According to central bank data, five state-owned commercial and specialized banks – Agrani, Sonali, Janata, Rupali and Krishi – received more than double the normal amount of remittances in three months from August to October this year.

Industry experts attribute this to banks offering higher exchange rates for remittances to alleviate the dollar shortage.

While the central bank sets the dollar rate at Tk 120, public banks pay between Tk 122.20 and Tk 122.40 per dollar. In contrast, private banks offer rates between Tk 122 and Tk 122.20 per dollar, they say.

They added that banks are using the extra dollars to settle overdue payments on government import letters of credit (LCs), which will have a positive impact on the overall banking sector.

According to central bank data, the total of remittances to the country’s banks in FY24 was $23.92 billion, while state banks received $3.4 billion, or 14.23% of the total.

In the three months following the takeover of the interim government, the banking sector received $7.03 billion in remittances from August to October 25; state banks received $2.06 billion, or 29.27% ​​of the total.

In other words, public sector banks received 60% of the total remittances they received in FY24 from August to October in FY25.

Banking industry experts say that the bank offering the highest rate gets the highest remittance. State banks seized this opportunity to meet their needs.

Several senior officials of state banks told TBS that most of the import loans extended by the government are processed through these banks. The dollar crisis, which began in mid-2022, combined with the central bank’s insufficient supply of dollars, led to the delay of many import payments.

The new central bank governor, Ahsan H Mansur, appointed by the interim government in August, focused on collecting overdue payments.

The governor told reporters that overdue payments at state banks exceeded $2 billion. However, he emphasized that no dollars would be withdrawn from the central bank reserves to cover these payments; banks would have to manage these dollars on their own.

Md Shawkat Ali Khan, CEO and managing director of Sonali Bank, told TBS that the bank collects remittance dollars by following all central bank directives.

“Our customers’ trust in our bank has increased significantly recently. We have also increased our service quality, which is among the main reasons for the increase in our remittance flow,” he said.

He added: “The remittance dollars are being used to clear the government’s overdue import LC payments and open new LCs, as instructed by Bangladesh Bank.”

According to officials at state banks, these banks generally cannot compete with private banks in collecting export revenues in dollars. As a result, they have two primary ways to obtain dollars: the interbank market and wire transfers.

Officials say that to compensate for overdue import LC payments, public banks are offering slightly higher rates in competition with other banks, leading to an increase in remittance inflows.

The country head of one of the leading foreign exchange houses operating in Bangladesh said that the foreign exchange house collects remittances from foreigners in various countries and provides dollar transfers to the bank offering the highest rate.

“In the past, private banks were collecting foreign currency at higher rates, but in recent months, state banks have been receiving a significant amount of dollars from us,” he said.

He added that on November 7, remittance dollars were sold to banks at Tk 122.20 to Tk 122.40 per dollar. While the remittance dollar rate was 10-20 basis points higher until mid-October, it has fallen since then.

Bangladesh Bank data shows that in September this year, these five state-owned banks received $748 million in remittances; this figure was only $154 million in the same month in 2024. This represents an increase of approximately 386% compared to September last year.

Among them, Agrani Bank’s remittance inflow increased from $45 million in September last year to $322 million this year, Rupali Bank’s from $7 million to $114 million, Sonali Bank’s from $33 million to $95 million, Janata Bank’s from $33 million. It increased from $1 million to $106 million. and Krishi Bank’s increased from $35 million to $110 million.

Impact on private banks

In the three months from August to October this year, remittances increased by 43% compared to the same period last year; Most of the increase came from state banks. There was no significant increase in foreign exchange flows to private banks.

According to central bank data, private banks received an average of $1.71 billion in remittances per month in FY24. However, despite the overall growth in remittances during August-October of FY25, private banks received an average of $1.66 billion per month during these months; This is lower than the average remittances of the previous fiscal year.

The deputy managing director of a leading private bank said his bank did not face any problems as state banks were receiving more remittances in recent months.

“We have no additional demand at the moment as we are already handling dollars for our due payments. Additionally, the demand for opening of imported LCs has also decreased significantly compared to previous months.”

He also noted that if state banks had not competed to collect remittance dollars, the dollar exchange rate would have been closer to the Tk120 set by the central bank.

But he expressed hope that the pressure on state banks from overdue payments was now significantly reduced. If this problem is completely solved, the entire banking sector will benefit from it.

He explained that clearing payment commitments with foreign correspondent banks would improve the country’s image abroad and increase commercial credit limits, ultimately facilitating the management of both offshore and onshore accounts.

He said the new president contacted hundreds of foreign correspondent banks to guarantee payment. As a result, even if state banks collect remittances by offering slightly higher rates, it will have a positive impact on the economy.