The Bangladesh Bank instructed banks to further clear overdue letters of credit (LC) payments, as this type of non-payment tarnishes the image of the country's banking system, increases the cost of foreign trade, and disrupts the trade environment.

After issuing similar directives a couple of times over the past five months, the central bank reiterated the order to all banks in a circular issued yesterday.

Overdue LC payments, which were hovering above $445 million in November last year, came down to $242 million as of January 31, according to central bank data.

"If the bill against imports is not paid in a timely manner, it tarnishes the image of the country's banking system, increases the cost of foreign trade, and disrupts a favourable trade environment," the central bank said.

As such, banks have been ordered to take several measures to ensure prompt payment of overdue bills.

One of the measures is to draft a comprehensive action plan for overdue accepted bills (foreign or local) after detailed review and analysis, considering factors such as litigation status and realisation clause.

Additionally, performance evaluations must be conducted on a branch-wise basis, where applicable, and special monitoring measures should be introduced in branches with a high volume of overdue unpaid accepted bills (foreign or local).

If any bill under litigation is not payable, the supplier's bank must be informed accordingly, the central bank said.

When submitting the monthly report on overdue accepted bills, the information must be verified through the Online Import Monitoring System before submission.

All submitted bills, discrepancies (if any), and payment information at the authorised dealer branch must be preserved and sent to the relevant department at the head office on a monthly basis.

This directive will be effective immediately, the BB added.