Bangladesh Bank (BB) on Sunday asked banks to open letters of credit (LC) for importing essential commodities to ensure stable supply in Ramadan at a minimum margin. The banking regulation and policy department of the central bank issued a circular in this regard and sent it to the top executives of the scheduled banks with an immediate effect. The financial sector regulator has issued the directive to regulate price and ensure enough supply of essential commodities such as edible oil, chickpeas, pulses, peas, onions, spices, sugar and dates during Ramadan. Read more: Monetary policy twice a year: BB According to the directives, the rate of cash margin to be reserved for import letters of credit (LC) of products. They issued the directive after recent meetings with trade bodies and the Ministry of Commerce. The businesses leaders have demanded that authorities allow them to open LC easily. The Bangladesh Bank tightened the LC opening to check unnecessary imports amid the foreign exchange crisis in the domestic market. Besides, the central banks also looked into the LC prices of goods, and whether it is arriving in the country at a due time or not because Bangladesh Financial Intelligence Unit (BFIU) and the BB in an investigation found that some traders smuggled money in the name of imports. Read more: General inflation in Bangladesh slightly down to 8.85% in Nov In some cases, the traders raised the price of goods from 20 percent to 200 percent in January-June this year. As a result, the central bank imposed strict monitoring on the LCs to protect against over-invoicing and under-invoicing.

Bangladeshi businesses cannot use Indian rupee for foreign trade as Bangladesh Bank is yet to enlist the currency to settle letters of credit (LCs). BB spokesperson and executive director Md Serajul Islam told UNB that the central bank is yet enlisted Rupee for foreign trade. He said that Bangladesh Bank is reviewing currency diversification in foreign trade to reduce sole dependence on the US dollar. Read:“Use rupee, taka”: India asks exporters to refrain from trading in dollars with Bangladesh Before allowing any foreign currency for trading, the central bank has maintained an exchange stander, and stability in line with the IMF standard, he said. Businesses said if trade between Bangladesh and India happen in local currencies, pressure from falling US dollar reserves and associated ongoing forex market instability can be reduced. They said India is the second largest source of imports of raw materials and other goods for Bangladesh. Industrial raw materials, capital machinery, cotton, yarn, fabrics, and chemicals worth USD 16.19 billion were imported from India in the fiscal year 2021-22. Read:Bangladesh’s forex reserves now $36.90 billion At the same time, Bangladesh exported goods worth USD2 billion to the neighbouring country. On September 15, Bangladesh Bank allowed banks to open accounts in the Chinese currency yuan. IMF has recognized five countries’ currencies as “high-value”. The Chinese yuan was admitted to IMF’s high-value currency basket in 2016. Since then, the yuan has become stronger than ever as per a currency review by the IMF. Read Sri Lanka hopes to reach initial agreement with IMF for help