With Bangladeshi banks increasingly not appraising LCs or letters of credit properly, Indian exporters fear that the money owed against their invoices will either arrive late or not at all. Due to this, significant decline in Indian exports to Bangladesh is observed. This information is known from the report of Indian media The Hindu Businessline.
Federation of Indian Export Organization regional chairman Yogesh Gupta told BusinessLine, 'India's exports to Bangladesh have been seriously affected. Because the guarantee of payment is very low. Exporters cannot be sure that Bangladeshi banks will evaluate the LC on time.
Yogesh further said, 'If the trade is not paid, the Reserve Bank of India takes the matter seriously and the provisions of the Foreign Exchange Management Act or FEMA come into play. So Indian exporters are not interested in sending consignments. A general fear is operating that the money will not come in time.'
The current political turmoil in Bangladesh has exacerbated the vulnerability of the country's banking sector. World famous rating agency Moody's recently revised the ratings of six Bangladeshi banks. This is mainly due to the recent downgrade of Bangladesh's sovereign rating. Moody's has cut Bangladesh's rating amid fears of rising political risks and low growth in the South Asian country.
The issue of reducing the rating. The interim government led by Muhammad Yunus further accentuated the economic challenges. Deterioration in India-Bangladesh relations and escalation of tensions may take a major hit in border trade within a month.
Petrapol Clearing Agents Staff Welfare Association General Secretary Karthik Chakraborty said, 'Border trade is still going on through the Petrapol-Benapole route. But it is likely to decrease. Banks in India and Bangladesh are issuing fewer letters of credit to traders. Indian exporters are reluctant to send consignments despite orders, as they are apprehensive about payment.' He said, 'If the tension is not quickly defused, there will be a huge impact on border trade within a month.'
