The central bank has decided to start special inspection to verify the reports submitted by banks on their holding and utilisation of foreign exchange, officials said.

The Bangladesh Bank (BB) has initiated the latest move against the backdrop of allegations of concealment of facts in the reports, which has resulted in volatility in the country's foreign exchange (forex) market recently.

"Our probe team will start investigation from Sunday (today)," a BB senior official told the FE Saturday, adding that the central bank will take drastic action against the errant banks after receiving the inspection reports.

The probe teams will investigate different aspects of foreign exchange dealings in line with the existing foreign exchange rules and regulations, the central banker said.

Besides, the inspection teams will examine the latest reports on foreign exchange deals covering both inter-bank foreign exchange market and corporate clients.

"The inspectors will also check the exchange rates offered by the commercial banks against US dollar, for receiving remittance from overseas exchange houses," the BB official said.

The central bank started collecting information on such exchange rates from the commercial banks through e-mail or fax since October 13 last to stop 'unhealthy' competition among the banks to offer higher exchange rates to the overseas exchange houses.

The BB official also said the central bank wants to know whether the banks are applying their due diligence or not while quoting the exchange rates.

"We are trying to trace unreported funds

held by the commercial banks by using different techniques," another BB official said, adding the teams will also examine the overall outflow, inflow and swap deals of the banks relating to foreign currency.

During the inspection, the teams will check the overseas accounts maintained by local banks with foreign banks, generally known as NOSTRO accounts, to know the actual foreign exchange position, the central banker noted.

The Bangladesh Taka (BDT) has been under pressure, leading to its depreciation in recent days against the US dollar, mainly due to higher demand for the greenback for settlement of import payments.

The local currency depreciated by 2.38 per cent against the US dollar at the level of customers opening LCs against import this month while the BDT lost its value by 1.90 per cent against the US currency in the inter-bank forex market.

The average exchange rate of US dollar rose to Tk 80.4923 for bills for collection (BC) on December 8 last from Tk 78.6211 on December 01, according to the statistics of Bangladesh Foreign Exchange Dealers Association (BAFEDA).

On the other hand, the US dollar was quoted at Tk 78.20-Tk 78.60 in the inter-bank foreign exchange market on December 8 last against Tk 76.92-Tk 76.95 on December 01 last, the BB data showed.

Source: The Financial Express/ Bangladesh/ 11th Dec 2011