Bangladesh Bank (BB) has relaxed the cash margin requirement for opening letters of credit (LCs) for fruit imports. This change replaces the existing 100 percent cash margin requirement with a margin to be determined by banks based on their relationship with customers. The central bank issued the instruction in a circular aimed at facilitating fruit imports, ensuring adequate supply at affordable prices, and creating a competitive market, while also considering public health and nutritional needs.
Previously, a 100 percent cash margin requirement for opening import LCs for certain luxury goods and import-substitute products was introduced against the backdrop of global economic instability to strengthen the country's currency and credit management. Fruits were included among those products subject to the mandatory 100 percent cash margin. However, considering the improving stability in the country's foreign exchange rate and transactions, the necessity of maintaining a 100 percent margin for opening LCs for fruit imports has declined.
The central bank noted that fruits are an essential nutritious food item, particularly in the daily diets of children, patients, elderly people, and pregnant women. Hence, the new directive instructs banks to determine the required cash margin for fruit import LCs on the basis of the banker-customer relationship instead of imposing a fixed 100 percent margin. All other instructions issued through earlier circulars on the matter will remain unchanged.
This policy shift is expected to have several positive impacts. By allowing banks to set margins based on their assessment of the customer's reliability and relationship, the process becomes more flexible. This flexibility is likely to encourage more importers to bring in fruits, thereby increasing the availability and potentially lowering prices for consumers. Moreover, a competitive market for fruit imports can lead to better quality products reaching the Bangladeshi market.
The directive was issued under the powers vested in Bangladesh Bank by Section 29 of the Bank Company Act, 1991, and took effect immediately. This move underscores the central bank's commitment to balancing economic stability with the nutritional and health needs of the population. As fruits play a crucial role in a balanced diet, ensuring their consistent availability at affordable prices is vital for public health.
