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Lesson 24 of 39 · Part H · Level 2 · Explained

Supply chain finance, e-documents and safeguards

Banks are encouraged to build supply chain finance for imports and may accept electronic invoices and transport documents, with checks. Why a new SCF product needs Bangladesh Bank's acknowledgement first, the five safeguards for non-LC finance, and why the LC stays.

In Lesson 23, Beyond the LC: other ways to pay for imports, Shirin showed Tahmid, Sadia and Rakib that the LC is not old-fashioned; it just has company. Open account, documentary collection and supply chain finance now sit beside it, and for imports the circular spells out advance payments, documentary collection and contract imports without an LC. Supply chain finance was only named there; today it gets its own rules. Tahmid left the branch happy. Two days later he is back, with a new letter from his supplier.

"They will give me 180 days to pay," he says, "but they want their money much sooner. They ask if my bank can pay them early and wait for me. Is that even allowed? And they want to send the invoice and shipping papers by email only. No courier, no paper."

Rakib looks at Sadia. Sadia smiles. "Good timing. Our guest at today's session is Dr Omar." Dr Omar is an economist and university professor, and a retired government officer who once served as Chairman of the Bangladesh Investment Board. He has spent a lifetime watching how money moves between buyers, sellers and banks.

Dr Omar listens to Tahmid and nods. "Your supplier wants cash today. You want time. The bank wants safety. A good finance tool tries to make all three of you smile at once." This lesson covers the last four paragraphs of Part H: supply chain finance for imports (H-4), digital trade documents (H-5), the safeguards for non-LC finance (H-6), and the closing provision that keeps the LC alive (H-7).

Para H-4New to the master circular

Supply Chain Finance (SCF)

In plain words

H-4 is about supply chain finance (SCF) on the import side. It has an encouragement, two ways of working, a note about Part D, and a firm procedure.

The encouragement. ADs are encouraged to develop import-oriented SCF, including buyer's credit, supplier financing and payables financing.

(1) Two ways to help

  • Finance the importer. ADs may extend financing to creditworthy importers for usance imports under sales/purchase contracts. The importer gets time; the bank funds the gap.
  • Or pay the supplier early. Once a creditworthy importer has accepted a usance import bill, the AD may discount it on a non-recourse basis to the supplier. The supplier gets its money early (the circular calls this early realisation of export proceeds, from the supplier's side), and the importer pays no additional financing cost. It is like a trusted customer signing a bill at the wholesale market, and the bank paying the wholesaler today on the strength of that signature.

(2) An extra, not a replacement. This facility may be given in addition to, and without prejudice to, the arrangements allowed under paragraph 4 of Part D and later instructions. H-4 doesn't repeat what paragraph 4 says; it only keeps it intact.

(3) The procedure. An AD that intends to introduce these SCF structures must:

  1. inform the Foreign Exchange Policy Department-1 of Bangladesh Bank before the launch; and
  2. start only after regulatory acknowledgement.

The submission must include the product structure, risk framework, credit assessment methodology, exposure limits, approval hierarchy, monitoring arrangements, and other relevant, pertinent issues. The circular doesn't say how long the acknowledgement takes. One thing is clear: no acknowledgement, no launch.

At the desk

Tahmid has accepted a 180-day usance bill for his machinery, and his supplier wants cash now. Sadia explains that her bank's new product could discount his accepted bill without recourse to the supplier, at no extra financing cost to him, but head office has informed FEPD-1 first and is waiting for regulatory acknowledgement before launching it. Rakib asks why they can't just start. Dr Omar laughs. "Rakib, a new bridge is opened after the inspection, not before."

Key words
Supply chain finance (SCF)
Finance tools, such as factoring and receivables financing, that help the sellers in a buyer's supply chain get paid earlier.
Payables financing
Finance that helps an importer handle the money it owes to its suppliers, for example by a bank paying the supplier early while the importer pays later.
Discounting
Paying the exporter now, minus a cost, for a bill that the buyer will pay later.
Non-recourse
The financier who paid the supplier early can't claim the money back from the supplier if the importer fails to pay.
Read the rule as written (Para H-4)

ADs are encouraged to develop import-oriented SCF including buyer’s credit, supplier financing, and payables financing.

(1) ADs may extend financing to creditworthy importers for usance imports under sales/purchase contracts. Alternatively, accepted usance import bills of creditworthy importers may be discounted by ADs on a non-recourse basis to the supplier, enabling early realization of export proceeds without imposing additional financing costs on the importer.

(2) This facility may be provided in addition to, and without prejudice to, the arrangements permissible under paragraph 4 of Part-D and subsequent instructions in this regard.

(3) ADs intending to introduce the above SCF structures shall inform the Foreign Exchange Policy Department-1 of Bangladesh Bank prior to launch and ensure implementation only after regulatory acknowledgement. The submission shall include product structure, risk framework, credit assessment methodology, exposure limits, approval hierarchy, monitoring arrangements, and relevant other pertinent issues.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part H, paragraph 4 (page 26). The original circular is the authority.

Para H-5New to the master circular

Digital trade facilitation and documentation framework

In plain words

H-5 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 buying a flat in Dhaka: the photos and the price list may come on WhatsApp, but the deed is signed and kept on paper.

3. The pointer

In this context, the instructions in Part I of the circular must be observed. H-5 doesn't repeat Part I; it points there, and this room will reach Part I later.

At the desk

Tahmid's supplier emails a PDF invoice and an electronic transport document and asks Rakib to work from those alone. Rakib checks with Sadia: the bank may accept them only if it can verify them, has assessed the counterparty and operational risks, and is sure they are legally valid and enforceable, and the instructions in Part I must be observed. Dr Omar adds, "If a law, the contract or a risky deal calls for the original, the bank may still ask for paper. Digital is the road, but the toll gate is still there."

