Banks may accept electronic invoices and transport documents, with checks, but paper can still be required in some cases. The five safeguards every bank must keep for non-LC trade finance, and why none of this closes the door on the LC.
In Lesson 21, New ways to finance exports, Evelyn learned that her bank may offer open account, documentary collection and supply chain finance alongside the LC, each with its own conditions. She went home excited. Then her export assistant, Tanvir, asked two awkward questions over lunch.
"Apa, if we stop using LCs, can we also stop printing all this paper?" he said, pointing at a pile of invoices taller than his tiffin box. "And if the bank isn't protected by an LC any more, what stops it from saying no to everybody?"
Evelyn takes both questions to Habib at her bank's AD branch in Dhaka. Habib grins. "Those are trainer's questions. Luckily, the trainer is here." It is Shirin, whom Evelyn had met at an earlier training: 35 years in banking, once head of trade and foreign exchange at a large bank, a documentary-credit specialist who now trains bankers.
Shirin laughs. "Tanvir, you want less paper. The bank wants less risk. The last three paragraphs of Part G try to give you both." This lesson covers digital trade documents (G-4), the safeguards for non-LC finance (G-5), and the overarching provision that keeps the LC alive (G-6).
Digital trade facilitation and documentation framework
In plain words
G-4 has three parts: an encouragement, a list of cases where paper may still be needed, and a pointer.
1. Going digital, with checks
ADs are encouraged to adopt electronic and digitised trade processing systems, to improve efficiency, transparency and operational resilience. ADs may accept electronic trade documents, including invoices and transport documents, but only subject to three things:
adequate verification mechanisms, so the bank can check a document is genuine;
an acceptable assessment of counterparty and operational risks, meaning the risks from the other party and from the bank's own systems and processes; and
ensured legal validity and enforceability, so the document will stand up in law if there is a dispute.
2. When paper may still be required
Physical documents may be required:
where applicable laws, regulations or contractual requirements mandate them;
where transaction-specific risks call for stronger controls; or
where legal enforceability depends on original documents.
Think of a wedding: the photos may all be digital, but the marriage certificate is kept on paper, signed and stamped.
3. The pointer
For electronic submission of export documents, the provisions of Part E of the circular must be complied with. G-4 doesn't repeat Part E; it points there.
At the desk
Tanvir uploads a scanned invoice and a transport document to Habib's portal and asks whether he can throw away the paper. Habib explains that the bank may accept electronic documents only after verifying them, assessing the risks and making sure they are legally valid and enforceable, and that the electronic submission must follow Part E. Shirin adds, "And if a law, the contract or a risky deal calls for the original, the bank may still ask for paper. So keep it filed for now."
Key words
Transport document
A document issued by a carrier, such as a bill of lading or an airway bill, showing that it has taken the goods for carriage.
Operational resilience
A bank's ability to keep working, and recover quickly, when its systems or processes face problems.
Counterparty risk
The risk that the other party in a deal does not do its part, for example does not pay.
Legal enforceability
Whether a document or promise can be relied on and enforced in a court of law if there is a dispute.
Read the rule as written (Para G-4)
ADs are encouraged to adopt electronic and digitized trade processing systems to enhance efficiency, transparency, and operational resilience, and may accept electronic trade documents, including invoices and transport documents, subject to adequate verification mechanisms, acceptable assessment of counterparty and operational risks, and ensured legal validity and enforceability. Physical documents may be required where mandated by applicable laws, regulations, or contractual requirements, where transaction-specific risks warrant enhanced controls, or where legal enforceability depends on original documents. In case of electronic submission of export documents, the provisions of Part-E of this circular shall be complied with.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part G, paragraph 4 (page 30). The original circular is the authority.
G-5 is the safety belt for non-LC trade finance. Without an LC, no bank abroad has promised to pay, so the AD must protect itself in other ways. G-5 says ADs shall take a prudent and risk-based approach and ensure five things:
(a) Robust credit assessment of buyers, importers and the respective parties, as applicable. Before trusting someone to pay later, check them properly.
(b) Defined internal exposure limits, based on approved risk rating systems. Decide in advance the most the bank will risk on a party, and base it on an approved rating, not on a good feeling.
(c) A complete documentation trail for all trade finance transactions. Every step should be on record.
(d) Continuous monitoring of exposures and settlement performance. Not a one-time check: keep watching whether buyers actually pay, and on time.
(e) Strict compliance with applicable AML/CFT requirements, foreign exchange regulations, tax laws and other relevant regulatory provisions.
A simple way to remember it: check, cap, record, watch, comply. The circular doesn't set any number for the exposure limits; each AD sets them under its own approved risk rating system.
