Bangladesh has witnessed a significant surge in inward remittances through banking channels, reaching a 35-month high of $2.2 billion in June this year. The remarkable increase can be primarily attributed to the festive occasion of Eid-ul-Adha and the rising dollar rates for remitters.
According to the Bangladesh Bank, out of the total remittance receipts last month, $447 million was processed through six state-owned banks. Private sector banks, numbering 43, contributed the highest amount of $1.75 billion, while nine foreign banks received a combined sum of $6 million in remittances.
This surge in remittance inflows is particularly noteworthy when compared to the data from June last year, where expatriate Bangladeshis sent home $1.84 billion through banking channels. Additionally, it is worth mentioning that the highest remittance inflow of $2.6 billion was recorded in July 2020.
Experts believe that the closure of Hundi, an illegal remittance channel, due to transport suspensions amid the coronavirus pandemic, has significantly contributed to increased remittance flows through legal channels. The closure of this illicit system compelled individuals to opt for legal means, boosting the remittance industry.
Data from the central bank reveals that Bangladesh has received a total of $21.61 billion in remittances in FY23, marking a 2.75% increase compared to the previous fiscal year’s $21.03 billion. This growth reflects the positive impact of the concerted efforts made to enhance the flow of remittances into the country.
High-ranking officials from various private banks have attributed the higher remittance inflows during the period leading up to Eid-ul-Adha to the generosity of expatriates who predominantly sent additional funds to their families in the country. The customs and traditions associated with Eid festivals often lead to an increased flow of remittance income into the country, and this year was no exception.
Notably, there was not a significant increase in expatriate income before Eid-ul-Fitr this year, celebrated in April. However, a considerable rise in expatriate income was observed during Eid-ul-Adha, underscoring the impact of cultural and religious practices on remittance patterns.
Emranul Huq, the managing director and CEO of Dhaka Bank, emphasized that remitters sent more dollars to their families and relatives due to the month of Eid. He expressed his belief in the continuation of this trend in the future. Furthermore, the increasing number of workers from Bangladesh employed in various countries, particularly in the Middle East, has also contributed to the overall growth in remittance income for the country.
The banking sector professionals attribute the higher remittance inflows during Eid-ul-Adha to the fact that many expatriate Bangladeshis performed animal sacrifices in the country. Additionally, organizations in Middle Eastern countries also sent funds to Bangladesh for the occasion, further bolstering the remittance industry.
As always, Islami Bank has maintained its position at the top in terms of facilitating expatriate income to the country, while the state-owned Agrani Bank processed the second-highest amount. The private sector Premier Bank secured the third position in terms of handling expatriate income.
Selim RF Hussain, the chairman of the Association of Bankers, Bangladesh (ABB), and managing director of Brac Bank, has cautioned against making predictions based on only one month’s remittance data. Hussain stressed the need to analyze the data for at least 6-9 months to observe an increasing trend in remittances before concluding that the situation has indeed improved. Thus, it is necessary to wait for a few more months to assess the remittance situation accurately.
Despite the latest decision by the ABB and the Bangladesh Foreign Exchange Dealers’ Association (BAFEDA) allowing banks in Bangladesh to pay a maximum rate of Tk108.50 against the remittance dollar, many banks continue to offer higher rates for remittances. Some banks are providing rates as high as Tk112-113 for each dollar of remittance.
Apart from banks, several remittance houses are also openly offering higher rates for remittance dollars. International remittance houses such as Moneygram and TapTap advertise dollar rates of up to Tk111.50 on their websites. Most banks in Bangladesh have agreements with these remittance houses to handle remittances.
Managing directors of banks expressing concern about the higher rates being offered by other banks claim that these banks receive more remittances because of the higher rates they offer. In contrast, banks that comply with the established rates receive fewer remittances. This situation affects the demand and supply of foreign exchange for compliant banks.
A private bank, for instance, managed to bring in remittances worth $474 million in a year, out of which $134 million was received during the month of June alone. This indicates that the bank received 28% of its yearly remittances in just one month.
Officials from various banks, who chose to remain anonymous, alleged that banks paying higher rates for remittances are not reporting these transactions to the central bank and are finding ways to conceal this information. They often adjust the additional cost of the remittance dollar by considering it as the interest cost of creating a fictitious deposit in a customer’s name.
However, according to Bafeda’s information, the weighted average cost of buying dollars on Sunday was Tk107.82 for banks. These officials claim that the central bank is turning a blind eye to the fact that some banks are paying higher rates for remittances.
In response to various reports published regarding higher dollar rates for remittances, reaching up to Tk114, the central bank held a meeting with 10 banks in March. These banks were strictly instructed not to pay higher rates, and punitive action was threatened against those found violating the rules. Subsequently, the central bank conducted inspections of forex transactions carried out by several banks. However, it is noteworthy that recently, the central bank has increased its reserves by purchasing dollars from some banks, even if they were offering higher rates.