Remittance inflow jumps by $1.07b YOY as expats favour bank channels following govt changeover

Infographics: TBS

Remittance inflow into Bangladesh surged by $1.07 billion in September, marking an impressive 80.22% year-on-year increase.

According to the Bangladesh Bank, the country received $2.40 billion in remittances last month, a significant increase from $1.33 billion in the same month last year.

Additionally, remittances in September increased by $180 million compared to the previous month, making it the highest inflow in the past three months.

Bankers say since the formation of the interim government on 8 August, expatriates have significantly reduced the use of hundi for sending remittances. Instead, they are now opting to send remittances through formal banking channels, even if it means waiting in queues. As a result, the country's remittance inflows have seen a considerable increase.

They further noted that the surge in remittances has helped stabilise the dollar market, with the exchange rate holding steady at Tk120 since the fall of Sheikh Hasina's government on 5 August amid a mass uprising. Previously, there was a consistent gap of Tk3-4 between the rates offered by banks and the kerb market, but now both rates are aligned.

Meanwhile, the country's foreign reserves currently stand at $19.56 billion.

A senior official at Jamuna Bank highlighted the fact that one of the key reasons for the increase in remittances through banking channels is the narrowing of the rate gap between formal and informal markets.

Additionally, with the new government's encouragement, expatriates are actively sending remittances through official channels, contributing to the rise in banking-channel remittances, he added.

Remittance dollar rates at banks 

Treasury heads at several banks say expatriates are currently receiving Tk120 per dollar through banking channels. While this rate remained stable during the first three weeks of September, expatriates were demanding Tk120.50 in the last week.

Currently, the crawling peg rate is Tk120, and banks are charging Tk121 for letters of credit, while exporters are receiving Tk119 per dollar for export proceeds.

"Payment overdue amounts owed to foreign banks are gradually decreasing, and inter-bank dollar transactions among our banks are regular. As a result, state-owned banks are managing their overdue payments with dollar support from other banks," one officer explained.

A senior official at the Bangladesh Bank noted that many banks have a positive net open position (NOP) in dollars, indicating that the dollar inflow exceeds the banks' liabilities.

"Overdue payments to foreign banks are expected to decline over the next two months. Moreover, if remittance inflows continue to increase, the dollar market will likely return to a completely normal state," he added.

High-remittance-receiving banks  

State-owned banks recorded the highest remittances in September, with Agrani Bank receiving $322 million, followed by Rupali Bank with $113 million.

Among private banks, Islami Bank topped the list with $402 million, while Trust Bank received $245 million. Additionally, Bangladesh Krishi Bank saw remittances of $109 million last month.

Remittances had initially fallen in July due to student protests that led to bank closures for several days, compounded by a significant campaign discouraging expatriates from using banking channels amid non-cooperation with the then Sheikh Hasina government. This overall environment contributed to a decline in remittance inflows.

However, following the ousting of prime minister Hasina, expatriates resumed their efforts to send remittances through banking channels, resulting in over $2 billion in remittances in August.

In June, expatriates had sent remittances totalling $2.5 billion, largely driven by an increase of Tk7 per dollar set by the central bank in May, as well as higher remittance inflows ahead of Eid-ul-Adha.