Bafeda wants to execute ‘One Country One Exchange Rate’

The Bangladesh Foreign Exchange Dealers Association (Bafeda) wants to execute the "One Country One Exchange Rate" policy for bringing remittance through exchange houses.

Bafeda has recently sent a letter to the Bangladesh Bank, requesting to hold a meeting and take a decision in this regard.

In the letter, Bafeda said it was decided to determine a single exchange rate for the dollar for all banks to bring remittances, taking into account the current exchange rate in the market, and the banks will comply with it.

The executive committee of Bafada held a meeting on 24 August to determine the strategy for implementing this decision.

According to the letter, a technical team of Bafeda and the relevant departments of the Bangladesh Bank need to hold a meeting urgently before formulating guidelines for the member banks to implement "one country one exchange rate". The executive committee of Bafeda requested the Bangladesh Bank to hold the meeting as soon as possible.

The letter also said a five-member technical delegation of Bafeda will participate in the meeting with the relevant departments of the Bangladesh Bank.

The exchange houses are making more profit than usual due to the lack of a uniform exchange rate in case of bringing remittance dollars.

In India there is an organisation called Foreign Exchange Dealers' Association of India (FEDAI), which fixes a rate for banks to collect dollars from exchange houses. Banks follow their decisions accordingly. The organisation has a lot of manpower and the scope of their work is also very large.

According to sources at Bafeda, currently 90% of remittances come into the country through domestic and foreign exchange houses, which set the rate for selling remittance dollars to the banks.

As the demand for dollars has increased due to the ongoing crisis and the area of ​​dollar collection has become limited, the banks' interest in collecting dollars has increased. Competition among themselves has also increased.

Utilising the opportunity, the exchange houses are setting the dollar price much higher than normal for their convenience. Consequently, the banks are also selling the dollar at a high price.

Bafeda wants to set a dollar rate on behalf of the country's banks to collect dollars from the exchange houses at a reasonable price, which they term "One Country One Exchange Rate".

If the rate is implemented, all the banks will buy dollars from the exchange houses at a fixed price. As a result, competition among banks will decrease and the dollar market will stabilise, said the bankers. 

The central bank has not yet informed Bafeda about when the meeting will be held. However, the Bafeda officials expressed their hope that the Bangladesh Bank will fix a date for the meeting very soon.

Recently, the Association of Bankers, Bangladesh (ABB), an organisation of managing directors of the country's public and private banks, has also decided to implement "One Country One Exchange Rate". The top officials of the banks agreed that they would verbally inform the central bank of their decision.

A source present at the meeting said the bank officials at the meeting signed a letter of consent to accept these decisions. In view of this decision, Bafeda has given a letter to hold a meeting with the Bangladesh Bank.

Sources at Bafeda told TBS that a decision to fix a rate daily for bringing in remittance, considering the market conditions, was taken in July in the first Bankers' Committee meeting after the current governor of central bank joined.

"We need the Bangladesh Bank's help to implement this decision. Now we want to discuss what kind of assistance the central bank will provide, which formula Bafeda will use to determine the rate, and how the daily rate will be published," a Bafeda member told TBS on condition of anonymity.

The banks said in a meeting of the ABB, Bafeda and the Bangladesh Bank, it was decided that the banks will be able to earn a maximum of Tk1 per dollar.

The export proceeds and the remittances are the main sources of dollars for the banks. Banks fix the buying price of dollars by calculating the weighted average of the cost of collecting dollars through these sources.

Currently, most of the banks pay around Tk99 per dollar for encashing export payment.

Around 60% of the dollars required for a bank's operation comes from exporters. The remaining 40% of their demand is met by remittance dollars.

Currently, banks have been paying Tk112-113 per dollar to collect remittance dollars from exchange houses.

As the banks pay way less for encashing export proceeds than they do for buying remittance dollars, banks currently have to settle LCs at Tk108 per dollar.

If the dollar price of remittances is fixed, banks will be able to buy dollars at a lower price and keep the dollar price lower in LC settlements as well. Which will affect the price of imported goods in the country, said experts.