The central bank has decided to introduce foreign currency (FC) clearing and settlement through the RTGS system for the first time - from September 04 - to facilitate business activities, officials said.
Under the new payment system, five currencies - including US dollar, Great Britain Pound, Euro, Canadian dollar and Japanese Yen - would be used to settle payments within the country through inter-bank transactions.
The clearing and settlement of Chinese Yuan would be incorporated in the Real Time Gross Settlement (RTGS) system soon, according to a notification - issued by the Bangladesh Bank (BB) on Sunday.
"The banks may clear as well as settle their FC transactions using the payment system from their own offices without coming to the BB," a top central banker told the FE, while explaining the main advantage of the new system.
"It will also help easing doing business in Bangladesh."
More than 100 million foreign currencies, mostly the US dollar, are expected to be dealt in each working day through the RTGS system without losing any time, according to the central banker.
Syed Mahbubur Rahman, managing director and chief executive officer of Mutual Trust Bank Limited, welcomed the BB's latest move, saying that it would make the country's payment system more efficient and transparent.
Currently, the banks carry out clearing activities of the foreign demand drafts (FDDs) - issued in foreign currencies - under the foreign currency clearing arrangement of the central bank.
But the clearing activities would be conducted through the RTGS instead of the FDDs from September 04.
The entire FC clearing and settlement process is still manual and paper instrument-based, which requires physical movement of instruments and officials - resulting in higher transaction cost and inconvenience.
"To overcome this problem, the BB has decided to introduce FC clearing and settlement through the RTGS system," the notification noted.
It also said the RTGS is a credit transfer system, and the FC operation in the RTGS system is similar to that of the local currency (BDT) settlement system.
At the beginning of each business day, the banks' specific FC accounts would be debited and the related RTGS settlement accounts would be credited as per standing instructions of the participants. The transactions would be settled instantly and the funds would be transferred to the beneficiaries' accounts.
"The transactions will be settled only when the RTGS settlement account of a specific currency has sufficient balance," the notification added.
At the end of the business day, balance of the settlement accounts of the RTGS system will be transferred to the banks' specific FC accounts.
"Thus FC clearing through the RTGS system will eliminate settlement risk as well as credit risk for the participants," it noted.
The RTGS system allows only currency-wise transactions, and cross-currency transactions are not allowed.
The banks may charge maximum Tk 100 (including VAT) or equivalent FC for each transaction from the originators, the BB noted.
The central bank formally launched the RTGS system on October 29, 2015 to facilitate business activities across the country.
The system is capable of operating clearing and settlement activities in both local and foreign currencies.
The RTGS can be defined as the continuous (real-time) settlement of fund transfers individually on an order by order basis (without netting).
'Real time' means the processing of instructions at the time they are received, rather than at some later time. 'Gross settlement' means the settlement of funds individually without netting with other transactions.
Different South Asian countries, including India, Pakistan and Sri Lanka, have already introduced the RTGS to provide speedy services for high-value transactions by businessmen.
