Bangladesh L/C Payment Overview
Letters of Credit (L/C) dominate import payment in Bangladesh. As of 2020, approximately 80% of import payments are processed via L/C, with Bangladesh Bank (the central bank) requiring a margin (deposit) of 5–50% upon L/C issuance under its foreign exchange management policy. The primary L/C types are Sight L/C, Usance L/C, and Back-to-Back L/C, while export receipts also utilize D/P and T/T methods.
L/C Types Comparison
| Type | Payment Timing | Margin Rate | Use Case | Share |
|---|---|---|---|---|
| Sight L/C | Upon document arrival | 10–50% | General imports | 30% |
| Usance L/C | 90–180 days after | 5–20% | RMG raw materials | 35% |
| Back-to-Back L/C | Linked to Master L/C | 0–5% | Bonded imports | 30% |
| Deferred L/C | 360 days after | 10–30% | Capital goods | 3% |
| TT/DP | Remittance/collection | — | Small-value imports | 2% |
Back-to-Back L/C carries the lowest margin rate at 0–5%, with bonded export factories opening raw material import L/Cs secured against a Master L/C from an overseas buyer. A significant portion of Korean raw material exports to Bangladesh is settled via Back-to-Back L/C.
Sight L/C vs Usance L/C
L/C Payment Flow
With 80% of Bangladesh's import payments processed via L/C, Korean exporters can manage payment risk by reviewing L/C terms in advance, preventing discrepancies, and utilizing Korean bank Dhaka branches. A solid understanding of Back-to-Back L/C structures enables effective raw material trading with bonded export factories.