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