L/c Material Risk Reminder Update: Bangladesh Padma Bank On Default Blacklist!

- Mar 14, 2019-

Recently, Bangladesh's central Bank has approved The former Farmers Bank Limited to be renamed Padma Bank.

The bank was founded in 2013 and has been plagued by irregularities and loan fraud since.Especially since last year, the bank has witnessed frequent vicious events of l/c default, causing huge losses to Chinese enterprises in Bangladesh's international trade.The bank has been blacklisted by the economic and commercial counselor's office of the Chinese embassy in Bangladesh.But the bank has rebranded itself with the intention of refusing to pay all previously defaulted letters of credit and continuing to do business with Chinese companies.

The economic and commercial counselor's office of the Chinese embassy in Bangladesh once again solemnly reminded all Chinese enterprises to strengthen risk prevention and control and avoid accepting the letter of credit issued by Padma Bank in their trade with Bangladesh to eliminate trade risks.

According to the foreign exchange control regulations of Bangladesh, except in special cases, the external payment of import and export must generally adopt the method of bank letter of credit.

However, the l/c issued by the bank of Bangladesh should be carefully considered.There are two kinds of letters of credit in the world, one is letter of credit, the other is letter of credit in Bangladesh.

Due to Bangladesh commercial bank's credit is generally poor, many irregularities of the issuing bank, in the company of Bangladesh export business in China, often encountered in without l/c discrepancies of d/p at sight, delay the payment time, or in the case of the customer did not go through the formalities of payment down, customer pick up the goods or to lodge a claim on quality exporters, after watching the goods prices forced to exporters, lead to economic losses.This mainly happens in the export of fruits and vegetables (ginger, apples), chemical raw materials and textile raw materials.

The main problems encountered by l/c in Bangladesh are:

1. After the importer takes delivery of the goods, the bank delays the payment time without any reason, even if the negotiating bank urges it repeatedly.

The bank does not make the payment immediately after releasing the documents to the importer. It allows the importer to lodge a claim on the exporter for alleged quality after taking delivery of the goods, forcing the exporter to reduce the discount. Then the negotiating bank instructs the issuing bank to deduct the discount from the payment.

3. After the importer takes delivery of the goods, he appeals to the local court about the quality of the goods, and the court informs the bank to stop the payment, and the bank cannot make the payment during the court hearing, thus delaying the payment time.

4. The bank still does not pay for the goods after the customer accepts the delivery of the goods with discrepancies.

If there are discrepancies in the documents, then the market price falls, and some customers return the documents or refuse to pay, or take the opportunity to lodge a high claim against the exporter, forcing the exporter to reduce the price, thus suffering great economic losses.The handling of the goods is very difficult after the bank returns the order.The return and resale of goods can only be handled with the consent of the original customer, and the procedures are complicated. Generally, the customer will not take a cooperative attitude, so the return of goods is rare. Even if the goods are returned, the loss will be very serious.According to bangladeshi customs regulations, if the goods remain in the port for more than 3 months (45 days for fruits and vegetables) without customs clearance, the goods will be auctioned by the customs and the auction proceeds will be turned over to the state Treasury.

Bangladesh's better credit Banks are:

1. Primer Bank Ltd 

2. Prime Bank Limited 

3. One Bank Limited 

4. Export Import Bank of Bangladesh Limited (EXIM BANK) 

Bangladesh's less creditworthy Banks are:

1. Islami Bank Bangladesh Limited 

2. Social Investment Bank Limited

3. Mutual Trust Bank Ltd. 

4. National Bank Limited 

5. Sonali Bank 

6. Janata Bank 

7. Basic Bank

8. Mercantile Bank Ltd.

9. Uttara Bank Ltd. 

10. The Farmers Bank Limited更名(Padma Bank)