Aug 8, 2012

Private banks offer Letters of Credit

Private banks began offering Letters of Credit to facilitate faster transactions in early August, several banking sources said last week.
The banks offering LCs are authorised to handle foreign currency accounts, including Ayeyarwady, Asia Green Development, Co-operative, Myanma Apex and Myanmar Oriental, and other banks will follow.
U Pe Myint, Co-operative Bank’s managing director, said offering LCs to customers was another step in a process to provide increased services.
“We have just started offering this service and will extend our range of banking operations wider in future,” he said, adding that CB began offering the service on August 1.
He added that private banks would charge clients no more for the service than state-owned banks such as Myanma Investment and Commercial Bank [MICB] and Myanma Foreign Trade Bank [MFTB].
MICB and MTFB charge fees of equal to US$30 in kyat (about K26,250 on August 4) for Letters of Credit for exports and $50-$1500 for imports depending on the type and quantity of commodity, he said.
“Private banks will have less procedures to follow than state-owned banks and we will do all we can to reduce non-essential steps,” he said.
When issuing LCs, state-owned banks require the trader to deposit the full value of the payment into the bank to ensure that the importer can pay for the shipment. However, private banks are discussing what percentage of the LC must be paid upfront, U Pe Myint said.
A spokesperson for Kanbawza Bank said the bank has links with banks in Singapore, Malaysia and Thailand and is trying to create links to banks in Australia, Bangladesh, India, Indonesia and South Korea.
“We also have proposals from banks in Europe and the United States,” she said.
Bean and pulses trader U Win Aung said he hoped that private banks would be more efficient than state-owned operators.
“The government-owned banks have so many procedures to follow and it takes a long time – sometimes we lose a whole day there. I hope that private banks will be faster than that,” said U Win Aung, who imported a car using an LC provided by a state-run bank six months ago.
He added LCs backed by private banks would provide increased presence of mind for traders.
“I know some traders who believe that state-owned banks send copies of LC requests to the government but I’m confident that the private banks will not do this,” he said.

Source: Myanmar Times