Banks asked to hike USD rate for inward remittance

Bangladesh Bank today verbally instructed some banks to offer a higher exchange rate for US dollars to lure remitters into sending their income through formal channels, according to a central bank official.

The move comes in a bid to bolster remittance inflow as the total value received this month will likely be less than what was collected in June, the official said.

This is because the recent five-day internet blackout affected remittance collection through banks and mobile financial services (MFS) in the country, which has been suffering from a forex crisis for more than two years now.

So, Bangladesh Bank verbally instructed about a dozen banks that receive a major portion of inward remittances to offer higher rates to migrant workers and non-resident Bangladeshis, the official added.

Central bank data shows Bangladesh received around $978 million in remittances as of July 13 while the overall inflow amounted to $2.54 billion in June, indicating lower collection.

Bangladesh Bank had introduced the crawling-peg system to determine foreign currency exchange rates in May, fixing the middle rate for US dollars at Tk 117 per greenback as prescribed by the International Monetary Fund (IMF).

As per the new exchange rate system, the banks could offer a maximum of Tk 118 per US dollar.

Now though, a good number of them immediately started offering rates of Tk 118.50 to Tk 118.70 per greenback upon receiving the instructions from the central bank.

A chief executive of a leading private commercial bank said his bank has already hiked the US dollar rate for inward remittance as the inflow in July did not reach expected levels likely due to the almost week-long internet outage.

He also said his bank is now trying to boost forex collection through inward remittance and export earnings as the US dollar rate will likely increase in the coming days.

Contacted, Bangladesh Bank Executive Director and Spokesperson Md Mezbaul Haque said he has no information regarding the central bank's instruction to hike the US dollar rate.

However, he did say remittance collection remains disrupted as the country's internet access is still not fully restored.

Against this backdrop, he pointed out that MFS clients were unable to operate their accounts amid the internet blackout, which was a major obstacle for sending remittance.

Officials of banks and MFS providers said their remittance collection remained suspended from midnight on July 18, when the internet outage began, until broadband services partially resumed on July 23.

Still, overall remittance mobilisation by banks and MFS providers remains lower than normal, with inward remittance having reached up to $100 million daily during regular times, they added.

Selim RF Hussain, managing director of BRAC Bank and chairman of the Association of Bankers Bangladesh, told this newspaper last week that overall remittance collection in July will likely be low due to the overall situation.

However, he also said they would likely get a better understanding on the situation this week.