Remittance hits 35-month high in June

Infographic: TBS

Bangladesh's inward remittances through banking channels reached a 35-month high of $2.2 billion in June this year, primarily attributed to Eid-ul-Adha and rising dollar rates for remitters.

Out of the total remittance receipts last month, $447 million was processed through six state-owned banks, according to the Bangladesh Bank.

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.

Expatriate Bangladeshis sent home $1.84 billion through the banking channels in June last year, the central bank's data shows.

Previously, in July 2020, the country witnessed the highest remittance inflow of $2.6 billion. 

Experts believe that the closure of hundi, an illegal remittance channel, due to transport suspensions amid the coronavirus pandemic, led to an increase in remittance flows through legal channels.

Data from the central bank reveals that Bangladesh 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.

High officials from various private banks said that expatriates predominantly sent additional funds to their families in the country ahead of Eid-ul-Azha. 

It is customary for extra remittance income to flow into the country before Eid festivals. However, there was not a significant increase in expatriate income before Eid-ul-Fitr this year, which was celebrated in April. In contrast, more expatriate income was observed during Eid-ul-Azha.

Emranul Huq, managing director and CEO of Dhaka Bank, emphasised that remitters sent more dollars to their families and relatives due to the month of Eid. 

He expressed belief in the continuation of this trend in the future. Moreover, 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-Azha to the fact that many expatriate Bangladeshis performed animal sacrifices in the country. Furthermore, organisations in Middle Eastern countries also sent funds to Bangladesh for the occasion.

As always, Islami Bank ranks first in terms of facilitating expatriate income to the country, while state-owned Agrani Bank processed the second highest amount. Private sector Premier Bank secured the third position in terms of handling expatriate income.

Selim RF Hussain, chairman of the Association of Bankers, Bangladesh (ABB) and managing director of Brac Bank, cautioned against making predictions based on only one month's remittance data. 

He said, "If we observe an increasing trend in remittances after analysing the data for at least 6-9 months, we can conclude that the situation has improved. Therefore, we need to wait for a few more months to assess whether the remittance situation is indeed improving."

Many banks ‍still offering higher dollar rates for remittances

According to the latest decision by the ABB and the Bangladesh Foreign Exchange Dealers' Association (Bafeda), banks in Bangladesh are allowed to pay a maximum rate of Tk108.50 against the remittance dollar. However, despite this decision, many banks are still offering higher rates for remittances. Some banks are providing rates as high as Tk112-113 for each dollar of remittance.

In addition to the banks, several remittance houses are openly offering higher rates for remittance dollars as well. International remittance houses such as Moneygram and TapTap are advertising 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 these banks have expressed concern about the higher rates being offered by other banks. They claim that these banks are receiving more remittances because they offer higher rates, while banks like theirs, which comply with the established rates, receive fewer remittances. This situation affects the demand and supply of foreign exchange for their banks.

For example, a private bank managed to bring in remittances worth $474 million in a year, out of which $134 million was brought in during the month of June alone. This means that the bank received 28% of its yearly remittances in just one month. 

The central bank, aiming to increase forex reserves, purchased dollars from some banks, including the aforementioned private bank. Similarly, other banks also received higher-than-usual remittances in June.

Senior officials from various banks, who preferred to remain anonymous, have claimed that the banks paying higher rates for remittances are not reporting these transactions to the central bank. They are finding ways to conceal this information. Often, the additional cost of the remittance dollar is adjusted 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 allege that the central bank is pretending to overlook the fact that banks are paying higher rates for remittances.

In response to a report published in TBS about higher dollar rates for remittances, reaching up to Tk114, the central bank held a meeting with 10 banks in March. 

The banks were strictly instructed not to pay higher rates, and punitive action was threatened against those found violating the rules. Subsequently, the central bank inspected the forex transactions of several banks. However, recently, the central bank has increased its reserves by purchasing dollars from some banks, even if they were offering higher rates.