Cenbank bars transfer of value-added portion of export proceeds
If an exporter fails to convert the proceeds within the time limit, the receiver bank will open an account under the exporter’s name and keep the money in that account
The Bangladesh Bank (BB) has barred businesses from transferring the value-added portion of export proceeds to other banks in a bid to bring discipline to foreign exchange transactions.
Besides, exporters can now retain the value-added portion of the proceeds for a maximum period of 30 days in the receiver bank, according to a circular issued by the central bank's Foreign Exchange Policy Department on Monday (4 September).
Speaking to The Business Standard, a senior official of the central bank said the new directives have been given as some exporters transfer export proceeds from the receiver bank to another, which pays a higher dollar rate. This results in the receiver bank losing the foreign currency and thus creates instability in the market.
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According to the new Bangladesh Bank circular, exporters can use the proceeds to pay back-to-back loans, export development funds and import liabilities through the receiver bank.
However, if an exporter fails to convert the proceeds within the time limit, the receiver bank will open an account under the exporter's name to keep the money.
Meanwhile, businesses received the news with mixed reactions.
"Not being able to transfer export proceeds in other banks is acceptable. But providing only 30 days to encash the proceeds is not realistic," Mohammad Hatem, executive president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) told The Business Standard.
He said exporters usually retain the proceeds to pay their bank-to-bank import letters of credits (LCs) later.
"Now, exporters need to encash the proceeds within a specific period. Then, they need to buy dollars from the market at a higher price, which will result in losses for the exporters."
The BKMEA official called for increased monitoring by the central bank to ensure that export proceeds are not transferred to other banks for more profit causing instability in the market.
"Some customers are selling dollars at higher prices taking export earnings to other banks. Why should this happen when there is a single rate for export proceeds? The supervision of the central bank should be increased in this regard," he said.
Bankers appreciated the new central bank move.
Syed Mahbubur Rahman, managing director & CEO of Mutual Trust Bank Limited (MTB), said, "It will be good that the bank through which the export will be done will get the export proceeds.
"In many cases, it was seen that banks export with various risks, but the export value is actually transferred by the customer to another bank. As a result the receiver bank misses out on profits."
Earlier on 23 August, The Business Standard published a report stating that large exporters allegedly are not adhering to the exchange rate set for export proceeds and are selling the highly sought-after dollars to importers directly at inflated prices.
The Bangladesh Foreign Exchange Dealers' Association (Bafeda) and the Association of Bankers, Bangladesh (ABB) have adjusted the exchange rate of the US dollar at Tk109.50 for both export proceeds and remittances.
