Bangladesh Bank’s move to curb foreign currency spending has resulted in stability in the market after a jump in hiking exchange rate over the last four months.
Through several regulatory measures against some banks and money exchange houses, the volatile forex market is seemingly stable now. Banks’ and kerb market’s exchange rate of US dollar stood at Tk 95 and Tk 98-100 respectively.
After joining as Bangladesh Bank Governor on July 12, 2022, Abdur Rouf Talukder has taken measures to bring banks and non-bank financial institutions (NBFIs) under strict monitoring.
He formed several teams led by deputy governors for inspection and monitoring of bank and NBFI activities.
Despite the central bank guidelines and instructions, several banks have been defying the rules of foreign trade, including LC opening, dollar trading, and spending of forex through credit cards.
Against this backdrop, Bangladesh Bank asked 27 banks to explain unusual spending of forex.
The central bank found such excessive spending under 71 credit cards issued by the 27 banks. These cards have been transacted from USD $12,500 to $20,000.
Bangladesh Bank spokesperson and Executive Director Sirajul Islam told UNB that the banks have been asked to explain the irregularities within 5 working days.
He said that there is a $12,500 spending limit on each card. But a review of Bangladesh Bank revealed that many banks have transacted above this limit.
According to the Foreign Exchange Control Act, a person can spend a maximum of $12,000 worth of foreign exchange per year. If anyone wants to spend more, in sectors including medical treatment and education, he/she must secure the central bank’s approval in advance.
Earlier, credit for importing some products were stopped, the margin rate has been increased. Treasury chiefs of six domestic and foreign banks have been removed from duties for making unusual profits from selling dollars. Show-cause notices have also been served to the managing directors of these banks.
Later, Bangladesh Bank fixed one taka profit per dollar to bring stability in the foreign currency market.
On August 31, the central bank issued a notification that individuals cannot possess US $10,000 for more than a month. Whoever has more than the limit was asked to sell it by September 30, otherwise they would have to face legal action.
Professor Mustafijur Rahman, distinguished fellow of the private think tank CPD, told UNB that the central bank has taken the right measures by curbing dollar spending.
He said that it is possible to save around one-third of forex by tightening unusual spending on imports and other sectors.
