All overdue LCs to be cleared within six months: BB governor

Bangladesh will clear all overdue payments relating to letters of credit (LCs) within the next five to six months, Bangladesh Bank (BB) Governor Ahsan H Mansur has assured correspondent banks.

The central bank governor made the commitment during a virtual meeting between the Bangladesh Bank and the correspondent banks on Tuesday.

A correspondent bank is a third-party financial institution that acts as the intermediary between domestic and international banks during foreign trade.

Bangladesh's state-run and private commercial banks have hefty overdue payments against LCs, which must be paid to correspondent banks.

After the meeting, Husne Ara Shikha, executive director and spokesperson of the central bank, told journalists that correspondent banks wanted to know how state-run banks and the government would cover the overdue payments.

Bangladesh had already cleared dues equivalent to $800 million to the correspondent banks, she quoted Mansur as saying in response to the query.

"Now Bangladesh Bank is collecting foreign currencies from the interbank market and providing it to state-run banks. Those state-run banks are then clearing LC payments for priority sectors like power, energy and fertiliser," Shikha said.

Bangladesh had not defaulted on any payments in the past and would not default in the future, she quoted Mansur as saying.

Although Shikha did not provide any data on the volume of overdue payments against LCs, BB officials said it was likely to be around $12 billion or $13 billion.

Bangladesh Bank data showed that Bangladesh Petroleum Corporation had the highest amount of overdue payment relating to LCs.