Monday 6th of December 2021

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How is the new import restriction implemented..?


2021-10-15 5794

 

There is no ban but a reduction in volume

 

(Achintha Madura Samarasinghe)

 

How is the new import restriction, imposed by the Central Bank, implemented? There is no ban on imports in this procedure. But the volume of imports will be reduced. That is definitely sure. Many people do not understand how it will work if nothing has been banned.

It is like this. Suppose that there is a person who is willing to import an item for $ 1000. He will go to the bank and say that he needs to import an item from another country. What the bank will do is, allocating $ 1000 from the Bank’s reserves on his behalf while blocking $ 1000 worth of money in rupees in his account.  

Then the Sri Lankan Bank sends an undertaking letter to the Bank of the supplier that the due amount is ready and ship the cargo to Sri Lanka. When the cargo arrives at the Sri Lankan port, the Bank remits the due amount to the Bank of the Supplier.  The Bank charges the due amount from the importer’s account. That is the normal LC method simply.

However, if the importer is a known customer of the Bank, who is regularly importing through the Bank, the LC is opened without withdrawing money from the customer's account. That is to do the fund transfer later on. The Bank can do this transaction on a credit basis too. Sometimes, an LC is opened with retaining only 10% from the due amount. The Bank will do this only for reliable customers. An interest will be charged for those transactions. This is what usually happens in the market.

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