Most banks still charging higher dollar rates for LCs

Most banks allegedly opened letters of credit (LCs) yesterday at higher dollar prices than the rates set by the Bangladesh Bank for the interbank money market.

To justify this, the banks said they had to buy dollars at higher prices and, also, they had not yet received any written instructions from the money market regulator.

The central bank on Sunday fixed the dollar price at all levels, setting Tk89.15 for opening an LC. Although many banks did not open LCs of a large size, most of them opened small LCs at dollar higher rates.

A senior official at the treasury department of a top remittance receiving bank said it opened LCs at the rate of Tk91 on Monday. At the same time, a fourth generation bank opened LCs at Tk96, which is much higher than the rate fixed by the central bank.

Earlier on Sunday, the central bank had verbally set the selling rate at Tk89 per US dollar and Bank Bills for Collection (BC) at Tk89.15 per dollar in the interbank currency market. Banks were supposed to sell dollars to importers at that price.

Shaheen Iqbal, an officer of the treasury department at Brac Bank, told The Business Standard, "The Bangladesh Bank fixed the dollar rate on Sunday. And we opened LCs at the same rate today (Monday).

"However, we have only very recently opened necessary LCs. It will be very difficult for us to open LCs at this rate because many banks have to buy dollars at higher prices."

He added it has been very difficult for banks to receive remittances at this rate. In such a situation, expatriates are sending remittances to the country through channels where they are getting higher prices.

The central bank held a meeting with the Association of Bankers, Bangladesh (ABB) and Bangladesh Foreign Exchange Dealers Association (BAFEDA) on Thursday to discuss the volatile foreign exchange market.

At the meeting presided over by Bangladesh Bank Governor Fazle Kabir, the banks took this decision on the advice of the central bank.  

Several bankers present at the meeting said the meeting was convened to overcome the dollar crisis in the market. However, the decision reached at the meeting will only exacerbate the crisis because remittances will not come to the country through the legal channels at such a low price.

Export earnings will also be hampered by the low value of the dollar. Without acknowledging the reality, the central bank still wants to keep the dollar price below Tk90, though in reality the dollar is being traded above Tk95, they also said.

Golam Awlia, managing director of NRBC Bank, told TBS that it remains to be seen as to what extent the rate set by the central bank for the dollar can be implemented.

"However, it can be maintained if the central bank provides proper supply as per demand. Since there was a rate in the market, it can't be suddenly reduced because many banks have had to buy dollars at a higher price," he added.

Moklesur Rahman, an official in the treasury department of the state-owned Agrani Bank, said the bank has not yet received a formal letter from the central bank. Besides, it did not have to open any LC on Monday as the international market was closed on Saturday and Sunday.