Banks now get a free hand to deal with overseas exchange houses to bring foreign exchange as the government strives to recharge reserves amid dollar crisis at home as also abroad.
Price of cash dollar bucked up to Tk 119 on the kerb market Wednesday from the previous high of Tk 115 as on Monday.
To make way for the free flow of forex, Bangladesh Bank (BB) bent the rules to allow banks to make drawing arrangements with overseas exchange houses without prior permission from the central bank (BB), officials said Wednesday.
The prerequisite of obtaining letters of references/certificates from the Bangladesh Embassy or High Commission in the respective country for setting up such drawing arrangements has been waived, driven the exigencies arising out of complex global crises.
All the authorised dealer (AD) banks are now permitted to go for drawing arrangements without letters of references or certificates from the Bangladesh missions, subject to satisfaction on licences issued by competent authorities favouring relevant exchange houses, and on conducting extended due diligence, according to a notification issued by the BB on the day as the local currency kept losing its value in exchange with the US dollar-now in hot demand worldwide.
It says the AD banks may make drawing arrangements with exchange houses abroad without prior permission from the central bank.
"In this context, ADs shall make post-facto report to the BB with detailed information of the arrangements," the central bank says in the notification waiving the obligations.
Earlier, the central bank would accord banks, on application, the right to make drawing arrangements with exchange houses abroad as per the policy guidelines 2007.
"We've relaxed the regulations on establishing drawing arrangements with exchange houses abroad aiming to expedite the flow of inward remittances," a senior BB official told the FE while explaining the main objective of the latest policy measure meant for buttressing the country's declining dollar reserves.
He also said such relaxation would help in setting up new drawing arrangements with overseas exchange houses in different countries, particularly China, Iraq, and South African counties.
Currently, 29 exchange houses are operating across the globe, setting up around 1,500 drawing arrangements abroad, to expedite the remittance inflow, according to the central banker.
"We'll strengthen our monitoring and supervision to check illegal funds transfer in the name of remittance," says the BB official while replying to a query.
The latest BB moves come in the wake of falling trend in the flow of inward remittances in the immediate-past fiscal year (FY) 2021-22, despite enhancement of cash incentives on remittance receipts.
The flow of inward remittances dropped over 15 per cent to $21.03 billion in the FY'22 from $24.78 billion a year before.
Lower remittance inflow along with higher import-payment obligations had pushed down Bangladesh's current-account deficit to an 'all-time' high at $18.70 billion in FY'22.
In a latest development value of the US dollar witnessed a downturn at customer level on Wednesday just after an action taken against six treasury heads of banks by the central bank on a charge of fuelling the foreign-exchange market through quoting higher rates of the greenback.
Some banks traded the greenback at rates ranging between Tk 95.00 and Tk 109 on Wednesday to their customers for settling import-payment obligations against Tk 95-112 of the previous working day, according to market operators.
However, the banks quoted formally maximum Tk 95.00 for the sale of bills for collection, generally known as BC, for settling import payments on the day to their customers--unchanged from the previous level.
On Monday, the central bank asked managing directors (MDs) and chief executive officers (CEOs) of six commercial banks--five private commercial banks (PCBs) and one foreign commercial bank (FCB) - to relegate their treasury heads to human resources (HR) department immediately on allegation of heating up the foreign-exchange mark recently through quoting 'unusual' higher prices of the greenback.
"We're observing the situation," a treasury head of a leading private commercial bank (PCB) told the FE while describing the latest situation on the country's foreign-exchange market.
On the other hand, the price of cash dollar increased further on the open market, generally known as kerb market, in the capital on Wednesday due mainly to short supply of the US currency on the market.
The cash dollar was traded maximum at Tk 119 on the kerb market on the day against Tk 115 on Monday.
However, the central bank continues to provide its foreign-currency support to scheduled banks for managing the forex-market volatility.
It sold $114 million more directly to seven commercial banks on Wednesday to help them meet a growing demand for the greenback--as global price rises have led to import-cost escalation with its resultant pressures on reserves of Bangladesh, as also of many other countries.
Earlier on Monday, the central bank sold $139 million to six banks on the same grounds.
The BB has so far injected $1.60 billion from the reserves directly into commercial banks as liquidity support for import payments in the current fiscal year (FY), 2022-23.
In FY'22, the central bank sold $7.62 billion from the reserves to the banks for the same purpose.
Bangladesh's forex reserves came down to $39.60 billion on Monday from $39.66 billion of the previous working day following higher sales of dollar to feed the market.
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