BB waives 10pc retention requirement on advance export payments

The Bangladesh Bank has scrapped the mandatory 10% retention on advance payments received by exporters from overseas buyers, allowing them full access to the funds upfront.

The move, announced in a circular on Thursday, aims to ease exporters’ cash flow and support trade operations amid global economic challenges.

Previously, exporters were required to park 10% of any advance remittance with banks until shipments were executed—a rule that often created liquidity stress, particularly for small exporters with thin margins.

“With the new relaxation, banks can now release 100% of the advance remittance to exporters, subject to due diligence and satisfactory export performance,” a senior Bangladesh Bank official said.

According to the circular, exporters must meet certain conditions: holding a valid and irrevocable letter of credit (LC) or contract, maintaining a record of satisfactory export performance, and demonstrating the capacity to complete shipments. The advance must be interest-free, with exports executed within 12 months of receiving the funds.

The one-year deadline will not apply when advance payments are linked to performance bonds, bank guarantees, or standby LCs. In cases of non-execution, authorised dealer (AD) banks may refund the advance—first from the exporter’s retention quota (ERQ) account, then from local taka accounts if required.

Business leaders welcomed the decision, saying it will ease pressure on exporters struggling with tight margins and volatile demand.

“For small exporters, the 10% retention was a real challenge. This measure will free up working capital, making it easier to buy raw materials and continue operations,” said a garment exporter.

Analysts noted the policy reflects the central bank’s attempt to balance compliance with export support. Banks have been tasked with closely monitoring transactions to prevent misuse, and all scheduled banks have been directed to promptly inform exporters of the change.