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India's top lender asks exporters to trade with Bangladesh in rupee, taka.


Date: 20-09-2022
Subject: India's top lender asks exporters to trade with Bangladesh in rupee, taka
NEW DELHI: Top lender State Bank of India has asked exporters to avoid settling deals with Bangladesh in the dollar and other major currencies as it looks to curb exposure to Dhaka's falling reserves, according to an internal document and a source.

Bangladesh's $416-billion economy is battling rising prices of energy and food as the Russia-Ukraine conflict widens its current account deficit, and dwindling foreign exchange forces it to turn to global lenders such as the International Monetary Fund (IMF).

"The country is facing a shortage of foreign currency due to higher import bills and weaknesses of Bangladeshi taka against dollar in recent times," the SBI said in an Aug. 24 letter sent to its branches and seen by Reuters.

The letter and its contents have not previously been reported. The SBI did not immediately respond to an e-mail seeking comment.

The decision not to increase exposure to the dollar and other foreign currencies in relation to Bangladesh stemmed from the current economic situation and the neighbouring nation's shortage of foreign currency, the bank said in its circular.

"However exposure in Indian rupee (INR) and taka will continue," it added.

Bangladesh's foreign exchange reserves declined to $37 billion by Friday from $48 billion a year earlier, according to data from the central bank, which provides import cover of just five months.

Finance ministry officials have said Bangladesh is seeking a $4.5 billion loan from the IMF, in excess of its maximum entitlement of $1 billion under the IMF Resilience and Sustainability Trust.

A source familiar with the matter said SBI did not want to increase its exposure to Bangladesh.

"We have an approximate exposure of $500 million to Bangladesh and have taken the decision not to grow it further aggressively, and maybe, even reduce it as needed, with the news surrounding the economy," added the source, who spoke on condition of anonymity. Bangladesh is just one of India's neighbours in financial distress.

The island nation of Sri Lanka is grappling with a financial crisis as its central bank reserves stand at just $1.7 billion at a time of galloping inflation and severe shortages of food and fuel that sparked protests and a change of government.

And Pakistan's central bank reserves of $8.6 billion are sufficient for just about a month of imports.

Source Name:-Economic Times

  
      

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