Dollars flow back into banks through RFCD accounts

Dollars and other foreign currencies that were once stored at homes have started to flow back into the banks against the backdrop of up to 7 per cent interest on dollars deposited in resident foreign currency deposit (RFCD) accounts. 

Besides, the depositors are allowed to use dollars from the RFCD accounts in home and abroad without any limitations. A maximum of $5,000 dollars can be used from an RFCD account during each of the foreign trips. 

A number of banks have rolled out different packages to encourage their clients to deposit dollars held at home. It led to an increase in cash dollar reserves in the banks from $28 million to $32 million within a month.

However, it is yet to bounce back to the pre-crisis level as the banks used to hold a dollar reserve of $50 billion in cash before the dollar crisis. 

An opposite scenario prevails in cases of informal currency exchange as there is no impact of rising dollar reserves in the banks on the kerb market and each of the dollars is still changing hands for Tk 120.

In a circular on 3 December last year, the central bank introduced extended facilities for RFCD accounts, in an effort to allure clients to divert the dollars to the banks. Later,  the City Bank and some others took extensive measures to open RFCD accounts. 

At present, a majority of the cash dollars are held by Eastern, City, BRAC, Dutch-Bangla, Prime, Pubali, Standard Chartered, HSBC, Islami, and some other banks. In addition to the USD, the clients can open RFCD accounts for Pounds, Euros, Australian Dollars, Canadian Dollars, and Singapore Dollars.

Syed Mahbubur Rahman, managing director of Mutual Trust Bank (MTB), said the amount of dollar deposits is rising in the banks in the aftermath of the central bank policy. Those who acquired dollars through legitimate means are returning to the banks to get interests. But those who amassed dollars through illegal channels may remain outside the banking system. 

The MTB MD further said they would take various initiatives, including promotional campaigns, to increase the flow of cash dollars to the banks. 

Any Bangladeshi citizen aged 18 or above returning from abroad can open an RFCD account in the banks. Here, the date and time of foreign trips will not be considered. The clients have to submit necessary documents, including passport, visa documents, two photographs, nominee information, National Identity Card (NID), and Tax Identification Number (TIN) to open a RFCD account. 

Instead of checkbooks, the bank authorities issue debit cards against the accounts. It requires no further approval while making transactions. 

A citizen can deposit up to $10,000 in an RFCD account for each overseas trip. If someone travels abroad for 10 times in a year, he or she can deposit up to $100,000 in his or her account without any necessary documents. 

However, the client needs to submit a declaration to the customs authorities if he wants to deposit more than $10,000 for a trip. 

As per the new instruction of the central bank, the banks are now offering up to 7 per cent of interest against the RFCD accounts.

The Bangladesh Bank instruction noted that the banks will pay at least one and a half per cent extra interest on the deposits, in addition to the benchmark rate. The secured overnight financing rate is now 5.31 per cent, which renders the interest rate on RFCD accounts at 6.81 percent.

Currently, a citizen can go abroad and spend a maximum of $12,000 dollars in a year. Those who purchase commodities from cross-border e-commerce sites cannot buy products worth more than $300 at a time. 

But there is no limit on overseas spending on the RFCD debit cards. The entire amount of the account can be used and it does not require the conventional approvals for spendings on education and health. The clients may collect $5,000 in cash from the banks during each of the trips. 

They can now buy products of any price at home and abroad. There is an opportunity to get two additional cards issued against a RFCD account and authorised dependents can use those without any hassle.

Also, with the facility, the clients can easily know the reasons for expenses through mobile SMS.  

The City Bank has incorporated facilities of payment of mobile roaming bills, credit card bills, duty for participation in meetings, seminars, and hotel bookings. Besides, the bank declared to waive the credit card duties and annual charges against the RFCD accounts opened by 31 March. 

The clients with a minimum deposit of $2,000 in their RFCD accounts can use the Amex lounge at the airports.  

Arup Haider, head of the Retail Banking Department at City Bank, said the RFCD accounts opened a new passage for overseas spending. It helps the clients spend additional dollars for education, health, and tourism abroad. Also, they are receiving attractive interest rates, duty-free cards, and airport lounge access facilities. It is a significant privilege for those who frequently travel abroad.