Staff Reporter:

Commercial banks in Bangladesh are facing severe liquidity strain and shrinking profits as the government delays reimbursing over Tk 8,565 crore in remittance incentive subsidies.

To encourage expatriate Bangladeshis to send money through official banking channels, the government offers a 2.5% cash incentive on incoming remittances. Commercial banks pay this bonus upfront to remitters using their own client deposit funds, with the understanding that the Finance Ministry will quickly refund them through Bangladesh Bank. However, due to a state funding shortfall, these government reimbursements are now nearly 9.5 months behind schedule.

Key Drivers Behind the Backlog

• Record Remittance Inflows: Expatriates sent a record $35.59 billion in FY2025–26, causing the required subsidy payments to grow much faster than state budget allocations.

• Taka Devaluation: As the dollar exchange rate rose from Tk 117 to Tk 123, the cash bonus paid by banks increased from Tk 2.95 to Tk 3 per dollar.

• Weak Revenue Collection: Delays in government tax collection have created a cash crunch, stalling fund releases from the Finance Ministry.

Major Affected Banks

While outstanding claims across the banking sector totaled Tk 8,565 crore by August, several private lenders carry the heaviest financial burdens:

How the Delay Hurts Banks

1. High Funding Costs: Banks pay 7% to 8% interest annually to gather the deposit funds used for these upfront bonus payouts.

2. Zero Return on Stuck Money: Because the government pays no interest on these delayed reimbursements, billions of taka sit yield-free.

3. Lost Investment Income: By tying up cash in unpaid claims, banks miss out on earning 9% or more in secure Treasury bills and bonds.

4. Reduced Lending Capacity: Cash locked in government arrears directly reduces the funds banks have available to loan to local businesses.

Proposed Solutions & Next Steps

Industry leaders recommend restoring the previous policy of providing banks with three months’ advance funding for incentives, alongside automatic monthly claim settlements.

The Governor of Bangladesh Bank has met with commercial bank CEOs and assured them that discussions with the Finance Ministry are active to expedite back-pay releases. Bankers caution that resolving this backlog quickly is essential to prevent remitters from turning back to informal hundi channels, which would jeopardize national foreign exchange reserves.