BB eases rules for small remittance houses to curb aggregator influence
The new circular also lowers the minimum balance requirement for Non-Resident Taka accounts of aggregator exchange houses
Highlights:
- The central bank has removed the $10,000 security deposit and minimum balance requirements for small exchange houses
- Small exchange houses will now be able to sell remittance dollars directly to any bank
- The move is expected to reduce the influence of aggregators in collecting remittance dollars and stabilising the forex market
The Bangladesh Bank has removed the security deposit and minimum balance requirements for small exchange houses, aiming to reduce the influence of aggregators in collecting remittance dollars and stabilising the foreign exchange market.
A dollar market aggregator is a financial intermediary that connects buyers and sellers of dollars, often aggregating liquidity from multiple sources to provide competitive exchange rates to clients.
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Small exchange houses will now be able to sell remittance dollars directly to any bank, as the central bank has removed the $10,000 security deposit and minimum balance requirements in Non-Resident Foreign Currency (NRFC) accounts.
The Foreign Exchange Policy Department issued a circular today (19 January), and the directive will take effect on 1 February.
"The security deposit and minimum balance requirements for the 'Pre-Fund' modality shall be withdrawn," reads the central bank's circular.
"Banks are instructed to communicate with their foreign counterparts having drawing arrangements under this modality to adjust the security deposit maintained in NRFC accounts through remittance disbursement."
A senior central bank official explained that banks generally collect remittances from exchange houses through two processes. The first is 'Pre-Fund,' where a bank pays money against remittances after receiving the dollars from exchange houses. In this process, small exchange houses sell dollars.
Previously, these houses were required to maintain a $10,000 security deposit with each bank they transacted with. For example, if a small exchange house needed to sell remittance dollars to 10 banks, it had to keep a $100,000 security deposit, which was not feasible for many houses.
"As a result, these houses would sell remittance dollars to aggregator exchange houses, allowing the aggregators to increase prices by acquiring most of the dollars in the market," he said. "This led to increased instability in the remittance dollar market. With the new rules in place, the influence of aggregators will decrease to some extent."
The new circular also lowers the minimum balance requirement for Non-Resident Taka accounts of aggregator exchange houses. These houses typically sell remittance dollars through a "Post-Fund" process, where the bank receives dollars after paying the money.
"The minimum balance requirement in non-resident taka accounts for the 'Post-Fund' modality shall be Tk20 lacs instead of the equivalent taka of $25,000," reads the circular.
"Banks are advised to apply the prevailing exchange rate on the date of minimum balance received in foreign currency for the necessary conversion. The security deposit requirement in NRFC accounts under this modality shall remain unchanged."
