Bangladesh Bank on Sunday issued a fresh directive mandating adherence to international rules and regulations for recording import-export transactions conducted under letter of credit (LC) and other sales contracts.
Specifically, the central bank has made it compulsory for banks to follow the 'Uniform Rules for Collections (URC)' when facilitating transactions via the documentary collection method.
The central bank issued a directive on Sunday (July 13) and sent it to the top executive of banks for immediate execution.
The circular specifies that commercial transactions can be conducted through three legitimate methods: advance payment, documentary collection, and open account.
However, it emphasizes the strict adherence to current import-export policies and foreign exchange management regulations in all these cases.
Previously, the Uniform Customs and Practice (UCP) for documentary credits had already been followed for LC-based transactions. With this directive, Bangladesh Bank has explicitly stated that URC must now be followed for alternative transaction methods as well, particularly for sales contract-based documentary collections, in addition to LCs.
Under the documentary collection method, the exporter's bank dispatches the necessary documents to the importer's bank. Subsequently, these documents are handed over to the importer in exchange for payment or a commitment to pay under predefined conditions.
In this process, banks act solely as intermediaries for document exchange and do not provide any financial guarantees. This international standard is commonly referred to as URC.
Bankers and stakeholders in the trade sector have welcomed Bangladesh Bank's new directive, deeming it timely and effective. They believe that making UCP mandatory for LC-based transactions and URC mandatory for contract-based transactions will enhance the transparency and specificity of transaction processes.
They also anticipate that this move will contribute significantly to improving payment security and efficiency in international trade.