Banks hit by Tk7,550cr remittance incentive backlog
Banks disburse a 2.5% cash incentive to expatriates on remittance inflows on behalf of the government and are later reimbursed through the central bank
Highlights:
- Government owes banks over Tk7,550 crore remittance incentives
- Reimbursement delays have persisted for more than nine months
- Banks fund incentives themselves, straining liquidity and profitability
- Ten banks account for Tk3,701 crore in unpaid claims
- Delays threaten remittance mobilisation and increase balance-sheet pressure
- Central bank says dues should clear this fiscal year
A backlog of more than Tk7,550 crore in government reimbursements for remittance incentives has persisted for over nine months, putting pressure on commercial banks' liquidity and profitability.
Talking to The Business Standard, Bangladesh Bank spokesperson and Executive Director Arief Hossain Khan confirmed that as of 31 May 2026, the amount is at Tk7,550 crore.
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Banks disburse a 2.5% cash incentive to expatriates on remittance inflows on behalf of the government and are later reimbursed through the central bank. However, bankers say the arrears continue to accumulate as these reimbursements remain unsettled.
According to available data, the outstanding amount stood at Tk4,000 crore in December 2025 and has since risen by a further Tk3,550 crore over the past six months. Ten banks alone account for Tk3,701 crore of the unpaid incentives as of June this year.
Liquidity strain and profit pressure
Bankers say they are funding the incentive payments from deposit mobilisations, which is restricting their ability to deploy funds in income-generating assets. As a result, a portion of deposits remains uninvested or is diverted from normal lending operations.
Speaking to TBS, they noted that banks typically use such funds in short-term government securities, where annual returns are estimated at around 10.20%. One private-sector banker said if Tk5,000 crore had been invested in one-year Treasury bills, banks could have earned about Tk383 crore in interest over nine months.
Instead, banks are reportedly financing costs, including deposit interest payments estimated at around Tk300 crore, without generating equivalent returns from the delayed reimbursement funds.
A senior policymaking official at a private bank said the mismatch between funding costs and delayed government payments is eroding profitability and may weaken banks' incentives to mobilise remittances in the coming months.
Rising burden on individual banks
A managing director of a private commercial bank said his institution alone is awaiting nearly Tk700 crore in reimbursement, which he said has significantly affected its liquidity planning and investment decisions. He added that timely payment would have reduced the need to fund incentives from deposits and could have allowed investment in Treasury bills at returns of around 10.20%.
Mohammad Ali, managing director of Pubali Bank, said the outstanding amount is currently recorded as an asset in accounting terms but does not generate income. He warned that prolonged delay could force banks to make provisions if repayment is not secured.
He estimated that full investment in Treasury bills could have generated over Tk500 crore annually in interest income for the banking sector.
Islami Bank Bangladesh, which channels the highest volume of remittance, holds an outstanding incentive claim of approximately Tk1,350 crore up to June.
System-wide concerns over remittance flows
Bankers said the rising volume of remittances has increased the government's incentive burden, while delays in reimbursement have worsened funding stress. They added that banks are increasingly reliant on deposit mobilisation to bridge the gap, putting pressure on balance sheets.
A senior treasury official said reimbursements were previously settled within a month, but are now being released roughly every three months, creating significant strain on liquidity management.
Another banker noted that earlier the scheme operated on an advance funding basis with quicker settlements, but delays have gradually increased over the past one and a half years.
Fiscal constraints and government borrowing
Bankers also linked the delays to broader fiscal pressures, noting that government revenue collection has weakened and borrowing from banks has increased. The government has set a borrowing target of Tk1,12,000 crore from the banking system in the upcoming fiscal year.
Central bank assurances
The issue was actively discussed at a recent bankers' meeting, where bank managing directors raised their concerns directly with central bank leadership.
Bangladesh Bank Governor Md Mostaqur Rahman assured the top executives that the central bank would liaise with the finance ministry to ensure the outstanding dues are cleared within the current fiscal year. Industry insiders expect fund releases to begin in earnest in July.
When contacted, the central bank's spokesperson Arief Hossain Khan clarified that the matter falls under the purview of the fiscal authority rather than the central bank.
"Since the government is providing the subsidy, the funds will definitely come. There may be a delay, but there is absolutely no chance of non-payment," he said.
