SBI directs it branches to settle trade in local currency with Bangladesh

Tags: Economy/Finance

India’s largest bank, State Bank of India (SBI) has asked its branches to avoid settling trade deals with Bangladesh in foreign currencies as the country is facing a major economic crisis and shortage of foreign exchanges. The SBI has instead asked its branch to settle trade in Indian Rupees and Bangladeshi Taka.

SBI fears large-scale defaults by Bangladeshi importers, if the country’s foreign exchange situation exacerbates.

IMPORTANT FACTS -

Economic crisis in Bangladesh :

• Bangladesh is the latest neighbouring country which is facing an economic crisis after Sri Lanka and Pakistan.  
• According to the Bangladesh Bank (the Central Bank of Bangladesh), the country's foreign exchange reserves declined to $37 billion on 16 September 2022 from $48 billion a year earlier. 
• It is barely enough to cover Bangladesh's five month import. 
• Bangladesh’s foreign exchange reserves started dwindling after a sharp increase in the global commodity prices, especially of oil and gas due to the Russia-Ukraine war. 
• Bangladesh has approached the International Monetary Fund (IMF) for a $4.5 billion loan to deal with its foreign exchange crisis.

Bangladesh an important Trade Partner of India : 

• Bangladesh was the 4th largest export market of India in 2021-22 after the USA, UAE and China.
• According to the government of India’s data, India’s export to Bangladesh in the April to July 2022 period increased to $$4.94 billion, a growth of 17% as compared to last year. The import in the same period from Bangladesh was $580.7 million. 

ADDITIONAL INFORMATION -

People’s Republic of Bangladesh :

• Capital: Dhaka 
• Prime Minister: Sheikh Hasina Wazed 
• President: Abdul Hamid
• Currency: Taka