As the South Asian country seeks to strengthen its foreign exchange reserves and lessen its dependency on dollars, two Bangladeshi banks intend to start offering trade operations priced in Indian rupees.
The plan for the exchange of rupees will be announced on July 11 by Eastern Bank, which opened accounts in rupees with the State Bank of India and ICICI Bank. The Sonali Bank, a state-run institution, is the other lender in Bangladesh providing the same service.
The usage of the Indian rupee by these lenders is a part of a growing global trend to rely less on the dollar. Developing countries can protect their foreign exchange reserves by using local and regional currencies.
“The use of the Indian rupee in India-Bangladesh trade provides a convenient and cost-effective mechanism for conducting cross-border transactions,” said Ali Reza Iftekhar, managing director of Eastern Bank, in an interview on Thursday. “That will lower the cost of doing business and the cost of exchange.”
In the fiscal year 2021–2022, Bangladesh purchased commodities totaling around $14 billion from India, its second-largest supplier behind China. Only $2 billion worth of goods were exported from Bangladesh to India during that time.
It is anticipated that some of the bilateral commerce, especially Bangladesh’s imports from India, will pass through these bank transactions.
We’ll begin in a very modest manner, Iftekhar said, adding that he didn’t anticipate the trade to reach $15 billion on the first day. “For businesspeople, the exchange loss will be less, and terms can be faster.”
As of July 5, Bangladesh’s reserves were down to $31.16 billion from $41.88 billion a year earlier. To stabilise its reserves, the South Asian nation switched to a more market-based exchange rate.
As foreign exchange reserves decline, Bangladesh’s central bank intends to deploy a taka and rupee debit card in September. Under the travel quota, Bangladeshis would be permitted to spend a maximum of 12000 rupees in India each year.
According to Governor Abdur Rouf Talukder, the implementation of the card is anticipated to stop double currency conversion, cutting the loss by 6%.
