Home Bangladesh Banks fight for dollar with high remittance rate
Bangladesh - December 5, 2023

Banks fight for dollar with high remittance rate

Staff Correspondent: The escalating price of the dollar was pushed down Tk 0.75 in two rounds in 10 days, but did not bring the expected respite from the dollar crisis. Banks are receiving remittances at a higher rate because they are unable to meet the customers’ demands.
Commercial banks in the country said they were not receiving remittances at a rate fixed by the government. Hence, they had to pay extra.
In most cases, the dollar is not being sold at the rate announced in the interbank circular. The price is higher in the open market, although it has dropped slightly.
As they buy dollars at a higher rate, banks are charging importers of dollars extra.
Those banks buying dollars at a hiked rate claimed Bangladesh Bank gave them the green light.
The central bank, however, suggested the bank should buy dollars at a fixed rate. In its latest initiative to ensure the price, the central had a meeting with the foreign currency exchange houses and money exchangers in the open market.
The authorities pushed the dollar price Tk 0.50 down for the first time on Nov 23, citing the shrinking gap in balance and trade deficits in current accounts. The prices dropped another Tk 0.25 after six days.
After two rounds of devaluation, the dollar buying rate was fixed at a maximum of Tk 109.75 and while the rate at sale was set at a Tk 110.25 maximum. The prices were supposed to take effect from Dec 3, but it never happened, according to those involved.
Despite the drop in dollar price, the existing dollar supply crunch would not end soon, believes Syed Mahbubur Rahman, managing director of the Mutual Trust Bank.
“We need a week to see the impact of the price drop. It will be evident only when transactions are done according to the rate. For the next few days, the transactions will follow the old rate,” he said.
Due to the supply crunch, banks are buying remittance dollars at the rate of Tk 122, some bankers said.
“Many banks are receiving remittances at Tk 122-123, as they have some prior commitments. We may know about the situation with the new rate after hours yesterday,” he said.
Bangladesh Bank has been controlling the import of dollars since July 2022 after the foreign currency market turned volatile. It has also directed the Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (BFEDA) to fix the dollar rate and make it market-oriented.
Both organisations have continued to fix the dollar exchange rate in consultation with the Bangladesh Bank since then. But the rates decided by these organisations were rarely followed.
The government gives a 2.5 percent incentive on incoming remittance. The ABB and BAFEDA can provide another 2.5 percent incentive. As per the current dollar exchange rate, the remittance dollar should cost not more than Tk 115.
Hasan Ahmed, a migrant worker in the United Arab Emirates, said he remitted through an exchange house at a rate of Tk 122.92.
To send Tk 35,000 to Bangladesh through Western Union, he had to deposit Tk 87.88 dinar in a Kuwait bank. The exchange rate was Tk 398.27 per dinar.
His family in Bangladesh received another Tk 875 from a private bank as the 2.5 percent incentive on top of the transfer of Tk 35,000.
Abed Sarkar, another migrant working living in Saudi Arabia’s Dammam, said he remitted money at a rate of 122.50. His family in Bangladesh received money on Thursday through the mobile app of the Alinma Bank, a Saudi private Bank. They received Tk 121.50 per dollar.
While remitting through money exchange houses, banks, or apps, migrant workers know the amount of foreign currency to deposit against their desired amount of Bangladesh currency beforehand. They deposit that amount and other necessary taxes and excise duties, the migrants said.
The hike in the dollar price has helped to maintain the uptick in remittance flow in November as well. The migrants were interested in remitting through banking channels as they received a better rate. Hence, Bangladesh received $1.93 billion in remittances in November, a 21 percent increase year-on-year.
According to Bangladesh Bank data updated yesterday, Bangladesh received an additional $334.8 million in remittances than the same month last year. The remittance flow was $1.59 in November 2022.
Migrants also remitted more through the banking channels in the period of July-November in the 2023-24 fiscal year. They sent $8.81 billion in five months.
Many banks are not getting remittances at the rate fixed by the ABB and BAFEDA, said Dhaka bank Managing Director Emranul Haque. many of them were compelled to buy dollars at an increased price, he said.
‘’The banks are committed to paying the import bills to foreign companies. They must pay in dollars. Hence, many of them are buying dollars at a rate of Tk 121-123,” he said.
‘’If we don’t get dollars at the new rate, we’ll have another discussion,” he said.
They may halt buying of dollars if they are not available at the rate fixed by the authorities, the banker said.
Yesterday, state-owned Sonali Bank and Rupali Bank sold cash dollars at Tk 114 and also charged Tk 250 as a passport endorsement fee.
In the private bank sector, BRAC Bank sold dollars for Tk 115.50 and bought for Tk 114.50 on the same day.
Dollars, the major foreign currency used for import business, had multiple rates in the market, said Rupali Chowdhury, managing director of Berger Paints Bangladesh. There wasn’t enough dollar supply in the market to meet demand, the business leader believes.
“We’re collecting dollars from different banks for import business. The rate ranges from Tk 111-112 to 115 to 116,” the former president of the Foreign Investors Chamber of Commerce and Industries said.
Both bankers and businessmen, however, said that the dollar crunch existed despite the drop in rates in two rounds. Hence, the banks were receiving remittances at a higher rate. Businessmen and importers were unable to open LCs, they said.

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