Foreign currency transactions through card rise 217% YoY in Sep

Foreign currency transactions through cards maintained an upward trend in September too, surging 217% year-on-year to an all-time high of Tk584 crore, amid a crisis of cash dollars.

Cardholders spent Tk184.6 crore in September last year – around Tk400 crore less than this year, Bangladesh Bank data show.

Bankers attribute the uptrend to more foreign trips by the affluent, cheaper greenback rate than the open market, small import payments by cards and the worldwide rising inflation.

Infographic: TBS

Banks on Tuesday endorsed cash dollars at Tk108, as the greenback was at Tk113 in the open market, according to Md Abedur Rahman, head of Cards at Midland Bank Ltd, told The Business Standard.

He said dollar spending through debit cards follows the real time local market rate as credit cards charge the rate on payment date.

In the face of a supply crisis, the greenback for the first time reached Tk100 in July. On 10 August, the US dollar hit record Tk120 in the kerb market, pressing the central bank for encouraging outbound travellers for foreign currency transactions through card instead of carrying cash.

Subsequently, foreign currency transactions through cards started to edge up from May. The transaction was Tk241 crore in April, which rose to Tk358 crore just next month.

Since then, foreign currency transactions through cards have been increasing for four consecutive months. In the last one year, the country's foreign currency reserve depleted by more than 23% to $34.2 billion, blurring any possibility of the forex market calming down anytime soon.

To relieve the pressure on the forex reserve, both the government and the central bank have been discouraging unnecessary foreign trips by government employees. However, a central bank official said the rich and the middle-income people are still making frequent foreign trips.

"There has been a huge surge in foreign trips recently as the pandemic waned. This has been contributing to the rising foreign currency transactions by cards," Syed Mahbubur Rahman, managing director of Mutual Trust Bank, told The Business Standard.

He also pointed the finger at rising commodity prices across the globe. He pointed out that small traders are now bringing in foreign products after purchasing those online through cards as banks are cold-shouldering small-amount LC (letter of credit) opening.

According to the central bank ceiling, a traveller is allowed to carry and spend a maximum $12,000 during a foreign trip.

"After endorsing dollars to card, multiple members of the same family are now travelling abroad. They are encashing the dollars abroad and selling those to the kerb market, which offers at least Tk5 more per dollar than banks, after returning home," said a top banker while talking to The Business Standard on condition of anonymity.

The official suggested lowering the dollar spending ceiling except for education and medical purposes.

According to the central bank, transactions through mobile banking rose Tk189 crore in September compared to August. September transactions stood at Tk87,635 crore – still lower than June's Tk94,293 crore centring the Eid-ul-Azha festival. Earlier in April, mobile bank transactions hit Tk107,460 crore ahead of the biggest Muslim festival Eid-ul-Fitr.