Written by The Banking Post
A much-needed respite to the economy from foreign exchange (forex) crunch is being felt with banks’ stock of foreign currencies or net open position (NOP) having reached to a new height.
NOP represents the difference between a bank’s forex assets and liabilities. It reflects the bank’s risk exposure to currency movements. NOP increases mean the commercial bank’s capacity to meet overseas payment obligation enhances.
According to the BB, the volume of NOP in banks reached around $1.10 billion now from less than $500 million recorded couple of months ago. The volume is the highest after the pandemic period of 2021.
The NOP was found negative or short positioning even early last year.
Officials and bankers said the increased inflow of remittance and export receipts coupled with a remarkable improvement in current account in recent months helped the banks turn the corner.
On condition of not disclosing identity, a BB official said rising inflow of foreign currencies over the last several months keeps bolstering the country’s forex reserve despite clearing huge volume of overdue import bills.
And it ultimately enhances bank’s capacity to meet their overseas payment obligations in this post-import compression regime, the official said.
“Look at net open position (NOP) of the banking sector, which keeps mounting because of the rising forex inflow,” the central banker said.
Bankers said the banking industry has been facing various problems like LC (letter of credit) opening because of the shortfall of the foreign currencies, particularly the American greenback, throughout the last calendar year. But with the remarkable improvement in the forex supply in recent months, things began easing.
Managing director and chief executive officer of Mutual Trust Bank (MTB) Syed Mahbubur Rahman said bank’s forex holding continues to rise because of the growing inflow of forex thanks to substantial growth in remittance and export receipts.
Because of the fact, the foreign corresponding banks began easing their line of credit backup for their Bangladeshi counterparts, which is a good sign for the economy, the experienced banker said.
Seeking anonymity, treasury head of a leading private commercial bank said major international banks that typically act as correspondents had squeezed or suspended limit of their lines of funds for the Bangladeshi banks. As a matter of fact, the country’s commercial lenders were in serious trouble in dealing with international trades.
Being encouraged by the country’s remarkable turnaround in terms of forex reserve buildups in recent months, he said, leading overseas corresponding banks like Mashreq Bank, Citi N.A, HSBC and Standard Chartered Bank started easing their credit supports for Bangladeshi banks.
