Bangladesh Bank has waived the mandatory 10 percent retention on advance remittances received against exports, to ease cash flow for small exporters.

In a circular issued on Thursday, the central bank said authorised banks may now release the full amount of advance remittances received from importers to exporters. The decision is intended to facilitate trade by allowing exporters quicker access to funds.

Advance payment is a system in which buyers transfer funds before goods are shipped, reducing the risk of non-payment for exporters but increasing exposure for importers. The method is often used in transactions involving new or high-risk buyers.

According to the new rules, banks must ensure certain conditions before releasing funds. These include verifying that exporters have irrevocable letters of credit or contracts in place, satisfactory past performance, and the capacity to deliver orders. Payments must not bear interest, and shipments must be completed within a year of receiving the advance, except in cases involving performance bonds or standby letters of credit.

If an export order is not fulfilled, banks may refund the advance payment, using funds first from the Exporters’ Retention Quota (ERQ) account and then from local currency accounts.

Bangladesh Bank said the relaxation is designed to support exporters and encourage smoother trade flows.