Central bank rejects private banks’ request for dollar support from reserves

The Bangladesh Bank on Monday turned down the private banks' request to provide them with dollar support from the foreign exchange reserves to meet the cost of imports of daily necessities including fertiliser.

At the same time, the central bank in a meeting with the Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers Association (Bafeda) on the day asked the banks to settle import payments by collecting dollars on their own, managing directors of several banks who attended the meeting told The Business Standard.

An official of the central bank, on condition of anonymity, told TBS that the central bank did not accept the banks' proposal in view of the current global market trend and the forex reserves situation in the country.

The meeting also set the exchange rate of the US dollar for remittances sent through the banking channel by white-collar wage earners – those who work in service industries and are paid salaries – at Tk107, which was Tk99.5 earlier.

According to meeting sources, the central bank also rejected bankers' requests for providing them with dollars from the reserve through currency swaps.

Bankers wanted to take dollars from the central bank in exchange of taka, which, they said, would reduce the dollar crisis in the market to some extent.

Private banks had been seeking dollar support from the reserve for the past few days.

State-owned banks will continue to get dollar support from the reserve as before, said ABB Chairman and BRAC Bank MD and CEO Selim RF Hussain.

So far, dollar support is being given for imports of fertiliser and daily necessities, he mentioned, adding as most of these LCs are opened in government banks, these banks are getting this support, and this will continue.

When asked what was discussed in the meeting, he said, "We organise an exchange meeting every two to three weeks. The central bank has made it easier for us to open exchange houses abroad. The meeting also discussed whether the fees imposed by the exchange houses can be waived, alongside strengthening marketing efforts, to increase remittance inflows."

About the hike in the dollar exchange rate for remittances by white-collar wage earners, he said professionals such as doctors, engineers, and lawyers thus far used to get Tk99.5 – equal to export proceeds – for each US dollar they sent through banks instead of exchange houses, while remitters who sent their money through exchange houses used to get Tk107 for $1. 

 "We have to increase our inward remittances. Marketing should be increased. Various product concepts to increase remittances were also discussed in the meeting. We are also thinking whether a fund, like a pension fund, can be created for the remitters.

Claiming that there was no talk about increasing the dollar rate for remittances and export proceeds, he said, "We have a plan to gradually reduce the gap between these two rates."

We are working with the aim of bringing these two rates to an equal level within the next 3-6 months.

Bangladesh Bank's deputy governors Ahmed Jamal and Kazi Sayedur Rahman, managing director of various public and private banks, and officials of the relevant departments of the central bank were present at the meeting.

Sources said the ABB and the managing directors of the Bafeda member banks will meet again either Tuesday or Wednesday to review the decisions made in Monday's meeting with the central bank.

The central bank has been selling dollars from its reserves of foreign exchanges since the beginning to meet the import costs of daily necessities. More than $4.5 billion has been injected into the market so far this fiscal year. Banks' liquidity is now under stress as more than Tk40,000 crore has gone to the central bank's vault from the country's banking sector for buying these dollars.

According to the latest data, the central bank's forex reserves stand at about $36.85 billion as of 26 October.