Disbursement of remittance incentive caught in paper work

Bangladesh Bank yesterday asked banks to fast-track paper work regarding the disbursement of cash incentives on remittance with a view to encouraging remitters to send their hard-earned money through legal channels.

The central bank also asked remittance recipient banks to send documents submitted by the beneficiaries in Bangladesh to sender banks as quickly as possible so that the disbursement of cash support on funds of more than $5,000 can be easily disbursed.

Recipients have to submit documents within two months after receiving the fund in contrast to the 15-day period previously provided for claiming cash incentives for amounts of $5,000 or above. They don't need to submit any documents if the amount is less than $5,000.

There was no time limit to send the documents to the sender banks by the recipient banks. 

But the process to disburse the incentive is being disrupted as recipient banks are not sending the papers to sender banks despite receiving them from the beneficiaries in Bangladesh within the stipulated time, the central bank said in a notice yesterday.

As a result, there have been delays in releasing the incentive in favour of the beneficiaries, it said.

Against this backdrop, lenders have been asked to settle the whole process in the quickest possible manner so that recipients can smoothly avail the incentive, according to the central bank notice.

Zahid Hussain, a former lead economist of the World Bank in Dhaka, said a better solution would be if the 2 per cent incentive is added to the amount sent automatically through a 2 per cent depreciation of the local currency. 

He said the cost of administering the policy is high whereas it could be made zero.

"If the process were automatic, bankers would not have to spend too much time documenting transactions, which are needed to claim reimbursements from the central bank.

"At the same time, it would have cut the burden on the budget as well because the government has to give subsidies on it," Hussain added.

The government has set aside Tk 3,060 crore to subsidise remittance for the current fiscal year, unchanged from the last fiscal year.

In June last year, the government introduced the 2 per cent cash subsidy for remitters to encourage them to send money home through legal channels. This has given a boost to remittance inflow.

Emranul Huq, managing director of Dhaka Bank, said beneficiaries face no delays when they submit required documents. The problems only surface when any of document submitted by a beneficiary does not match those at the sending banks' end.

Rahel Ahmed, managing director of Prime Bank, said the disbursement of the incentive has become much simpler compared to the initial months when it was introduced.

Remittance hit an all-time high of $18.2 billion in the just-concluded fiscal year, giving much-needed breathing space to the government to manage the macroeconomic state of affairs hit hard by the ongoing financial whiplash.

The inflows were 10.87 per cent higher than in fiscal 2018-19, according to data from the central bank.

The momentum continued in the current fiscal year as well. Migrant workers sent home 36 per cent higher remittance in August, in a respite for their families as well as the ailing economy amid the coronavirus pandemic.

Last month, they remitted $1.96 billion against $1.44 billion in the same month a year ago, data from Bangladesh Bank shows.

This was the second straight month in the current fiscal year that they sent a higher amount of remittance. The inflow of remittance grew 50 per cent year-on-year to $4.56 billion in the July-August period.

About 51 per cent remittance enters the country through legal channels while the remaining 49 per cent comes through informal channels, Finance Minister AHM Mustafa Kamal said on September 2, citing a previous study.

About 1.3 crore Bangladeshis are working abroad and their transferring of money back home has become a pillar of strength for the economy.