How state-owned banks are boosting remittance inflows

Five state-owned commercial and specialised banks – Agrani, Sonali, Janata, Rupali, and Krishi – received more than double the usual amount of remittances in three months from August to October this year, according to central bank data.

Sector insiders attribute this to the banks offering higher exchange rates for remittances to address their dollar shortages.

While the central bank has set the dollar rate at Tk120, the state-owned banks are paying between Tk122.20 and Tk122.40 per dollar. In contrast, private banks are offering rates between Tk122 and Tk122.20 per dollar, they say.

The banks are using the extra dollars to settle overdue payments on government import letters of credit (LCs), and this will have a positive impact on the overall banking sector, they added.

According to central bank data, in FY24, remittances to the country's banks totaled $23.92 billion, with state-owned banks receiving $3.4 billion, or 14.23% of the total.

In the three months following the interim government's takeover, the banking sector received $7.03 billion in remittances from August to October of FY25, with state-owned banks receiving $2.06 billion, or 29.27% of the total.

In other words, state-owned banks received 60% of the total remittances they received in FY24 during the period from August to October of FY25.

Banking sector insiders say the bank that offers the highest rate receives the highest remittance. State-owned banks have seized this opportunity to meet their needs.

Several senior officials at the state-owned banks told TBS that most of the import LCs opened by the government are processed through these banks. A dollar crisis that began in mid-2022, coupled with insufficient dollar supplies from the central bank, led to many import payments being overdue.

Ahsan H Mansur, the new central bank governor appointed by the interim government in August, has focused on clearing these overdue payments.

The governor told reporters that the overdue payments in state-owned banks exceeded $2 billion. However, he emphasised that no dollars would be drawn from the central bank's reserves to settle these payments; the banks would have to manage these dollars on their own.

Md Shawkat Ali Khan, CEO and managing director of Sonali Bank, told TBS that the bank is collecting remittance dollars while adhering to all central bank directives.

"Customer confidence in our bank has of late improved significantly. Additionally, we have enhanced our service quality, which is among the main reasons for the surge in our remittance inflow," he said.

He added, "The remittance dollars are being used to settle overdue government import LC payments and to open new LCs, as instructed by the Bangladesh Bank."

According to officials at state-owned banks, these banks typically cannot compete with private banks in collecting export proceeds in dollars. As a result, they have two primary avenues for acquiring dollars: the interbank market and remittances.

To clear overdue import LC payments, state-owned banks have been offering slightly higher rates in competition with other banks, which has led to a surge in their remittance inflows, the officials say.

The country head of one of the leading foreign exchange houses operating in Bangladesh said the exchange house collects remittances from expatriates in various countries and provides remittance dollars to the bank that offers the highest rate.

"In the past, private banks collected remittances at higher rates, but in recent months, state-owned banks have been acquiring a significant amount of dollars from us," he added.

He added that on 7 November remittance dollars were sold to banks at a rate of Tk122.20 to Tk122.40 per dollar. While the remittance dollar rate was 10-20 basis points higher until mid-October, it has since decreased.

Bangladesh Bank data show that in September this year, these five state-owned banks received $748 million in remittances, compared to only $154 million in the same month of 2024. This marks an increase of around 386% compared to September of last year.

Among them, Agrani Bank's remittance inflow rose from $45 million in September last year to $322 million this year, Rupali Bank's increased from $7 million to $114 million, Sonali Bank's grew from $33 million to $95 million, Janata Bank's increased from $33 million to $106 million, and Krishi Bank's rose from $35 million to $110 million.

Impact on private banks

Remittances increased by 43% in the three months from August to October this year compared to the same period last year, with most of the increase received by state-owned banks. The remittance inflow to private banks has not seen much growth.

According to central bank data, private banks received an average of $1.71 billion in remittances per month in FY24. However, despite the overall growth in remittances during August-October of FY25, private banks received an average of $1.66 billion per month during these months, which is lower than the average remittances of the previous fiscal year.

A deputy managing director of a leading private bank said his bank is not facing any problem as state-owned banks has been receiving more remittances in recent months.

"As we have already managed dollars for our overdue payments, we don't have any additional demand at the moment. Additionally, the demand for opening import LCs has significantly decreased compared to previous months," he added.

He further stated that the dollar rate would have been closer to the Tk120 set by the central bank if state-owned banks had not competed to collect remittance dollars.

However, he expressed the hope that the pressure from overdue payments in state-owned banks has now significantly decreased. If this issue is fully resolved, the entire banking sector will benefit.

He explained that settling payment commitments with foreign correspondent banks would improve the country's image abroad and increase trade credit limits, ultimately facilitating the management of both offshore and onshore accounts.

He said the new governor has already met hundreds of foreign correspondent banks to ensure payment. As a result, even if state-owned banks collect remittances by offering slightly higher rates, it will have a positive impact on the economy.