Insurance coverage

Banks invited to take out insurance for export financing

The Bangladesh Bank has today asked banks to take out insurance against their financing to exporters in a bid to minimize the risk of default.
In accordance with banking standards, lenders can provide post-shipment financing to exporters even if they do not receive the funds from their correspondent banks.
In such a situation, there is always a risk of default if the correspondent banks – through which the exporters receive the funds – do not repay the value of the exported items in time.
Default risk will be minimized if banks take out insurance, according to a notice from Bangladesh Bank.
This will give additional comfort to the banks as the insurance companies have to take responsibility in case of non-realization of the fund by the lenders.
The central bank, however, said banks would take the hedge with the consent of exporters.
Banks will also be allowed to take out insurance for their financing to exporters during the pre-shipment phase.
The central bank, however, warned the banks that the insurance cover would not give waivers to the realization of export earnings which must be repatriated within four months from the date of shipment, as required by the regulations. changes.
A BB official said the insurance cover will help banks extend facilities to exporters smoothly, as the insurance cover protects banks’ funding against credit risk.