Dollars flow back into banks through RFCD accounts

Given that resident foreign currency deposit (RFCD) accounts can earn up to 7% interest on dollar deposits, dollars and other foreign currencies that were previously kept at homes have begun to return to the banks.

Additionally, depositors have unlimited access to use dollars from their RFCD accounts both domestically and internationally. An RFCD account may be used for up to $5,000 on each of the overseas travels.

Several banks have launched various incentives to entice their customers to deposit money that is kept at home. In less than a month, it caused the banks’ cash dollar reserves to rise from $28 million to $32 million.

It hasn’t yet recovered to its pre-crisis level, though, as banks had a $50 billion cash reserve before to the financial crisis.

When it comes to informal currency exchange, the situation is quite different because each dollar still exchanges hands for Tk 120 and the kerb market is unaffected by the banks’ growing dollar holdings.

To encourage customers to transfer their dollars to the banks, the central bank increased the features for RFCD accounts in a circular issued on December 3rd of last year. Afterwards, significant steps were taken to open RFCD accounts by the City Bank and a few other banks.

Currently, Eastern, City, BRAC, Dutch-Bangla, Prime, Pubali, Standard Chartered, HSBC, Islami, and a few more banks own the majority of the cash dollars. Customers can open RFCD accounts for Pounds, Euros, Australian Dollars, Canadian Dollars, and Singapore Dollars in addition to USD.

The managing director of Mutual Trust Bank (MTB), Syed Mahbubur Rahman, stated that the central bank’s strategy has resulted in an increase in dollar deposits in banks. People who obtained funds through legal means are going back to the banks in order to receive interest. However, people who obtained money through shady means might continue to be outside the financial system.

The MD of MTB added that the company would launch a number of efforts, such as advertising campaigns, to boost the amount of money coming into the banks.