Bangladeshis are increasingly using their credit cards to make purchases in India, as the country offers attractive exchange rates, cheaper medical services, and a variety of shopping options.
According to the latest data from the Bangladesh Bank, the central bank of the country, Bangladeshis spent Tk 116 crore (about $13.7 million) using their credit cards in India in December 2023, a 33% increase from the previous month and the highest amount ever recorded.
India accounted for nearly 20% of the total foreign currency transactions via credit cards by Bangladeshis, which amounted to Tk 579 crore (about $68.3 million) in December 2023. The other top destinations for credit card spending by Bangladeshis were the US, the UAE, Thailand, Singapore, Saudi Arabia, the UK, Canada, Malaysia, Australia, the Netherlands, and Ireland.
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Bangladesh Bank report of credit card
The Bangladesh Bank report also revealed that the majority of credit card transactions in India were made in department stores, accounting for 28.25% of the total spending. Other popular categories were retail outlet services, drug stores, cash withdrawal, clothing, transportation, and various other purposes.
Bankers and analysts attributed the surge in credit card spending in India to several factors, such as the shortage of US dollars in the local market, the lower exchange rate for card transactions compared to cash purchases, the ease of travel and visa procedures, and the availability of quality and affordable medical treatment in India.
Our nation is currently experiencing a dollar crisis. Most people cannot travel with cash dollars. They are compelled to use dollars on cards. Our Nostro accounts’ dollar liquidity is further reduced by this outflow. If the rate of dollar outflow exceeds the rate of inflow, the situation may worsen,” a senior official of the Bangladesh Bank told The Business Standard1.
He also mentioned that December is a month when more people travel, which raises credit card spending.
Another banker, who heads the treasury department of a private bank, expressed concerns about the increase in dollar transactions through cards, stating that it is not good news at this moment because the country’s dollar outflow exceeds its inflow.
Furthermore, he stated that travelers are choosing to endorse dollars on cards for travel or medical care because they can get dollars at a lower cost if they do so.
“For instance, if a person spends US dollars using a credit card, he/she has to pay Tk 110-112 per dollar, whereas the rate would range from Tk 120-130 per dollar for cash purchases,” he explained.
He also suggested that the Bangladesh Bank should monitor the credit card transactions more closely and impose some restrictions or limits on the amount of foreign currency that can be spent through cards.
On the other hand, some experts and travellers argued that the credit card spending in India is beneficial for both the countries, as it boosts trade, tourism, and people-to-people ties.
Dr. Ahsan H. Mansur, executive director of the Policy Research Institute of Bangladesh, said that the credit card transactions in India are not a cause for concern, as they reflect the growing economic and social interactions between the two neighbours.
He said that the credit card spending in India is mostly driven by the demand for medical services, which is a legitimate and humanitarian need for many Bangladeshis who cannot afford or access quality health care in their own country.
He also said that the credit card transactions in India are not a drain on the foreign exchange reserves of Bangladesh, as they are mostly offset by the remittances sent by the Bangladeshi workers in India, which amounted to $1.4 billion in the fiscal year 2022-23.
He added that the credit card spending in India also helps to diversify the export basket of Bangladesh, as many Bangladeshi traders and entrepreneurs buy raw materials, machinery, and other goods from India using their cards.
He urged the Bangladesh Bank to facilitate and encourage the credit card transactions in India, as they can enhance the economic cooperation and integration between the two countries.
Meanwhile, some Bangladeshi travellers who frequently visit India for various purposes shared their positive experiences of using their credit cards in India.
For the past few years, I have been traveling to India for medical examinations and treatments. I always use my credit card to pay for the hospital bills, medicines, and other expenses. It is very convenient and cost-effective. I don’t have to worry about carrying cash or exchanging currency. I also get discounts and offers from some hospitals and pharmacies if I use my card,” said Md. Kamal Hossain, a 55-year-old businessman from Dhaka.
I enjoy going shopping in India, particularly in Mumbai and Delhi. They have so many options and varieties of products, from clothes and accessories to electronics and gadgets. I use my credit card to buy everything I want. It is very safe and secure. I also get reward points and cashback from my bank if I use my card. It is a win-win situation for me,” said Farzana Akter, a 32-year-old teacher from Chittagong.
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According to the Bangladesh Bank, the number of credit cards issued by the banks in Bangladesh stood at 1.6 million as of December 2023, up from 1.4 million a year ago. The total outstanding balance of the credit cards was Tk 3,038 crore (about $358 million), up from Tk 2,487 crore (about $293 million) a year ago.
The Bangladesh Bank allows the cardholders to spend up to $12,000 per year for travel and medical purposes, and up to $5,000 per year for education and other purposes, subject to the availability of their credit limit.
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