LC cash margin requirement slapped on 779 imported goods

The 100 percent cash margin requirement against letters of credit (LC), which the Central Bank announced recently, is applicable to 779 goods this time, broadening the scope from an earlier version of the requirement last year, which covered 623 imported goods deemed as non-essential and non-urgent. 

In a Banking Act Direction, the Central Bank also made clear that this was the same 100 percent cash margin requirement, which was brought in last year, though with a wider scope and barred the banks from loaning to enable the importers of these goods without a 100 percent cash margin requirement. 

Although the Central Bank last week announced that it would revive the last September rule to limit and discourage the importation of a select list of goods, there was some lack of clarity on the specifics as to what it could entail. 

The Central Bank said, “A 100 percent non-interest-bearing cash margin shall be kept on the invoiced value of imports,” on the 779 goods identified with their HS codes, “under Documents against Acceptance (DA) and Documents against Payment (DP) terms”. 

In the case of NSB, the margin requirements would be applicable for such imports under the LC terms, in addition to DA and DP terms, the Central Bank said. 

Making further clarity, the Central Bank said that the cash margin requirement must cover the total value of the invoice, “regardless that the same invoice includes goods that are not covered under these Directions”. 
The Direction came into effect on May 19. 

Making clear of the purpose of making certain imports difficult, Central Bank Governor Dr. Nandalal Weerasinghe said the idea was to utilise more foreign currency for imports of essential commodities such as fuel, gas and medicines, which are in short supply.

Prior to bringing this latest rule, Dr. Weerasinghe urged people to defer their purchasing of imported goods that come under the durables category such as consumer electronics, so that their reduced demand would discourage the importers from importing them.