Banks can do nothing to reduce the cost of bringing remittance to Bangladesh as they do not charge anything at all for channelling the hard-earned money sent by the migrant workers.
Only the exchange houses of local banks abroad take a minimum commission from remitters for sending money, said bankers at a meeting with Bangladesh Bank at the latter's headquarters in Dhaka yesterday.
The meeting was called to discuss how to cut the cost of sending money by the migrants amid a sharp drop in remittance income.
Remittance inflow in 2016-17 has been the lowest in six years. Migrant workers sent home $12.77 billion last fiscal year, down 14.47 percent year-on-year.
“The fact is that banks don't charge for receiving money from the remitters or disbursing it to the beneficiaries,” said a senior executive of a private bank.
He said the cost of sending money is not responsible for the fall in remittance to Bangladesh as expatriates spend very minimal to send money home. Local exchange houses take comparatively less than foreign exchange houses.
The local exchange houses are making a loss because of lower income from remittance. If the commission is withdrawn, it would be impossible for them to continue the business, said the banker.
The BB discussed with the banks on ways to bring down the cost, but it has not taken any decision in this regard, said Subhankar Saha, executive director of the central bank.
A few months ago, the finance ministry sent a letter to the BB asking it to assess the cost of sending remittance and take steps to reduce the cost, if necessary.
Bangladesh is the least costly corridor among the remittance recipient countries, according to the World Bank data.
The average cost of sending remittance from Kuwait to Bangladesh is 3 to 4 percent of the amount sent while it is 2 to 3 percent for India.
The cost is 3 to 4 percent for both Bangladesh and India for remittance sent from Singapore, according to the WB.
Expatriates living in Saudi Arabia have to spend 5 to 7 percent to send money to Bangladesh, while the cost is 3 to 4 percent from Oman.
The charge of sending money from the US and the UK is higher because of stringent compliance related to anti-money laundering regulations, said a central banker.
Globally, sending remittances costs an average of 7.32 percent of the amount sent, according to the WB. Besides, South Asia remains the cheapest receiving region, with an average cost of 5.52 percent.
Currently, there are 29 exchange houses abroad and many of them are loss-making, said a central banker.
The slump in remittance is a result of the global economic crisis, fall in oil prices in Middle Eastern countries, Brexit and the Trump administration's policy aimed at migrant workers, said AB Mirza Azizul Islam, former finance adviser to a caretaker government.
He said adjustment of the exchange rate could help remitters a little bit. “There is a wide gap between the exchange rate in the kerb market and the interbank market. It should be minimised.”
Another option, he suggested, is to enhance the skill of migrant workers going abroad and diversify the destinations.
The inter-bank exchange rate was Tk 80.64 per USD on Tuesday whereas it was Tk 82.80 in the informal market.