LC opening
   
The procedure for opening L/Cs under Aid/Loan/Grant/Credit etc. is almost same as opening of L/C under cash source. Only the reimbursement procedures of some L/Cs are different and some additional clauses are incorporated in the L/Cs as per provision of agreement/E.Ex. circular.

We describe below some of the reimbursement procedures of L/Cs opened under Aid/Loan/Grant/Credit etc.

Reimbursement Procedure:
This is same as the reimbursement procedure of L/C opened under cash. On negotiation of documents, strictly as per terms of L/C, negotiating bank reimburses by debiting nostro account of the designated bank. Some additional documents along with the shipping documents are to be forward to the designated bank as per terms of the L/C (Some times additional documents are forwarded to Bangladesh Bank/donor agency). Designated bank sends these documents to Bangladesh Bank for getting reimbursement from the donor agency/country.

Commitment Procedure:
In commitment procedure, fund of designated bank is not involved in the transaction. Supplier of goods/services gets payment directly from donor agency/country under the L/C against their commitment to reimburse. Initially L/Cs are opened in inoperative manner, which become operative on receipt of Commitment to Reimburse from the donor agency/country. After opening L/C, designated bank / Bangladesh Bank along with required document requests donor agency/country to issue commitment to reimburse against the L/C. On negotiation of documents complying L/C terms, supplier gets payment directly from the donor agency/country  through negotiation bank against their commitment to Reimburse by submitting specified documents. This commitment is termed differently in different Aid/Loan/Grant/Credit etc. Under IDA Credit it is known as QAR (Qualified Agreement to Reimburse), in Kuwait Investment it is known as QC (Qualified commitment) and son on.
In commitment procedure, two types of L/Cs are opened. One is under project assistance and the other is under non-project commodity assistance. In project assistance, the utilizing agency need not require to make payment against L/Cs opened under Aid/Loan/Grant/Credit at import stage. That is, in project assistance, shipping documents are delivered to the importing agency without any payment (Free of payment).
For non-project commodity assistance, designated bank is required to deposit counterpart founds to specified Government Account maintained with Bangladesh Bank within 03 (three) working days from the date of receipt of shipping documents (clean document). Penalty at prescribed rate is to be imposed to the designated bank for delay depositing counter part fund to Bangladesh Bank. B.C selling rate is applied for depositing counter-part fund of Bangladesh Bank.  
Allowcation/Utilisation:
 Designated bank maintains allocation register to record the L/C opening/Utilisation of fund against the particular Aid/Loan/Grant/Credit etc. In allocation register, the register, the name of the utilization agency, latest L/C opening and expiry dates, loan validity date, total found allocation, particulars of L/Cs opened/amount utilised, balance fund available etc recorded.
Statements:
Regular statements regarding L/C opening/Fund utilisation are required to be submitted to Head Office of designated bank and also to Bangladesh Bank/donor agency as per provision of F.E Circular.
The above procedures for import under Aid/Loan/Grant/Credit etc. are not permanent procedures. Bangladesh Bank may introduce new procedures for import L/C opening against Aid/Loan/Grant/Credit etc. through F.E circulars as per agreement between Government and donor agency/country.




Columns of L/C liability and margin

SL.NO.
L/C NO.






Amount in F.C.
Amount of liability in Tk.
Dr.
Contra date
Cr
Balance
Initial
1
2
3
4
5
6
7
8
9



















Margin (in Tk) with %
Security on Tk.


Dr.
Contra date
Cr
Balance
Initial
Remarks
10
11
12
13
14
15
16














Checking Point Lapses of L/C before dispatch the L/C as follows:


1. L/C proposal is Processed or not considering the importers means, standing market reputation, 
    and integrity in his business.
2. L/C application form properly fill in or not.
3. The L/C is to be opened complying all terms & conditions of the sanction advice, Import Policy, 
    Exchange control regulations, Bangladesh Bank Circulars, Public Notices of CCI & other 
    Government directives or not.
4. L/C application & agreement form duly stamped of Tk. 150/- as per stamp act enforced in 
    Bangladesh, as it guarantee of payment or not.
5. The margin/cash security is duly realised  before opening of L/C as stipulated in the sanction
    advice / as per business discretionary power / as credit restrictions of margin requirement 
    imposed by Bangladesh Bank or not.
6. In case of import under Aid/Loan/Barter terms & conditions of the relevant Bangladesh Bank
    circular & Public Notice issued by CCI & E is complied with or not.
7. Bank charges i.e.L/C opening commission, P&T, Courier/Telex charge realised entered in the 
    L/C opening register & credited in the bank’s income a/c or not.
8. L/C proposal of the party not showing the detailed address or shown fictitious address than actual.
9. Name of proprietor/Director/Partner of Co. is actual or not.
10. Opening of L/C beyond H.O.Sanction / Limit/ Discretionary Power of Branch.
11. Signature of applicant not verified by bank officials or not.
12. Insurance coverage properly made or not.
13. Credit report of supplier obtained/in case of L/C over Tk.2.00 lac or not.
14.  Less / Excess charge realised as per schedule of foreign transaction.
15. LCAF not properly typed HS Code not mentioned properly.
16. IMP From dully signed sealed by the importer or not.
17. L/C opened against conditional indent / Indentor suspended by B. Bank through Circular /Public Notice
18. Acceptance of applicant absent in invoice / Indent or not.
19. L/C opening charges realised the same day or not.
20. All L/C`S are properly entered in the L/C Opening Register or not.
21. Conversion & rate of exchange (B.C.Selling) to be correctly applied or not.
22. Pre-shipment inspection is compulsory for all imports of goods by private sector & charge –1%  
      of  CFR value of imports is taken properly or not.
23. L.C.A forms & L/C application forms properly recorded and kept in Safe Custody or not.
24. Cutting / Erasing / Alteration, if one are in the L/C Application are authenticated by the Importer or not.
25. Two authorised officers dealing in the exchange department sign L/C whose signatures are already supplied to 
      the correspondents abroad or not.
26. If L/C advised by cable sending message under test got to be authenticated by two officers or not.
 27. PSI form dully filled in or not and has submitted to concern firm with bank forwarding & related papers or not.