The commercial banks in the country have sought a clear directive from the central bank about settlement of payments against the 'inland bill purchase' (IBP) following the much-talked-about Hall-Mark loan scam involving a state-run bank.

Although the Bangladesh Bank (BB) verbally instructed the banks Monday to settle overdue payments against inland bills, some banks were not convinced.

"If the BB takes a step for settlement of all 'overdue' payments against inland bills, the confidence gap between the businesses and the bankers will be bridged promptly," a senior banker said.

The total number of overdue accepted bills in the banking sector stood at about 7,260 involving around US$ 363 million as of June 30 last. The large volume of unsettled bills needs to be settled urgently through direct intervention of the BB to restore confidence in the banking sector.

"The BB asked the banks verbally Monday to settle payments against inland bills without further delay. But it may not be effective if they do not take actions directly," a senior official of a leading commercial bank told the FE Monday.

Until settlement of those overdue bills, most banks might not be interested in accepting or buying fresh 'inland bills' from traders, he said.

He also pointed out that the BB should come forward with a comprehensive guideline to deal with the 'inland bills' for purchase or providing 'acceptance' against L/Cs (letters of credit) opened by the businesses in the country.

Bankers said in the absence of comprehensive guidelines on the 'inland bills' the bankers, especially the new generation ones, were getting confused about how to deal with such bills, as the business turnover is gradually increasing in the country.

The BB recently issued a circular giving a couple of instructions for the banks to follow while purchasing inland bills.

But they were not enough in the context of the prevailing situation, the bankers said.

In the latest circular the BB said any branch manager must take permission from their head office before providing acceptance against inland bills.

The branch manager also needs to be sure that the goods were supplied to the exporter, before accepting or buying an inland bill.

This circular in some cases was helping the banks verify authenticity of the bills. But it was not assisting the banks in settling overdue payments against inland bills, bankers said.

The move also could not address the banks' reluctance to purchase or provide 'acceptance' against new 'inland bills,' as the Hall-Mark Group and other five business entities swindled a large sum of money from the state-run Sonali Bank through fake bills and documents

Therefore, the supply chain, related with the country's ready-made garment industry, was highly disrupted over the last few days due to the banks' unwillingness to accept or buy such 'inland bills' from concerned traders.

While talking to the FE Monday, Bangladesh Krishi Bank (BKB) Chairman Khondokar Ibrahim Khaled told the FE: "The BB should come forward to negotiate the existing problem in relation to the payments against 'inland bills' for the sake of the country's economic benefit. It needs strong intervention in the banking sector to solve the problem."

The Managing Director and CEO of the state-run Agrani Bank Limited, Sayed Abdul Hamid, said the BB also should take a step to change the definition of 'Deemed Export' to solve the problem urgently.

"Perhaps, after the Hall-Mark loan scam, the time has come to change the definition of 'Deemed Export' for the sake of confidence-building between the bankers and the traders," Mr Hamid said.

As per the existing definition, the 'Deemed Export' refers to the transactions in which the goods supplied have not left the country and the payment for such supplies is received in local currencies, and in the case of Bangladesh it is taka.

The business confidence, especially in dealing with 'inland bills' among the bankers and the traders could be restored if the definition was changed, the Agrani Bank MD noted further.

News: The Daily Financial Express/Bangladesh/17th-Oct-12