The Bangladesh Bank has asked scheduled banks to bring export financing to under insurance coverage to minimise default risk.
In a notice issued on Sunday, the central bank advised banks to safeguard their financing from default risk through under credit guarantee scheme from local insurance companies.
“Banks will take the coverage with consent from exporters,” as per the BB notice.
Currently, banks can extend financing facilities to exporters against usance export bills by discounting in foreign currency.
The BB said that the default risk coverage by appropriate insurance may also be adopted against funded or non-funded facilities to exporters at pre-shipment stage.
It also alerted banks that insurance coverage will not give waiver from realization of export proceeds, which need to be repatriated within four months from the date of shipment as per requirement of foreign exchange regulations in force.
Talking to The Business Post, a high official of a commercial bank welcomed the central bank initiative saying that the move will facilitate banks to extend facilities to exporters smoothly since insurance coverage will safeguard the financing.