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 H-5)

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 this context, instructions as outlined at Part-I need to be observed.

Source: Bangladesh Bank, FEPD-1 Circular No. 30, 13 August 2026, Part H, paragraph 5 (page 27). The original circular is the authority.

Para H-6New to the master circular

Regulatory and Prudential Requirements

In plain words

H-6 is the safety belt for non-LC trade finance. Without an LC, the bank has fewer built-in protections, so it must protect itself in other ways. H-6 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 over tea.

(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 payments are actually made, 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

Before financing Tahmid's machinery import on usance terms, Sadia's credit team assesses his business, sets an internal exposure limit for him under the bank's approved risk rating system, and opens a file to keep every document of the deal. Dr Omar advises Rakib to diary each due date and payment, and to run the usual AML/CFT, foreign exchange and tax checks. "Without an LC, nobody else is watching the clock for you," he says. "So your own team must."

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 H-6)

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;

(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. 30, 13 August 2026, Part H, paragraph 6 (page 27). The original circular is the authority.

Para H-7New to the master circular

The provisions of this part are intended to facilitate …

In plain words

H-7 is short, and it closes Part H. It says two things:

  • The purpose of Part H: 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. Like a kitchen with a pressure cooker, a karai and a rice cooker: each one has its job.
  • 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 transactions.

So an importer who is happy with LCs can keep using them. An importer who wants something else can ask the bank about the alternatives, under the conditions in the rest of Part H. Part H adds choices; it doesn't take any away.

At the desk

A rice importer tells Rakib he heard that "LCs are finished; everything is supply chain finance now". Rakib shows him H-7: Part H aims at gradual diversification, and nothing in it restricts the continued use of LCs. Dr Omar smiles. "New roads do not close the old highway. Use whichever gets your rice home safely."

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 H-7)

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. 30, 13 August 2026, Part H, paragraph 7 (page 27). The original circular is the authority.

Putting it together

So far: ADs are encouraged to build import supply chain finance. They may finance creditworthy importers for usance imports under contracts, or discount their accepted usance bills without recourse to the supplier at no extra cost to the importer, in addition to paragraph 4 of Part D, but only after informing FEPD-1 and receiving regulatory acknowledgement. ADs may accept electronic invoices and transport documents with proper checks, paper may still be required in some cases, and Part I must be observed. For non-LC finance, banks must check, cap, record, watch and comply, and the LC remains valid and widely accepted.

Next: Part H of the import room is complete. Part I, on a pilot for digital trade documents through approved trade corridors, starts in Lesson 25, The digital documents pilot for imports: aims, scope and principles.

Check yourself

30 questions, in 3 sets of up to 10. Nobody sees your answers but you.

Set 1 of 3

1. Which import-oriented SCF tools does H-4 encourage ADs to develop?
2. Under H-4(1), to whom may ADs extend financing for usance imports under sales/purchase contracts?
3. Under H-4(1), on what basis may an AD discount accepted usance import bills?
4. What does H-4(1) say about the importer's cost when its accepted bill is discounted for the supplier?
5. According to H-4(2), how does this SCF facility relate to the arrangements under paragraph 4 of Part D?
6. Which department of Bangladesh Bank must an AD inform before launching an import SCF structure?
7. Which of these is NOT listed in H-4(3) as part of the SCF submission?
8. True or false: under H-4, an AD may launch a new import SCF product first and inform Bangladesh Bank afterwards.
9. Sadia's head office wants to launch a payables financing product next Sunday but has not yet informed Bangladesh Bank. What should happen?
10. Tahmid has accepted a 180-day usance bill. His bank discounts it and pays the supplier now, and if Tahmid later fails to pay, the bank cannot claim the money back from the supplier. What is this?

Set 2 of 3

11. Why does H-5 encourage ADs to adopt electronic and digitised trade processing systems?
12. Which of these is NOT one of the conditions in H-5 for accepting electronic trade documents?
13. Which electronic trade documents does H-5 name as examples that ADs may accept?
14. Which part of the circular does H-5 say must be observed in this context?
15. True or false: under H-5, physical documents may be required where legal enforceability depends on original documents.
16. Tahmid's supplier sends an electronic transport document, but Rakib's system cannot yet confirm it is genuine. What does H-5 point to?
17. Tahmid's sales contract says the original invoice must be sent on paper, but the supplier now wants to send only a PDF. What is the right view under H-5?
18. A first-time supplier in an unfamiliar market raises warning signs, and Sadia asks for original paper documents even though her branch usually accepts e-documents. Is this consistent with H-5?
19. What approach does H-6 require ADs to adopt in facilitating non-LC trade finance?
20. Under H-6(b), on what must internal exposure limits be based?

Set 3 of 3

21. Which of these is NOT listed in H-6(e) as an area of strict compliance?
22. True or false: H-6 sets a fixed numerical exposure limit for every importer.
23. True or false: under H-6(c), a complete documentation trail must be kept for all trade finance transactions.
24. Tahmid has banked with Sadia's branch for years, so Rakib suggests skipping the credit assessment for his new usance import finance. What does H-6 require?
25. The branch approved Tahmid's usance finance last year, but nobody has since checked whether he pays on the due dates. What is missing under H-6?
26. A relationship manager wants to give an importer an unlimited non-LC exposure "because he always brings sweets at Eid". What does H-6 say?
27. According to H-7, what are the provisions of Part H intended to facilitate?
28. True or false: H-7 says the LC remains a valid and widely accepted instrument for international trade transactions.
29. A rice importer says, "LCs are finished; everything is supply chain finance now." What is the accurate reply under H-7?
30. Tahmid wants to keep one supplier on LC terms and move another to a usance contract with bill discounting. Is this consistent with Part H?
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