At the desk
Evelyn wants to move all her Hamburg shipments to open account. Habib's credit team assesses the buyer, sets an internal exposure limit for it under the bank's approved risk rating system, and opens a file to keep every document of each deal. Shirin advises Habib to track each due date and payment, and to run the usual AML/CFT and foreign exchange checks on every shipment. "The LC used to watch the buyer for you," she says. "Now your own team has to."
Key words
Risk-based approach
Putting the most care where the risks are highest.
Exposure limit
The most a bank decides in advance it is willing to risk on a party or a type of deal.
Documentation trail
A complete set of records of a trade finance deal, kept so that every step can be followed later.
AML/CFT
Anti-Money Laundering / Combating the Financing of Terrorism rules.
Read the rule as written (Para G-5)
ADs shall adopt a prudent and risk based approach in facilitating non-LC trade finance arrangements and ensures the following:
(a) Robust credit assessment of buyers, importers, and respective parties, as applicable;
(b) Defined internal exposure limits based on approved risk rating systems;
(c) Maintenance of a complete documentation trail for all trade finance transactions;
(d) Continuous monitoring of exposures and settlement performance; and
(e) Strict compliance with applicable AML/CFT requirements, foreign exchange regulations, tax laws, and other relevant regulatory provisions.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part G, paragraph 5 (page 31). The original circular is the authority.
G-6 is short, and it closes Part G. It says two things:
The purpose of Part G: its provisions are meant to help the gradual diversification of trade finance mechanisms in Bangladesh. "Diversification" simply means having more kinds of tools, so that not every deal depends on one tool.
The LC stays: nothing in these instructions restricts the continued use of LCs. The LC remains a valid and widely accepted instrument for international trade.
So an exporter who is happy with LCs can keep using them. An exporter who wants something else can ask the bank about the alternatives, under the conditions in G-2 to G-5. Part G adds choices; it doesn't take any away.
At the desk
A new exporter of leather bags tells Habib he heard that "Bangladesh Bank wants everyone off LCs now". Habib shows him G-6: Part G aims at gradual diversification, and nothing in it restricts the continued use of LCs. Shirin smiles. "Use the LC if it suits you. Part G only puts more tools on the table."
Key words
Letter of credit (LC)
A bank's promise to pay the seller, as long as the seller presents the right documents on time.
Diversification
Spreading across more kinds of tools or options, so that you don't depend on just one.
Read the rule as written (Para G-6)
The provisions of this Part are intended to facilitate the gradual diversification of trade finance mechanisms in Bangladesh. Nothing in this instruction shall restrict the continued use of LCs, which remain a valid and widely accepted instrument for international trade transactions.
Source: Bangladesh Bank, FEPD-1 Circular No. 26, 30 July 2026, Part G, paragraph 6 (page 31). The original circular is the authority.
So far: ADs are encouraged to go digital and may accept electronic invoices and transport documents, as long as they verify them, assess counterparty and operational risks and make sure the documents are legally valid and enforceable; paper may still be required by law, regulation, contract, higher risk, or where enforceability depends on originals, and electronic submission of export documents follows Part E. For non-LC trade finance, ADs must take a prudent, risk-based approach: assess credit, set exposure limits, keep a complete documentation trail, monitor exposures and settlement, and comply strictly with AML/CFT, foreign exchange and tax rules. Part G aims at gradual diversification, and the LC remains valid and widely accepted.
Next: Part G of the export room is complete. Part H, on the export of services, including IT-enabled services, starts in Lesson 23, Software and freelance exports by internet.
Check yourself
30 questions, in 3 sets of up to 10. Nobody sees your answers but you.
Set 1 of 3
G-4 says ADs are encouraged to adopt such systems to enhance efficiency, transparency and operational resilience. (G-4)
G-4 says ADs may accept electronic trade documents, including invoices and transport documents. (G-4)
G-4 lists verification mechanisms, assessment of counterparty and operational risks, and legal validity and enforceability; buyer-government approval is not mentioned. (G-4)
G-4 says physical documents may be required where legal enforceability depends on original documents, among other cases. (G-4)
G-4 says that for electronic submission of export documents, the provisions of Part E shall be complied with. (G-4)
Operational resilience is a bank's ability to keep going through system or process problems; G-4 names it as an aim of digital systems. (G-4)
False. G-4 says ADs may accept electronic documents subject to verification, risk assessment and legal validity and enforceability. (G-4)
True. G-4 lists laws, regulations or contractual requirements as one case where physical documents may be required. (G-4)
G-4 makes acceptance of electronic documents subject to adequate verification mechanisms. (G-4)
G-4 says physical documents may be required where mandated by contractual requirements. (G-4)