About the Project


The project entitled ‘Financial Intermediaries and Trade Facilitation in South Asia’ was undertaken by CUTS with the support of The Asia Foundation under the programme ‘Innovative Approaches to Address a Specific Non-Tariff Barrier to Trade in South Asia’. This project will focus on specific barriers related to trade related financial services in bilateral trade between Bangladesh-India and India-Pakistan. The purpose of the project is to generate awareness on issues related to trade related financial services which affect bilateral trade and to explore trade opportunities that can be realized by addressing such issues, generating welfare outcomes for Bangladesh, India and Pakistan.

The financial regulatory authorities in various South Asian countries have been indifferent to trade finance needs and hardly attend to the problems faced by traders on account of default on payments and other aspects of trade finance. Many a times the principal financial instrument issued against a trade transaction, ‘letter of credit’ (LoC), by banks in one country, is not honoured by banks in another due to lack of obligations on mutual recognition between them. This regulatory divide poses serious payment-related risks. In this context, the specific NTB to be addressed in this project is stated as ‘lack of reliable and fast payment options to facilitate trade transactions’.

Incidence of cases of non-acceptance of LoC is mostly reported in the case of India-Pakistan and India-Bangladesh trade. Traders mostly rely on multi-national banks and indirect payments are routed through third country bank branches in the absence of indigenous banks in operation in trade financing sector. As far as the official positions of apex regulatory authorities in Bangladesh, India and Pakistan are concerned, specific regulations restricting payments are not enacted.

However, regulatory complacency has resulted in de facto restrictions on payments. For instance, the Reserve Bank of India does not prevent domestic banks from honouring payment instruments issued in either Bangladesh or Pakistan. However, lack of contractual relationships between banks from these countries is still an obstacle for creating a conducive environment for trade transactions. This project attempts to address this issue.

The duration of this project is of 10 months from September 2013 to June 2014.


3rd Focused Expert Group Meeting between Clientele Group, Financial Intermediaries and Apex Financial Regulators
 to address  Lack of Reliable and Fast Payment Options to Facilitate Trade Transactions in South Asia

May 24, 2014, New Delhi, India
Agenda | Press Release | Report



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Last updated: July 19, 2015

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