Hundi Depletes Significant Remittance

In November 2023, Bangladesh witnessed a 21% YoY increase in remittance inflow, totaling $1.93 billion, driven by banks offering higher rates for the US dollar. However, this figure represents a 2.42% decline from October's $1.98 billion. Some banks are reportedly offering rates exceeding the authorized Tk 109.75, providing additional incentives.

The central bank has introduced measures to address the reserve crisis by allowing remitters, including Bangladeshi expatriates, domestic entities, and foreign companies, to maintain foreign currency deposits in domestic banks at an interest rate of up to 9%.

The remittance inflow in Bangladesh experienced a fluctuation, reaching $794.4 million in the initial 10 days of November 2023 but declining to $698.54 million by day 14. This volatility is attributed to Bangladesh Bank's changing decisions regarding remittance handling.

In the first 17 days of November 2023, Bangladesh received $1.18 billion in remittances through banking channels, according to Bangladesh Bank data. This follows the trend from October, which saw the highest remittance in the past four months, totaling $1.97 billion.

The dollar price of remittances in Bangladesh decreased by Tk5-6 to Tk118-119 following a meeting between the central bank governor and member banks. Exchange houses lowered prices for selling remittance dollars, with banks previously collecting at Tk124. The central bank directed banks to collect remittance dollars at a maximum rate of Tk116, including incentives.

Banks have been directed to maintain the remittance exchange rate at Tk115 per dollar, inclusive of government and bank incentives, following reports of some banks purchasing remittances at Tk124. The Association of Bankers, Bangladesh (ABB) and the Bangladesh Foreign Exchange Dealers' Association (Bafeda) issued this instruction at a joint meeting, emphasizing the need to curb arbitrary incentives beyond the fixed-dollar rate.