Dollar price for LC settlement rising despite fall in kerb market

The price of dollar for import payments against letters of credit has been on the rise despite a fall in the kerb market.

On Tuesday, banks charged importers up to Tk107 for a dollar, which was Tk105 last week, while the interbank exchange rate has been constant at Tk94.70 for the last eight days.

The greenback fell to Tk107 in the kerb market on Tuesday from a record  high of Tk112 on 26 July, thanks to the ongoing central bank's raids and other regulatory measures.

Bankers claimed that they are now forced to collect dollars at the rate of up to TK112 from the Bangladeshi expatriates abroad, but selling the currency to local importers with a great loss – only to continue business amid the critical situation. 

"Currently, the country has a huge demand for dollars. On the other hand, most banks face dollar deficiency in their foreign accounts [Nostro Account]," head of treasury of a Shariah-based bank, who wished to remain unnamed, told The Business Standard.

"We are buying dollars from expatriate Bangladeshis at Tk112 per dollar today [Tuesday]. For imports involving large amounts, we offer a rate of Tk107."

He further added they consciously make the loss for the sake of their business continuation with their foreign counterparts.

"Building new business relationships with foreign banks is a lengthy and complex process. We must not spoil the relations."

The official, however, is hopeful that the crisis will fade out within the next few months, as the volume of imports has been on the decline.

Talking to The Business Standard, City Bank Treasury Department official Shah-Alam said although the interbank dollar rate is less than Tk95, they have to collect dollars at higher prices.

For the last two days, the bank collected dollars from Bangladeshi expatriates abroad at Tk110-112, he added.

Licence of 5 money exchange houses cancelled, 42 served show-cause notice

As part of market monitoring, the central bank has been conducting raids on different money exchange houses in the country for the last eight days. So far, it has cancelled the licence of five houses, while 42 others were served show-cause notice, Sirajul Islam, spokesperson of Bangladesh Bank, told the media on Tuesday (2 August).

"Decision on the money exchange houses who received show-cause notice will depend on their reply," he added.

He told the media that nine more exchangers were sealed off as they were doing business without licences.

"Law enforcement agencies will take action if irregularities are found in the exchange of dollars."

Expressing hope that the dollar market will be stable soon, the central bank official said due to the crisis, they have imposed several conditions on imports.

"Now the central bank's permission is required to open LC involving $3 million. Earlier, it was $5 million. We have now found many errors in LCs and we have not approved them. As a result, our imports decreased significantly in July compared to the previous month."

He further added that remittance influx and export earnings have also increased. "If we consider these aspects, we can say that the dollar market will become stable soon."

According to the latest data, the central bank sold dollars to commercial banks at the rate of Tk94.70. At the beginning of May, it was just TK86.45.