Card-based forex transactions hit all-time high in Dec

Highlights: 

• The transactions increased by Tk389 crore in just one year in December 2022 from Tk250 crore in December 2021.
• Bankers said that the trend is not good for the economy amid depleting reserves.
• Foreign currency transactions through cards have increased as well as local currency transactions. 
• The transactions with local debit and credit cards stood at Tk39,025 crore in December 2022, which was Tk38,675 crore in the previous month. 

Foreign currency transactions with cards hit an all-time high in December 2022 to Tk639 crore, which is more than double compared to transactions made in the same month of the previous year.

The transactions increased by Tk389 crore in just one year in December 2022 from Tk250 crore in December 2021.

Bankers said the dollar appreciation and an increase in the number of treatments and travels abroad have contributed to the high forex transactions through cards.

They also said that the trend is not good for the economy amid depleting reserves.

According to the central bank, foreign currency transactions through cards have been on the rise since April last year when the amount stood at Tk241 crore. After that, August registered transactions crossing Tk500 crore and it amounted to Tk605 crore in October.

Shaheen Iqbal, head of treasury at Brac Bank, told The Business Standard, "There are several reasons why foreign currency transactions through cards are on the rise. Dollar price at the open market is Tk110-112, whereas the cost stands at Tk106-107 when dollars are endorsed using cards."

"There has been a cash dollar shortage in banks since August last year. At that time, it could be seen that many banks have issued foreign currency cards to customers, which has led to an increase in card transactions," he added.

According to a treasury department official at another private bank, the number of customers using cards has increased since the cash dollar crisis began.

"Customers are inclined to buy products from foreign e-commerce platforms with cards. Besides, due to various restrictions imposed on imports, including the 100% LC margin, small traders are importing products with credit cards, due to which card transactions have increased," he added.

Seeking anonymity, the managing director at a private bank said that due to the coronavirus pandemic, travelling and going abroad for medical treatment almost stopped during 2020 and 2021. Everything is now fully open, and transactions have increased as a result. However, due to the appreciation of the dollar, its amount has also increased.

He also said the central bank's reserves are depleting due to the regular sale of dollars for the import of daily necessities. In the meantime, it is not desirable to increase the amount of dollars through cards. Banks should be more careful in this regard.

According to the central bank data, the price was Tk85.80 per dollar in December 2021. A year later, in December 2022, the rate jumped to around Tk106. As the transactions with cards are calculated in taka, their amount has also increased owing to the rise in the dollar rate.

The country's reserves, which amounted to $48 billion in August 2021, have been depleting since early 2022. The reserves stood at $32.63 billion at the end of 8 February 2023.

The central bank recently issued a circular asking banks to verify the previous endorsements of clients when endorsing passport dollars. Because a customer can spend a maximum of $12,000 in a year and the circular has been issued to keep a regular check on dollar expenditure.

Foreign currency transactions through cards have increased as well as local currency transactions. The transactions with local debit and credit cards stood at Tk39,025 crore in December 2022, which was Tk38,675 crore in the previous month. In December 2021, it was Tk26,824.