New policy to reduce time, cost of export: BGME

BB eases rules for advance payment against imports

New policy to reduce time, cost of export: BGME 

Siddique Islam

The central bank has relaxed the foreign exchange regulations relating to advance payment against imports, particularly by exporters, officials said Monday.

Under the amended regulations, a local exporting firm will be allowed to send a maximum of US$ 10,000 instead of $5,000 without any bank guarantee against a bonafide business purpose using their own Exporter's Retention Quota (ERQ).

"We've relaxed such regulations aiming to facilitate business activities, particularly in foreign trade," a senior official of the Bangladesh Bank (BB) told the FE.

He also said that the central bank's latest move was to help the country's exporters to expedite their businesses.

The central bank issued a circular in this connection Monday and asked the commercial banks to follow the new instruction relating to advance payment against imports properly.

Exporters welcomed the BB's latest move, saying that such amendment would be able to bring a positive impact on the country's foreign trade particularly export.

"It's a good step of the BB that would facilitate the country's overall export performance," President of the Bangladesh Garment Manufactures and Exporters Association (BGMEA) Abdus Salam Murshedy told the FE.

The BGMEA chief also said the amended regulations will help to reduce both time and cost of export.

Currently, merchandise exporters are entitled to a foreign exchange retention quota of a certain portion of repatriated FOB (free on board) of their export.

Foreign exchange out of the retention quota may be maintained in foreign currency accounts with the concerned commercial banks in US dollar, Pound Sterling, Euro or Japanese Yen upon realisation of the export proceeds.

"Balance of these accounts may be used by the exporters for bonafide business purposes, such as business visits aboard, participation in export fairs and seminars, establishment and maintenance of office aboard, import of raw materials, machineries and spares without prior approval of the BB," the central bank said in its existing foreign transactions regulations.

Regarding advance payment against imports, the commercial banks concerned shall, on their own responsibility, have to arrange for repatriation of the remittance made in advance, in case the entry of goods into the country is not affected within the stipulated time, according to the foreign exchange transactions regulations.

While opening a back-to-back letter of credit (LC), the banks should adjust the value of advance payment to ensure the value addition requirement as stipulated in the import policy order (IPO) is not breached, it said, adding that before the advance payment, an authorised dealer (AD) bank must obtain a form of undertaking duly signed by the importer.

CONSTITUENTS OF CAPITAL OF PRIVATE BANKS OF BNGLADESH. TIER-1 & TIER- 2 CAPITAL

CORE CAPITAL (TIER-1)

A. Paid up Capital

B. Non-repayable Share premium account

C. Statutory Reserve

D. General Reserve

E. Retained Earnings

F. Minority interest in Subsidiaries

G. Non-Cumulative irredeemable Preference Shares.

H. Dividend Equalisation Account

SUPPLEMENTARY CAPITAL (TIER-2)

A. General Provision maintained against Unclassified loans

B. Assets Revaluation Reserves

C. All other Preference Shares

D. Perpetual Subordinated debt

E. Exchange Equalization Account

F. Revaluation reserves of HTM Securities (Upto 50% of the revaluation reserves)

Note 1: Core Capital must be equal to or more than  5% of the risk-weighted assets.

Note 2: Reserves created by periodic revaluation of banks' assets can be included as a

Component of Tier-2 capital only if the revaluation is formally conducted by

professionally qualified valuation firm. Such reserves will be eligible up to 50% for the

treatment as Supplementary Capital provided that the rationale of the re-valued amount is

duly certified by the external auditors of the bank. Such revaluation may be done once in

a year.

Reference: BRPD Circulars on Capital Adequacy.

Cpital Adequacy / Minimum Capital Requirement of a Bank

Capital Adequacy / Minimum Capital Requirements of Banks in Bangladesh

According to the BRPD circular no. 11/2008:

Minimum Paid up Capital and Reserve & Surplus of a bank must be Tk. 400 crore of which paid up capital must be at least Tk. 200 crore.

To raise Paid-up Capital and Reserve Fund, as mentioned in the notification, banks shall

have to follow instructions as stated below:

(i) Banks shall have to fulfill the required Paid-up Capital and Reserve Fund of Taka 400 crore

within 3 years from the notification date i.e. within 11 August 2011 and the paid-up capital

will be not less than Taka 200 crore. .

(ii) To maintain required capital Banks may raise the Reserve by keeping profit after tax by

issuing right shares or IPO, if applicable.

(iii) Any Bank having shortfall of required capital and reserve will not pay or declare cash

dividend.

(iv) Foreign Banks will have to meet the capital shortfall by not repatriating the profit or by

bringing in additional/Capital from abroad within the stipulated.

(v) In terms raising the capital, bank-company shall take necessary measures to amend their

Memorandum and Articles of Association.

(vi) Feasibility of merging with other banks and financial institutions may be considered to

ensure the required capital and reserve within stipulated time limit.

Minimum Capital of bank as % of Risk-Weighted Assets:

Accoording to BRPD Master Circular No. 05/2007 on may 14, 2007.

With a view to strengthening the capital base of banks and make them prepare for the implementation of Basel II Accord, it has been decided that henceforth banks will be required to maintain Capital to Risk-Weighted Assets Ratio 10% at the minimum with core capital not less than 5%. This requirement will have to be achieved by December 31, 2007.