State-owned banks settle LCs at Tk109 per dollar

The US dollar has started to get stronger again in the Letter of Credit (LC) settlement for imports. On Monday, state-owned banks settled LCs at a maximum of Tk109 per dollar, which was Tk106 on Thursday.

Most private banks, however, settled LCs at Tk105-106 per dollar on Monday, to avoid penalties by the Bangladesh Bank. Some banks even settled LCs as low as Tk104.

A treasury official of a state-owned bank, on condition of anonymity, told The Business Standard, "We are not getting enough dollars from the central bank, not even half the amount we require. We are selling dollars that the central bank is giving us at the fixed rate of Tk95.05.

"Since we have to make more payments, we have to buy dollars from exchange houses. But if we buy dollars from them at a rate above Tk111, naturally we have to sell dollars at a higher price than that."

The central bank is selling dollars to the state-owned banks at the interbank exchange rate of TK95. On Monday, $164 million was sold to the banks from the reserve.

The Bangladesh Bank has sold $2.21 billion since July of the current fiscal year. Besides, the banks are giving a maximum rate of Tk102-103 to the exporters for encashing export payments.

According to the heads of the treasury departments of several banks, the Bangladesh Bank is constantly monitoring the profits made from dollar trading in commercial banks.

Private banks have become very cautious in buying and selling dollars, fearing punishment by the central bank.

Seeking anonymity, the head of the Treasury Department of a fourth-generation private bank told TBS, "We now have to argue with customers about the price of the dollar. To reduce the rate of LC settlement, we are trying to give low rates to exporters for encashing export payments. But the market is now going towards some turbulence and the main reason for this is that we have to pay very high rates for buying remittance dollars from exchange houses."

He said, "Last Thursday I bought some dollars from exchange houses at the rate of Tk110.75 due to high pressure of payments. I couldn't buy any dollars from there as the price increased more on Sunday and Monday. Now, the maximum rate of Tk112 has to be paid to buy dollars from the exchange houses."

Meanwhile, the exchange houses said that they too are collecting remittance dollars at high rates. A visit to the websites of several exchange houses on Monday showed that Moneygram is buying remittance dollars from expatriates at Tk108.90, Small World at Tk110.50 and Western Union at Tk106.91. 

Last Thursday, Western Union bought the dollar at the same rate, while MoneyGram bought the dollar at Tk103.95 and Small World at Tk109.41. 

Banks are now trying to survive with Export Payment Encash and dollars received from their own remittances. Unless forced, they are not willing to buy dollars from exchange houses at a higher price. Besides, the pressure of LC settlement has also declined a little compared to earlier and remittances coming through banking channels are increasing.

Due to the ongoing dollar shortage, the LC settlement rate reached a maximum of Tk112 on 8 August. On the same day, the central bank ordered the removal of the treasury heads of five local banks and one foreign bank for making an excessive profit from dollar trade.

$1 now costs Tk111 in open market

Aside from banks, the dollar price has also increased in the kerb market. On Monday, the country's money changers sold the greenback at a rate of Tk111. Last Thursday, they sold per dollar at Tk109.

An official of a money changer firm said, "The Money Changers' Association set Monday's buying price of the dollar at Tk108.25 and selling price at Tk109.75. However, many traded dollars at rates higher than the fixed price."

The central bank recently suspended the operations of five money changers due to irregularities and warned 42 money changers on various charges. 

In addition, the Bangladesh Financial Intelligence Unit of the central bank has launched an investigation to find out whether any money changer is involved in money laundering or hundi after various irregularities were found in the inspection. Bank account details of 28 money changers have been subpoenaed by the anti-money laundering unit.