Top executives of the country's scheduled banks have been forewarned of a possible volatility in the foreign exchange market and advised to strictly monitor the market on a daily basis.
The Bangladesh Foreign Exchange Dealers' Association (BAFEDA) raised the concern at its executive committee meeting in Dhaka on September 12, advising the CEOs of taking pre-cautionary measures. It put forward four-point measures for them to maintain strictly.
Within two weeks, the forex market showed some fluctuation though in case of import payment settlements only - the BC (Bills for Collection) rate fluctuated substantially on Tuesday and Wednesday, before Bangladesh Bank's 'intervention' in trying to stabilise the market on Thursday.
BB sold US$ 14 million to two commercial banks on Thursday.
Earlier, the BAFEDA, in its meeting, also advised the banks' CEOs to monitor the money market too.
After a critical evaluation of the market, they raised concerns over some key indicators, particularly the overall exposures of the member banks to OBU (offshore banking unit), decline in inflow of remittance, increased payment against import LCs (letters of credit) and insignificant growth in export earnings during the first couple of months of the current fiscal year (FY).
Their meeting reviewed the overall forex position, transactions in inter-bank forex market, movement of exchange rates and outlook of forex inflow and outflow.
The meeting also informed about the growing gap between the receipts and payments of foreign exchange during the FY 2017-18 over the same period of the previous fiscal.
The BAFEDA also advised the CEOs to consider inflow and outflow of foreign exchange position of the respective bank and the depth of inter-bank forex market before taking any foreign exchange position.
In a letter to the CEOs, it asked them to maintain and follow the guidelines of the BAFEDA while quoting foreign exchange rates for the exchange houses abroad.
The managing directors and chief executive officers of its member banks have also been advised to maintain ADR (advance-deposit ratio) as per guidelines of the BB.
"We expect that the stability in the market to continue if the top executives of our member banks follow the recommendations properly," a senior member of the BAFEDA told the FE, in response to a question about their suggestions.
He also urged the central bank to revise the existing net open position (NOP) limit considering the business size of the respective banks.
"Foreign currency holding risk reduced mainly due to higher NOP limit, set by the BB earlier," the senior banker explained.
Earlier on July 27 last year, the BB had raised substantially the NOP limit of the banks for holding foreign exchange to keep the inter-bank forex market stable.
The NOP limit of all 56 scheduled banks has been increased by more than 45 per cent to US$ 2.19 billion from previous $1.51billion.
The existing NOP limit has been determined on the basis of 20 per cent of the total regulatory capital of the banks as on March 31 last year, according to the BB officials.
Earlier, the NOP was re-fixed on the basis of 15 per cent of the total regulatory capital of the banks on March 31, 2015.
The central bank of Bangladesh had earlier set the safe limit of CDR at 85 per cent for conventional banks and at 90 per cent for Sharia-based Islamic banks.
Six commercial banks including two public, three private and one foreign have already crossed their safe limit of ADR, according to the BB's confidential report.
Currently, 35 banks out of 57 are running their OBUs across the country as per a directive issued by the Banking Control Department of BB on December 17, 1985.
Total outstanding of loans, provided by the OBUs of banks, stood at Tk 468.74 billion as on June 30, 2017, the BB data showed.
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