Documentary credit process & relevance in RMG sector

Abstract

Jamuna Bank Limited is amongst one of many private banks who are operating & functioning properly with abiding by all the rules being set by Bangladesh Bank. The whole bank is divided into many sub-committees who divide the whole work in different segments. In the upper regions of the hierarchal system of the managing body of the bank, they have Directors running different committees such as Credit Committee, Finance Committee etc. The directors are saturated into positions of CEO/Managing Director which are centered and all the work done is kept a harmony in all departments for the betterment and efficiency of the bank. The means by which any and all of the banks in existence operate are by, amongst facilitating other services, providing financial aid which sometimes include lending capital to businesses and firms in the form of loans. Exporters & Importers of items require huge sums of funds to operate their foreign exchange dealings. A majority of these funds are provided to the RMG sector, as is the case of Bangladesh. These loans are termed as Documentary Credits and are referred to as LCs or Letter of credits. These are classified into various forms- some are paid on sight, are amendable/not amendable, sometimes transferrable & subject to cancellation by one/any of the parties. The export scenario of Bangladesh is in a rapidly growing stage, with the majority of income coming from the RMG sector. LCs are standard procedure for RMGs to conduct their business, as it has historically been so. In this paper, I shall discuss the LC processes and how it is significantly helpful for this sector & how efficient it is as a process entirely.