How can some banks collect more remittances offering higher rates?

SOME banks are seeing extraordinary growth in remittance inflows thanks to offering at least Tk 4 more than the permitted rate per dollar.

The Bangladesh Foreign Exchange Dealers Association (BAFEDA) and the Association of Bankers Bangladesh (ABB) have stipulated that a maximum of Tk 116 can be offered per dollar for inward remittance.

However, many banks are collecting remittances at Tk 120 to Tk 125 per dollar. Industry insiders said the banks offering higher rates than the set rate receive more remittances.

In the first 17 days of November, Islami Bank received the highest remittance of $206 million, followed by Pubali Bank ($122 million), Al-Arafah Islami Bank ($66 million), Brac Bank ($52 million) and Eastern Bank ($48 million).

During the period, the remittance receipts of state banks were below $35 million: Janata Bank received $29.02 million, Sonali $19.85 million, Agrani $26.27 million and Rupali $3.34 million. Bangladeshi expatriates are sending remittances through those banks that are offering high dollar rates.

During the said days of the month, Mutual Trust Bank received $20.98 million as remittance, City Bank received $25.13 million and Prime Bank received only $3.06 million.

All three banks’ officials said the inflows were much lower than in previous months. Industry insiders blamed the central bank for the indiscipline in the forex market.

That indiscipline has helped hundi, an illegal cross-border transaction, to flourish. During August and September, the Bangladesh Bank inspected some banks due to their alleged involvement in dollar rate manipulation.

The remittance inflows rose in October due to the relaxed monitoring of the BB. Fixing the dollar rate has failed to cool down the forex market.

A floating exchange rate is essential for our forex market right now. If it is not possible then the central bank should introduce a managed floating exchange rate.