Dealers asked to maintain benchmark for quoting rates to overseas exchanges

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Siddique Islam
The foreign exchange dealer banks have been requested to maintain a benchmark for quoting foreign currency exchange rates to the overseas exchange houses, which are engaged in remitting money to Bangladesh.
The Bangladesh Foreign Exchange Dealers' Association (BAFEDA) has already sent a letter to its member banks and requested them to quote at least Tk 0.20 lower than the inter-bank buying and selling average unit rate.
The country's apex body of the foreign exchange dealer banks took the latest move aiming to ensure a healthy competitive atmosphere in the country's foreign exchange market.
"We've requested our member banks to maintain the benchmark for quoting exchange rates to the overseas exchange houses to avoid any unhealthy competition among the banks," Chairman of the BAFEDA Syed Abu Naser Bukhtear Ahmed told the FE Thursday.
Mr. Bukhtear, who is also Managing Director and Chief Executive Officer of the Agrani Bank Limited, said unhealthy competition neither benefits the remitters nor the beneficiaries in Bangladesh.
Currently, some commercial banks are quoting unusually high rates to the overseas exchange houses to attract more inward remittances and these rates often exceeded the inter-bank foreign exchange market rates.
"Only the overseas exchange houses benefited from such high rates," a senior treasury official of a private commercial bank told the FE.
He also said such unethical practice, in some cases, causes loss to the bank concerned and also hampers the national interest.
Some banks are quoting exchange rates to overseas exchange houses prepared by their remittance departments rather than relying on the treasury rates. But the remittance departments are neither equipped nor empowered to quote such rates, he added.
"The banks should follow the central bank's core risk guidelines before offering such rates to the overseas exchange houses," the treasury official noted.
The BAFEDA also requested the member banks not to offer or sell foreign currency to the importers of other banks to settle their letters of credit (LC) for import.
"Only the LC opening bank will have to arrange the required foreign currency for settlement of LC liability on behalf of their customers account," the BAFEDA chief added.
Mr. Bukhtear also said the BAFEDA has already introduced Dhaka Inter-bank Offered Rate (DIBOR) for the first time as the country's benchmark interest rate in the financial market to ensure transparency in the money market.
At least 18 commercial banks are now providing their inter-bank offered rates to Reuters for publishing each working day, the BAFEDA chairman added.