Remittance dollar price cannot exceed Tk115 : ABB-Bafeda

Banks have been asked to keep the remittance exchange rate within Tk115 per dollar, including incentives paid by both the government and banks themselves, after media reports revealed that some banks were purchasing remittances at a rate of Tk124.

The Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers' Association (Bafeda) issued the instruction at a joint meeting on Wednesday.

It was stated during the meeting that many banks are currently purchasing remittance dollars at above-market rates. This practice is expected to fuel inflation and erode forex reserves, ultimately causing harm to the state.

A senior bank official present at the meeting said, "In a meeting on 31 October, ABB and Bafeda instructed banks to bring in remittances with arbitrary incentives beyond the fixed-dollar rate. It was also emphasised that regardless of the purchase price, dollars must be sold to customers at Tk111.

"Immediately after this announcement, banks started buying dollars at higher prices. Last Wednesday, exchange houses quoted the remittance rate at a maximum of Tk124, significantly higher than the official set rate of Tk110.50. However, it was said in the meeting, banks have been instructed to give incentives as they wish from their own funds, but they should not give incentives more than 2-2.5% per dollar."

The managing director of a private bank, wishing not to be named, told The Business Standard that the huge gap between buying and selling rates is fostering corruption.

"If we purchase remittances at Tk124 per dollar and sell them to importers at Tk111, then we will have to incur a loss of at least Tk130 crore a month," he said, adding that to avoid such losses, his bank would have to go for underhand dealings with importers and sell dollars in line with the remittance rate. However, this would necessitate his bank's officials handling large sums of cash.

The managing director of another private bank told TBS that there are many banks that have a high demand for dollars. They are buying dollars at higher prices to settle import letters of credit they have opened in the past. 

The dollar rate increased to Tk114 in the middle of last year. After that, banks have been fixing the rate since September 11 last year through the mediation of the Bangladesh Bank.

As part of this process, initially the dollar rate was fixed at Tk108 for remittances and Tk99 for exports. Periodically, the dollar buying rate is equalised in both cases.

Besides fixing the dollar rate to control high inflation, the central bank has been selling a lot of dollars from its reserves. About $4.5 billion has already been sold in the current financial year. In the last fiscal year, $13.58 billion was sold, compared to $7.62 billion in the previous fiscal year.

Among these, the Bangladesh Bank has paid $1.17 billion due to the Asian Clearing Union (ACU). Due to this, the foreign exchange reserves have further dropped below $19 billion. The country's international reserves amounted to a record $48 billion in August 2021