Banks invited to take out insurance for export financing

The Bangladesh Bank has advised banks to take out insurance against their financing to exporters.

Currently, banks can grant financing facilities to exporters against usance – the time allowed, allowed by custom, between the date of the invoice and its payment – ​​discount export invoices in foreign currency.

For comfort, the central bank, in a circular issued on Sunday, advised banks to protect their funding against the risk of default through insurance cover under a credit guarantee scheme available from credit companies. local insurance.

Banks will take cover with the consent of exporters, the circular says.

Coverage of default risk by appropriate insurance can also be adopted against funded or unfunded facilities for exporters at the pre-shipment stage, he added.

The circular warns the banks that the insurance cover will not give waiver to the realization of export earnings which must be repatriated within four months from the date of shipment in accordance with the requirements of the current foreign exchange regulations. .

According to business insiders, the insurance cover will help banks extend facilities to exporters smoothly since the insurance cover will protect banks’ funding.

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Justin D. O'Neill