Banks charge Tk118 per dollar for import, Kerb market rate hits Tk125

A day after the central bank's significant depreciation of the taka, banks on Thursday (9 May) charged Tk1-Tk2 more per dollar for import letter of credit (LC) settlements. Also, the dollar rate in the kerb market surged by Tk7 within a single day.

Officials of several state-owned and private banks said banks charged Tk116-Tk116.5 for settling import LCs on Wednesday, which was Tk118 on the day.

The greenback became costlier by Tk7 as the taka saw its biggest single-day devaluation on Wednesday. The central bank introduced a crawling peg system for buying and selling foreign currencies, setting the Crawling Peg Mid-Rate (CPMR) at Tk117 per US dollar from the existing Tk110. With this decision, banks can now buy and sell US dollars at their own rates depending on the market.

A managing director of a private bank, seeking anonymity, told TBS that the dollar price for import settlement is determined by the specific dollar needs of customers.

He said, "On Wednesday, we processed LC payments for small importers at a minimum rate of Tk115.5. However, dollars were provided to many larger clients at the maximum rate of Tk117 because we had to acquire remittance dollars at a higher rate to meet the large payment obligations.

"However, following the central bank's announcement, banks have slightly raised the dollar price for import settlement. The central bank allowed banks to adjust the dollar price independently."

Kerb market rate hits Tk125

Money changers reported a substantial surge in the dollar price in the kerb market on Thursday, with the greenback selling at Tk125 compared to Tk118 the previous day.

Ripon Mia, a dollar trader in the open market, said despite the price surge, dollars are not readily available as per demand.

"Kerb market traders are more interested in buying dollars now. Everyone wants to buy cheap dollars from customers but no trader is selling it below Tk125," said Ripon, adding that the situation is feared to be chaotic for a few days.

"On Thursday, traders bought dollars from customers at a maximum rate of Tk122," he added.

Mahfuzur Rahman, who plans to go to Thailand for medical treatment, visited Motijheel on Thursday to purchase retail dollars.

He told TBS, "I am scheduled to depart for Thailand next Sunday. Today, I came to buy $500. I visited at least six money exchanges, but none were selling dollars. I also visited Exim and Agrani banks and presented my visa passport, but they said direct dollar sales were not possible. Later, I contacted a familiar banker at UCB, who informed me that the banks are hesitant to sell dollars without an account."

Several public and private banks' treasury officials said they are selling retail dollars at branches, albeit only to recognised customers. On Thursday, most banks sold retail dollars at Tk118.

MS Zaman, president of the Money Changers Association of Bangladesh, welcomed the central bank's decision to raise the dollar rate but noted that it will take some time to observe its impact on the market.

"Our natural inclination is that when the price of something rises, we tend to hold onto it, anticipating further increases. This behaviour is not only observed among regular customers but also among money changers. That is why there was reduced dollar volume in the market on Thursday," he said, expressing hope that the market will gradually stabilise.

Remittance dollar rate also ticks up

According to another official from a private bank, banks acquired remittance dollars at the highest rate of Tk116.50 on Wednesday, whereas dollars were obtainable at even lower prices. However, banks had to pay an average of Tk117 to procure these dollars on Thursday.

He said, "On Thursday morning, exchange houses attempted to elevate remittance rates by over Tk1. Nonetheless, by day's end, banks displayed less interest in purchasing dollars at higher prices, prompting exchange houses to lower their rates as well."

Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank Limited, said, "We need to wait a few more days to gauge the market's response to the central bank's official increase in the dollar price. Although exchange houses tried to sell remittance dollars at a higher rate, they could do so by day's end."

Exporters rejoice at the dollar rate surge

Exporters are reaping the benefits of the escalated dollar price as they are now getting Tk117 per dollar instead of the previous Tk110.

A bank official said, "Previously, prominent exporters would negotiate with us to sell dollars at a higher rate than that set by the central bank. Many succeeded in selling dollars at an increased price. However, smaller exporters lacked such bargaining power. With the official appreciation of the dollar, smaller exporters now stand to gain more."

At a recent event in the capital, Syed Nasim Manzur, managing director of Apex Footwear Ltd, said as the official greenback rate approaches the market rate, it presents favourable conditions for exporters. 

However, the rise in the dollar's value also leads to increased transportation costs. Additionally, the cost of fuel is expected to escalate with further increases in import costs, he said.

Furthermore, traders will face higher expenses for capital machinery. Although real wages may rise, productivity won't see an immediate increase. Overall, he anticipates an increase in the cost of doing business, he said.

This seasoned businessman also noted that if the dollar price increases, the government's import expenditure will rise as well.

Tonmoy Modak is a Staff Correspondent at The Business Standard who covers banking and financial sector. He can be reached at [email protected].

MD Sakhawat is a staff correspondent at The Business Standard who covers financial sector, bank and financial institutions. He can be reached at [email protected].