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Card-based forex transactions slow after six months

Foreign currency transactions through cards slowed after six months in November to Tk572 crore, which is 5.45% lower than the previous month.

According to Bangladesh Bank data, foreign currency transactions using cards stood at Tk241 crore in April 2022, which is Tk39 crore lower than the previous month. After that, card transactions increased for six consecutive months through October.

Bankers said forex transactions by cards declined in November as the dollar price normalised somewhat in the open market. The dollar price through cards stands at Tk107 to Tk108 after which the card charges again. The greenback is available at the same rate in the open market.

The card division head at a private bank said on condition of anonymity that many banks have a dollar shortage.

“When a bank customer spends dollars using a card, the lender has to pay dollars from its foreign account, so banks have reduced issuing new cards,” he added.

As the country’s reserves are decreasing, banks have faced a dollar crisis since April last year. On 12 July, for the first time, the dollar was sold at Tk100 in the open market. 

After that, the price of the dollar increased to Tk120 on 10 August, prompting the Bangladesh Bank to verbally ask lenders to increase the use of cards to reduce dependence on cash dollars. Since then, foreign currency transactions by cards have increased.

The country’s reserves stood at $48 billion in August 2021 due to good remittances and export earnings. In the following month, the central bank started selling dollars.

Although the central bank continues to sell the greenback, a dollar crisis began in April 2022 due to rising import costs. Then the reserves started to deplete as the central bank gradually sold dollars from its reserves. The amount of reserves was $33.83 billion at the end of December.

A bank’s treasury department official said, to reduce the pressure on the reserves, the government has imposed a 100% margin on opening letters of credit (LCs) for the import of all products except daily necessities.

It has led to a drop in the country’s imports. Small traders used credit cards to import goods because they did not get dollars from banks for import. They have taken cards in the names of multiple family members due to the fact that card transactions were higher during this period compared to the previous year.

By card or passport endorsement, a customer can spend up to $12,000 per year. However, the central bank said that on 4 September it issued letters asking 27 banks to provide reasons for overspending on credit card limits. At least 71 bank credit card holders spent between $12,500 and $20,000

In November, overall card transactions hit all-time high

In recent history, November saw the highest transactions at automated teller machines, points of sale, cash recycling machines, and e-commerce transactions.

In November 2022, the transactions through these cards stood at Tk39,247 crore, compared to Tk25,501 crore in the same month a year ago. As such, it has increased by 53.90% compared to the previous year.

In November, card transactions at automated teller machines stood at Tk29,720 crore, those at points of sale at Tk2,420 crore, those at cash recycling machines at Tk5,944 crore, and those in e-commerce at Tk1,162 crore.

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