BB mulls over redesigning remittance channel

Posted by BankInfo on Wed, Jul 19 2017 12:22 pm

Bangladesh Bank (BB) is thinking of redesigning the remittance channel to arrest the declining trend of remittance inflow. Economists belive any continuation of the downtrend might affect the country’s macroeconomic stability that took a long time to achieve.

 A team of experts are now working on the observations of a study conducted recently by a group of BB officials in some countries look into the decline in remittance inflow, sources said.

 Economists and bankers suggest remodeling the country’s banking channel incorporating the mobile financial services (MFS) to check the fall in remittance inflow amid a rising trend in the use of illegal channels like Hundi.

 The experts blamed the use of illegal money transfer system widely known as Hundi amid fluctuating exchange rates of Taka and higher fees charged by exchange houses for the decline in remittance inflow.

 Earlier this month, the finance minister hinted that the government was planning to lower the remitting fees to boost remittance inflow through formal channels.

 Former BB governor Dr Atiur Rahman said the government has been planning a collaboration between the banks and mobile financial services to combat the uprising of Hundi.

 “The central bank has to concentrate on expansion of the formal banking channel with the use of MFS.

Currently, one or two international money transfer agencies are dominating the market. We should tag our banking service with MFS to bring more foreign currency through the legal channel,” Dr Atiur Rahman told daily sun.

 He also suggested lowering the charges at exchange houses operated by banks to encourage the expatriates to remit money through the formal channel.

 Remittance, which contributed 13 percent to Bangladesh’s gross national product (GNP) in 2015, has been on a downward trend in the last few years.  

 The expatriate Bangladeshis remitted nearly $12.77 billion last fiscal, which is a six-year low. The amount dipped around 14.5 percent from the previous financial year, according to central bank data.

 The money sent by expatriate Bangladeshis had been hovering over $14 billion annually since 2012-13 fiscal. Remittance crossed the $15 billion mark in 2014-15 fiscal.

 However, Agani Bank Chairman Zaid Bakht opposed the idea of lowering the service charge for remitting money from abroad, arguing that it will discourage banks to established exchange houses.

 “The banks spend a lot to operate the exchange houses. Besides, the fees charged by the exchange house is not the only reason for the fall in remittance inflow, an instability in the global money market is also responses for this,” Zaid Bakht, also a director of Bangladesh Institute of Development Studies, told daily sun on Saturday.

 He recommended for introducing a special duel currency rate at the exchange houses to address the fall in remittance flow.

News:Daily sun/19-jul-2017
Posted in Banking, News