Star Business Report

Two top bodies of bankers yesterday asked lenders not to offer over Tk 115 for one US dollar when conducting the exchange with Bangladeshi migrants working abroad, according to insiders.

The decision comes against the backdrop of some banks offering as much as Tk 124 for a greenback in an effort to encourage remitters to send their earnings home through formal channels instead of informal money transfer systems called "hundi".

The higher rates are also an attempt to mitigate US dollar shortages at banks.

Amidst all this, allegations arose over banks selling the greenback to importers at a rate higher than that fixed by the two top bodies of bankers last week.

The Bangladesh Foreign Exchange Dealers' Association (BAFEDA) and Association of Bankers' Bangladesh (ABB) had fixed it at Tk 111 per US dollar.

At the meeting on October 31, the two bodies decided to buy each US dollar from exporters at Tk 110.5 from the next day, effectively hiking the then rate by Tk 0.5.

The BAFEDA-ABB also said banks "may at their own options and cost absorption, continue to practice offering incentives for buying wage earners remittances".

At a previous meeting on October 22, both the associations decided to let banks offer a 2.5 percent higher purchase rate at their own expense when availing US dollars from remitters.

They were, however, asked to maintain proper records for verification by the banking regulator.

"The dollar rate should not go past Tk 115," said a chief executive of a private bank after the meeting.

Besides, remitters get a 2.5 percent incentive from the government on the amount of money they send through banks, he said.

The development comes at a time when Bangladesh's foreign exchange market has been suffering from volatility and taka is losing its value to foreign currencies, namely the US dollar, as inflow continues to lag behind the overall outflow for imports and other payments.

Taka lost nearly 30 percent in value over the last one and a half years.

Inflow of remittance, a major source of foreign currency for Bangladesh, declined 4.3 percent year-on-year to $6.8 billion in the July-October period of the current fiscal year of 2023-24, showed Bangladesh Bank data.