Bangladesh Bank has issued a circular allowing import transactions to proceed without Letters of Credit (LCs) under purchase and sales contracts. This is permitted, provided the transactions comply with applicable regulations and do not impose payment obligations on banks unless separately contracted, the central bank said in a press statement.
The move is part of a broader effort to expand alternative trade finance mechanisms and reduce reliance on traditional LC arrangements.
Under the new framework, authorised dealer banks can facilitate a wider range of trade finance instruments, including advance payments, open account exports, and documentary collection methods such as Documents against Payment (DP) and Documents against Acceptance (DA). The circular also promotes structured supply chain finance solutions, including reverse factoring, which enables suppliers to receive early payments against invoices approved by creditworthy buyers, improving cash flow across the supply chain.
Bangladesh Bank has encouraged the adoption of digital trade documentation systems, allowing electronic invoices and transport records to be accepted subject to verification, legal validity, and risk assessment. Business insiders said the circular is expected to enhance efficiency in trade financing, improve liquidity for exporters and importers, and strengthen Bangladesh’s integration into the global trading system while maintaining regulatory safeguards.
