- The banks that follow verbal rules of BB are losing but those offering higher rates winning
- Banks are supposed to pay up to Tk110 per dollar for remittances
- According to bankers, some banks pay max Tk116 to collect remittances
- Exchange houses also compete among themselves to collect remittance
- They collect remittances at higher rates, sell them to banks
- Due to this, the banks that offer official rates are not getting remittances as before
While the inflow of remittances through some banks has plummeted to nearly one-tenth of their usual levels, the opposite holds true for others.
Take, for instance, Dutch-Bangla Bank, once ranked among the top five banks in terms of handling inbound remittances. In normal circumstances, it receives an average of $220-230 million each month.
But its remittance has dwindled by around 80%, with only $38 million received this August.
This has also been the case within state-owned banks. For instance, just a year ago, Sonali Bank averaged $120-130 million in remittances, but this figure plummeted to $44 million in August. Remittances of Agrani and Rupali declined by 50-60% compared to the normal time.
Md Afzal Karim, chairman of the Bangladesh Foreign Exchange Dealers' Association (Bafeda) and managing director of Sonali Bank, said, "I have always wanted to follow the rules and regulations properly as I am serving as Bafeda chairman. You all know very well why our remittance income has dropped so much. No further comment should be made on this matter."
Conversely, remittance channels in certain banks have witnessed a phenomenal surge, leaving many other banks puzzled.
For example, until the middle of last year, Social Islami Bank received an average monthly remittance of $15-20 million. It skyrocketed to $127 million in August this year.
Answering the question "why the remittance growth is higher", Zafar Alam, managing director of Social Islami Bank, told TBS, "Our remittance growth is slightly better than other banks. This is because we have taken some steps to increase the inflow. We provide an e-account opening facility for all. We have held gatherings with expatriate brothers in countries like the UAE, Malaysia, and Singapore.
"Besides, we have introduced several facilities, including pick-up and drop-off service from the airport to Dhaka city and discounts on treatment at SIBL Hospital for expatriates who maintain accounts with us. Due to these reasons, our remittances have increased."
Similarly, Dhaka Bank, which used to receive $3-4 million in monthly remittances during normal times, saw an uptick to about $26 million in August.
Emranul Huq, managing director at Dhaka Bank, said, "We have taken several steps to bring about growth in remittances, including increasing campaigns. Besides, we followed other banks to increase remittance income."
Shahjalal Islami Bank, which used to receive $3-4 million in remittances every month before the dollar market volatility, received $34 million last month. In the same month, Brac Bank received $89 million, compared to $30-40 million it had received on average earlier.
Upon analysing data from the Bangladesh Bank, TBS found that at least half of the around 60 banks operating in the country experienced significant declines in their inward remittances, while the others managed to attract substantial remittance inflows. The question is: Why is there such a stark contrast within the same industry in a single country?
Central bank takes steps against dollar rate violations
A high-ranking official at the Bangladesh Bank said banks are still competing on remittance dollar rates. This race, which started in the middle of last year, is not stopping yet. Amidst all these, the banks that follow the verbal rules of the central bank are losing, but the banks offering higher ratings are winning.
At present, banks are supposed to pay a maximum of Tk110 per dollar for remittances. But, according to bankers, some banks are paying the exchange houses up to Tk116 to collect remittances.
Exchange houses are also competing among themselves to collect remittance dollars. They are collecting remittances at higher rates and selling them to banks. Due to this, the banks that offer official rates are not getting remittances as before.
The central bank has said at various times that it has taken action against the responsible banks. Recently, the central bank has written to 10 banks' treasury department heads, asking why disciplinary action should not be taken against them.
Bankers said the law, which the letter mentions, provides for a fine ranging from a minimum of Tk25,000 to a maximum of Tk2 lakh.
Another central bank official said they are analysing banks' dollar buying and selling rates. Some banks bought and sold dollars at a higher rate, while others prepared false reports about the dollar rate. More banks may come under this type of punishment.
"We also found several cases where banks hid their liquidity by doing forward sales of forex. Previously, there were no rules on how forward dollar buying and selling could be done. We made a new rule in this regard last Sunday. Now, banks can fix the rate of forward dollars by adding the maximum six months' moving average rate of treasury bill (SMART) + 5% per year with the current dollar rate," he added.
At present, the SMART rate is 7.14%. Banks can charge a maximum of 12.14% additional with the present dollar rate in cases of forward dollar buy and sell.
The central bank has limited the forward dollar selling timeline for a maximum of three months. Banks can now sell forward dollars for a three-month period.