Banks have more than four billion dollar holdings: BB governor

Banks in the country have more than $4 billion holdings, and by depositing these dollars in Bangladesh Bank, they can take liquidity assistance, said Bangladesh Bank Governor Abdur Rouf Talukder.

He made the statement in response to a question regarding currency swap in a seminar organised at Bangladesh Institute of Bank Management today (7 March).

Stating that the country currently enjoys a surplus in its current account balance, the governor assured that if necessary, banks could withdraw dollars from their accounts. He emphasised that such a mechanism could facilitate an easier resolution of liquidity issues in the market.

He further said, "People have bought dollars and put them under the pillow. We have taken several initiatives to return these dollars to the banks.

"After returning home from travels abroad, anyone can deposit up to $10,000 in his or her resident foreign currency deposit [RFCD] account. Besides, if someone declares at the airport, Bangladesh Bank has given the opportunity to keep any amount of dollars in an account without question.

"There is a lot of discussion going on about the kerb market but we don't want to focus on it too much as only $40-50 million are transacted in the open market in a year, whereas $270 billion are transacted in the bank.

"So there will be no problem with our exchange rate even if transactions in the kerb market increase." 

Governor Abdur Rouf Talukder believes that the dollar price in the kerb market increases and decreases due to rumours.

Meanwhile, while discussing the foreign exchange market at the seminar, former Bangladesh Bank governor Mohammed Farashuddin addressed the need for a unified exchange rate in the country. He expressed concern over the disparity in the kerb market, suggesting that the difference in rates should not exceed Tk4. 

Farashuddin also questioned the effectiveness of the currency swap process, indicating that banks hold over $4 billion dollars more than necessary. He raised the question of whether these excess dollars in the hands of banks are contributing to money laundering and questioned the role of Bangladesh Bank in such scenarios.

He also urged Bangladesh Bank to work more effectively to mitigate inflation in the country. He pointed out that despite efforts, market manipulation by some unscrupulous business people and corrupt officials is hindering the reduction of inflation. 

The former governor further said that the government's campaign to collect rice at fixed prices faces challenges, with mill owners resorting to backdoor dealings to procure rice at lower prices, causing significant losses to local farmers. He suggested increasing the capacity of government storage facilities to 3 million metric tons to tackle this issue effectively.