of the guaranteed part can make credit guarantee scheme operational: Standard Chartered Bangladesh’s CEO NaserEzazBijoy
- Action should be taken against willful defaulters: MdJashim Uddin, president of FBCCI
Even at a time when banks are sitting on a pile of surplus liquidity with low interest loans, private sector credit growth has remained sluggish owing to the lending rate cap, raising concern over achieving expected economic growth, said bankers at an event on Thursday. High default loans are killing the banking industry as well as businesses, they said while exchanging views with leaders of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) at a city hotel.
Private sector credit growth remained low at 7% to 8% because of the lending rate cap, said Iftekhar.
It will be challenging for banks to achieve the monetary target of 14.8% set for the current fiscal year. The economy cannot grow much with this low level of credit growth, he added.Private sector credit grew 8.38% in July, a slight increase from 8.35% in the previous month.The credit growth was 8.40% in the last fiscal year against the monetary target of 14.8% when the lending rate was 6% to 7%, the lowest in recent history.The credit growth started to dip after the lending rate had been capped at 9% from 1 April last year.
Emphasizing taking actions against willful defaulters, President of FBCCI called upon bankers to support businesses that defaulted on loans for genuine reasons.”We cannot let many businesses suffer for some willful defaulters,” the FBCCI president said.He urged bankers to speed up loan disbursements for the SME sector as it accounts for a major share of revenue for banks.
Source: The Business standard, details: https://www.tbsnews.net/economy/banking/rate-cap-keeps-private-credit-growth-down-bankers-300421