Commercial banks transacting foreign trade without credit reports: Study

FT ONLINE

Many commercial banks of the country are making transactions in foreign trade without obtaining proper credit reports which is resulting in fraudulence and malpractices, said a study.

The study, conducted by Bangladesh Institute of Bank Management (BIBM), also showed that banks have made transactions even after getting adverse credit report such as poor rating, inconsistent line of business and absence of location of the business houses.

A team of the BIBM, led by it Professor Dr Shah Md. Ahsan Habib, made the survey titled “Practices of obtaining credit report of foreign counterparts in trade services—Is it working?”.

The report was unveiled on Monday at BIBM office at Mirpur in the city with its Director General Dr Toufic Ahmed Choudhury in the chair.

Dr Habib in their survey report said some Tk 6.0 billion worth of products of some 26 Bangladeshi exporters faced fraudulence by a non-existent UK company.

“When two buyers placed orders to the Bangladeshi producers, they approached banks for opening back-to-back Letter of Credits (LoCs) in China.  After searching the credit reports, it was found–‘unable to locate the buyer’ and also found—‘high risk to failure in payment’.”

“With those reports, some banks were unwilling to open the LoCs. However, some had opened LoCs based-on the local exporters’ credibility. After final shipment to UK by the 26 Bangladeshi companies, no payments were received”, continued the survey.

The BIBM survey also showed that some commercial banks were forced to open LoCs before obtaining the credit report of the counterpart importer or exporters which affected the payment thereafter.