The Bangladesh Bank has sent show-cause notices to managing directors (MD) of six banks for allegedly profiting more from selling US dollars.
They have been asked to explain ten issues about their dollar transactions, including unusual profits, and high spread between buying and selling costs.
They were also asked to reply in seven working days.
The six banks are Dutch Bangla Bank, Southeast Bank, Prime Bank, City Bank, Brac Bank and Standard Chartered Bank.
A Bangladesh Bank source confirmed that they sent the letters to the MDs of the banks on Wednesday.
On the same day, in another letter, the Bangladesh Bank said that extra profit from the sale of dollars cannot be declared as the bank's income.
Regarding the matter, Bangladesh Bank Executive Director and Spokesperson Md Serajul Islam said: “I do not know yet whether the letter has been sent to the MDs of 6 banks. However, due to earlier reasons, action has not been taken against six banks. For the same reason, every bank will be inspected, if evidence is found then action will be taken against them.”
Action was taken against the treasury heads of the banks earlier.
The central bank took a week for examining the authenticity of the collected documents and then issued the show cause notices on Wednesday.
According to a central bank source, a dozen more banks have been brought under the investigation.
For this, foreign exchange transaction information has been sought from all these banks.
Banks profiting
Bank Asia, a private commercial bank, registered a 770% year-on-year growth in its profit from foreign exchange dealings in the first six months of this year.
Apart from Bank Asia, nine banks made exchange gains of above 200% during the period, while two made profits above 140% from the volatile dollar market, according to banks.
The central bank is likely to take further action against other high profit-making banks, according to sources at the Bangladesh Bank.
In a recent meeting with the Bangladesh Bank, bankers placed a list of 12 banks that made excessive profits from dollar trading, raising the question as to why only six banks were punished.
Based on the list, the Bangladesh Bank is now planning to ask other banks to clarify their position about their unusual profits from the volatile dollar market, a central bank source confirmed.
In January-June, taka lost 9% value amid rising dollar prices. At the beginning of the year, the interbank exchange rate was Tk85.80, which reached Tk93.45 at the end of June.
However, in the open market dollar price crossed Tk100 per dollar, making the interbank exchange rate ineffective in LC (Letter of Credit) settlements.
The Bangladesh Bank devalued taka 16 times during these six months.
The severe dollar crisis forced the central bank to inject dollars into the market, causing an erosion of foreign exchange reserves by nearly $4 billion in six months of the current year.
Some banks allegedly made a gain of more than Tk5 per dollar, further intensifying the dollar crisis.
Money changers' profit capped
After banks, Bangladesh Bank has also set the profit limits for money changers.
As part of an effort to stabilize the country's foreign exchange market from now on, they would not be allowed to gain a profit of more than Tk1.50 for buying and selling every cash dollar in the open market.
The central bank earlier instructed banks to make a maximum profit of Tk1 per dollar.
For instance, if a money changer purchases a dollar for Tk 110, it cannot be sold for more than Tk 111.50.
The decision came from a meeting between Bangladesh Bank and money changers at the central bank headquarters in Dhaka on Wednesday.
Bangladesh Bank Executive Director and spokesperson Md Serajul Islam said: “In this case, they will buy dollars at an additional price of Tk1 from the average rate of banks. Money changers can make a profit of up to Tk1.50 on subsequent sales."
"As we have observed the buying and selling of dollars by the banks, the same has been done in the money changers."
The central bank spokesperson also said that currently 235 money changers are doing business with permission from the Bangladesh Bank. But there are more than 700 money changers in the market.
"We can take action against legitimate money changers for any irregularities. But the Bangladesh Bank has requested law enforcement agencies to take action against those who are illegal. They are taking action in this regard. Their campaign is still ongoing," he added.
'Withdraw ban on 5 money changers'
A source in the meeting said leaders of the Money Changers Association of Bangladesh requested the central bank to allow five suspended money changers to operate after imposing fines.
But Bangladesh Bank rejected the request.
Earlier Bangladesh Bank has suspended the licences of five foreign exchange houses and served show-cause notices to an additional 42 for their alleged involvement in the manipulation of US dollar prices in the kerb market.
There is an allegation that a section of people hoarded dollars in cash to gain profit by taking advantage of the instability, which created a further shortage in the open market.
Against this backdrop, 10 inspection teams along with members of an intelligence agency started visiting money changers around Dhaka city on July 27 to investigate whether they were intentionally hoarding US dollars to hike their rate against the Taka.