Banks in the country continue to purchase remittance at rates higher than the officially announced rates. On Monday, some private banks acquired remittance at Tk 124, as individuals sought dollars to pay their import and foreign debt dues. This is in contrast to the official dollar rate of Tk 111, which is fixed to meet import liabilities.
However, banks unable to meet the demanded dollar price set by remittance houses are reportedly not receiving remittance. This information was gathered from officials of the concerned banks.
As per bank announcements, the dollar's buying rate for remittance is Tk 110.5, with an additional two and a half per cent incentive from the government. Some banks are offering an extra two and a half per cent incentive. Consequently, the maximum dollar price reaches Tk 116. State-owned Sonali and Agrani Banks are purchasing remittances with an added two-and-a-half percent incentive. Moreover, certain private sector banks are acquiring remittance at higher rates, along with this incentive.
An official from the remittance department of state-owned Agrani Bank revealed to Prothom Alo that the Saudi company Al-Razi Exchange proposed to sell at Tk 123.5 per dollar. However, they refused to pay more than Tk 110.5. Subsequently, an Islamic bank purchased the remittance from Al-Razi Exchange at Tk 124.
Agrani Bank experienced a significant decline in remittances on Monday, receiving only USD 100,000 due to the lower dollar price, compared to the usual USD two million a day.
Simultaneously, the elevated dollar price is leading to an increase in remittance inflow through legal channels. In the first 9 days of this month (1-9 November), remittances through the banking channel amounted to USD 794 million, compared to USD 562.2 million in the same period last year.
Consequently, remittance has seen a rise of about 41 per cent during the same period this year, compared to the first 9 days of November last year.
Instructions to purchase remittance at fixed prices
During a meeting last Wednesday, the Bangladesh Foreign Exchange Dealers Association (BFEDA) and the Association of Bankers, Bangladesh (ABB) decided to maintain the purchase of dollars at Tk110.5 for remittance and export earnings, as previously practiced. With a 5 per cent incentive, the maximum dollar price will be Tk 116.
However, for import liabilities, the dollar's price will be capped at a maximum of Tk 111. This directive is mandatory for all banks to follow. The managing directors of 16 prominent banks engaged in foreign trade reiterated their commitment to comply with the established dollar price in a meeting with the central bank on Thursday. They emphasised the need for strict supervision by the central bank to ensure adherence.
Subsequently, Bangladesh Bank convened a meeting with local representatives of top-level remittance houses yesterday. This gathering included officials from Western Union, Instant Cash, Small World, Transfast, Moneygram, Ria, NEC Money Transfer, Merchant Trade, and other remittance houses. During the meeting, instructions were issued to collect remittances at the fixed prices set by ABB and BFEDA.
Officials from two remittance houses present at the meeting told Prothom Alo, "Directions have been given to collect remittance at the fixed prices set by ABB and BFEDA. We collect remittances according to the banks' requirements, purchasing at a higher price for banks with high demand."
Officials angry over the meeting
BFEDA and ABB have consistently set the dollar price following Bangladesh Bank's instructions. Despite holding regular meetings, discussions about the supply and demand for dollars are notably absent.
A record of an online meeting revealed that one participant expressed frustration, questioning the purpose of the meeting if it primarily serves to provide instructions rather than engaging in negotiations for price determination. The meeting, it seemed, was merely a platform to convey the price established by the central bank.
Since September of the previous year, BFEDA and ABB have been tasked with determining the dollar price based on Bangladesh Bank's guidance.
An official from Bangladesh Bank involved in the price determination process stated their support for gradually transitioning to market-based prices. To facilitate this shift, they have, with the governor's approval, issued instructions to incrementally increase the price by 50 paisa to 1 taka in each meeting.
However, in hindsight, it appears that this decision may not have been the most effective. The official noted that if the responsibility for setting prices had been left to the banks, the market might have stabilised by now.