The Bangladesh Bank has sought explanation from Islami Bank Bangladesh PLC over buying dollars from foreign exchange houses allegedly at rates higher than the ones set by the Bangladesh Foreign Exchange Dealers Association and the Association of Bankers, Bangladesh.

In a letter dated December 14, the central bank sought the explanation from the managing director of Islami Bank Bangladesh.

Ahsanul Alam, son of Mohammed Saiful Alam who is the chairman of Chattogram-based S Alam Group, is the chairman of Islami Bank Bangladesh.

According to the rates announced by BAFEDA and ABB in November and December, banks are permitted to buy each dollar from remitters and exporters at Tk 109.75 and sell them to importers at Tk 110.25.

Additionally, banks can provide a maximum of 2.5 per cent incentives to foreign exchange houses, but they are not eligible for the incentives provided by the government to remitters.

According to the show-cause letter, the central bank earlier sent a letter to the private commercial bank, saying that the private bank was purchasing foreign currencies from exchange houses at rates higher than those specified by BAFEDA. 

The head of the Islami Bank Bangladesh’s treasury stated that the decision to purchase foreign currencies at higher rates was made based on the suggestion of senior officials of the bank, the BB letter said.

In response to the central bank’s request to cease such activities, the treasury head assured that the bank would communicate its next steps after discussing the matter with senior officials, according to the letter.

However, the bank did not follow up with the central bank as promised and continued to purchase foreign currencies at higher rates, disregarding the central bank’s instructions, the letter said.

Islami Bank Bangladesh managing director and CEO M Monirul Mowla could not be reached over phone for comments on the issue.

In September, the Bangladesh Bank fined treasury heads of 10 banks Tk 1 lakh each due to trading of dollars at higher prices.

Earlier in July, 13 banks were found to have manipulated dollar prices and the central bank had run investigations into the overpricing of the foreign currency.

The country's financial market has been grappling with a severe dollar crisis in the past year, leading to difficulties in opening letters of credit to meet market demands.