Notably, the dollar shortage crisis in the country has been apparent since the onset of the Russia-Ukraine war in March of the previous year. In an attempt to address this crisis, Bangladesh Bank initially fixed the price of the dollar
A robust surveillance operation has been initiated to unveil the culprits behind the dollar syndicate, with three prominent public sector entities at the forefront of this endeavor. These organizations are none other than the Bangladesh Bank, the Bangladesh Financial Intelligence Unit (BFIU), and the National Security Intelligence Agency (NSI).
These entities have launched comprehensive investigations aimed at identifying individuals involved in the manipulation of the dollar market. The focus of their inquiry encompasses a broad spectrum, including tracking those purchasing dollars at exorbitant rates, discerning the motives behind these acquisitions, ascertaining storage locations, and deciphering the mechanisms employed for subsequent sales. As part of their strategy, these organizations are prepared to carry out targeted raids on suspected addresses linked to banks, money changers, or any individuals implicated in these activities.
You can also read: Dollar Surge Shakes the Nation: Implications on Import Costs, Inflation, and Lives
Information pertaining to these efforts has been disclosed by reliable sources. According to these sources, the Bangladesh bank is delving into the operations of commercial banks, while the NSI is scrutinizing money changers and activities within curb markets. BFIU officials are providing valuable support in these investigations. The collective objective of these three entities is to identify those responsible for the illicit manipulation and hoarding of dollars. Subsequent actions will be taken based on the findings of these investigations, with initial measures already being executed against certain banks and money changers. Further actions are currently in progress.
Bangladesh Bank’s measures to regulate the surge in dollar transactions
In response to a Bangladesh Bank investigation, it has come to light that certain banks were procuring remittance dollars at prices exceeding the limits set by the Bangladesh Foreign Exchange Dealers Association (BAFEDA). These acquired dollars were subsequently resold at higher rates, contrary to the prescribed maximum remittance dollar price of 109 taka.
Evidently, some banks were acquiring these dollars at rates ranging from 113 to 114 taka, thereby incurring an additional cost of 4 to 5 taka per dollar. Consequently, foreign multinational exchange houses favored banks offering the highest prices, resulting in a redirection of remittance flows from larger banks to smaller ones.
These purchased dollars, obtained at inflated prices, were resold by these banks at rates ranging from 116 to 117 taka, yielding a profit of Tk 3 per dollar. It’s important to note that according to Bangladesh Bank regulations, the gap between the buying and selling price of the dollar should not exceed one taka, allowing for a maximum profit of one taka per dollar.
Additionally, banks are obligated to report daily dollar exchange rates to the Bangladesh Bank. However, these banks failed to inform the Bangladesh Bank about the additional rates at which they were procuring dollars, leading to regulatory action against member banks for providing false information.
Simultaneously, money changers reacted to the apparent dollar crisis within commercial banks by inflating their dollar prices. While they are mandated to sell at a maximum rate of 112 taka per dollar, they began trading dollars in the open market without adhering to the official exchange rate.
These money changers purchased dollars at 116 taka per dollar and sold them at rates ranging from 117 to 118 taka, diverting a significant portion of cash dollars into the open market and thereby reducing the flow of dollars to banks. In response, the National Security Intelligence Agency (NSI) launched an investigation into money changers and the curb market, with support from the Bangladesh Financial Intelligence Unit (BFIU).
During their investigations, several money changers were found to be engaged in irregularities, leading to the sealing of eight money changer establishments and the seizure of 2 crore taka in cash. Additionally, investigators are compiling a list of individuals who purchased dollars from the open market and money changers.
Furthermore, investigators have uncovered instances in which importers had engaged curb market dealers to procure cash dollars. These dollars were subsequently used to open Letters of Credit (LCs) for luxury goods imports since banks were reluctant to provide dollars for such transactions. It’s worth noting that purchasing dollars from the curb market for LCs is illegal, and this matter is under investigation.
Moreover, individuals who amassed cash dollars through purchases from the curb market are also under scrutiny, as the Bangladesh Bank previously issued a public notice requiring those with more than 10,000 dollars upon returning from abroad to sell them to banks or money changers—an advisory that went largely unheeded.
Lastly, many individuals fail to declare their cash dollar holdings on customs forms when returning from abroad, despite regulations mandating such declarations. Consequently, the Bangladesh Bank lacks comprehensive information regarding dollar reserves due to these laps in compliance.
Bangladesh Bank oversight of commercial banks
Bangladesh Bank (BB) has initiated inquiries into the practices of 13 commercial banks regarding their sale of dollars at elevated rates. Concurrently, Bangladesh Bank is closely monitoring the operations of these banks.
Mesbaul Haque, the Executive Director and Spokesperson for the Bangladesh Bank, revealed to the media that the licenses of seven money changers have been temporarily suspended for selling dollars at inflated prices. Furthermore, explanations have been requested from ten additional money changers in response to similar complaints. Haque also emphasized that ongoing scrutiny is being applied to banks, with the promise of punitive measures should substantial evidence of wrongdoing emerge.
Notably, the dollar shortage crisis in the country has been apparent since the onset of the Russia-Ukraine war in March of the previous year. In an attempt to address this crisis, Bangladesh Bank initially fixed the price of the dollar. However, the persistence of the crisis is attributed to the limited availability of dollars in the international market. In light of the dollar scarcity, commercial banks are being accused of engaging in the purchase and sale of dollars at premium rates in pursuit of greater profits.
Conclusion:
Bangladesh Bank, along with other key regulatory bodies, is intensifying its efforts to combat dollar manipulation and irregularities in the currency market. This multi-pronged approach includes rigorous surveillance, investigations into commercial banks and money changers, and enforcement actions against those found engaging in illegal practices. As the country grapples with a prolonged dollar shortage, these measures aim to restore transparency and stability to the currency market while holding wrongdoers accountable for their actions.
