Exchange companies urge SBP to provide level-playing field

The exchange companies have urged the State Bank of Pakistan to provide level playing field with commercial banks and immediately lift the ban on export of currencies to increase inflows of home remittances and stabilising exchange rate. Sources told Business Recorder on Friday that the Exchange Companies Association of Pakistan (ECAP) held a meeting with State Bank of Pakistan (SBP) Governor Dr Shahid Kardar at SBP head office.
The meeting discussed various issues and problems faced by the exchange companies, including withholding tax, delay in agreements, export of currencies, etc. After detailed discussions, the Governor announced to constitute a committee, comprising two representatives of ECAP and two from SBP. Representatives of the ECAP asked for the lifting ban on export of currencies like UAE dirham, euro and pound sterling.
They said that the central bank, in May 2008, had imposed ban on export of these currencies and now exchange companies are surrendering these currencies in interbank deals, where they are not getting good rate and are facing losses. They said that after lifting of ban the exchange companies would get better rates, which would definitely stabilise the exchange rates in the country.
They also asked for early issuance of NOC for fresh franchises and opening of branches, as presently a large number of agreements of the exchange companies are lying with SBP for a long time and have not either been approved or rejected. Shahid assured the ECs that SBP would soon set a period for issuance of new licence and agreements, and it was likely to be one month.
The ECAP delegation also informed the Governor that the Ministry of Finance is being paid rebate of 25Saudi riyal on every 100 dollars remittance to the banks, while the ECs do not get a single penny rebate on inward remittances. Therefore, they desired to enter PRI system to get same rebate on every 100 dollars remittance. During the meeting the ECAP also discussed the issue of 0.3 percent withholding tax being paid by exchange companies on every cash withdrawal of rupees despite the fact that inward remittances are exempted from taxes.
The representatives of ECAP demanded that SBP should negotiate with FBR to resolve the issue. The exchange companies claimed that they had made several requests with the State Bank and FBR for removal of 0.3 percent withholding tax on cash withdrawal. However, still the problem has not been resolved and they are paying tax. On the other hand, commercial banks are already enjoying exemption of withholding tax on cash withdrawals.
"This type of behaviour is weakening the performance of the companies, which are making efforts to raise the inflow of remittances," they said, and demanded that the central bank should provide equal playing field along with commercial banks to enhance the inflows of home remittances.
"The ECs have almost 50 percent share in remittances and, during the last fiscal year, they brought some 4.5 billion dollars", they said, adding that "we can fetch about one billion dollars home remittances every month if the SBP and ministry of finance fulfil our demands".
They said that as per SBP circular dated January 26, 2010, the ECs are already reporting all transactions to SBP on the same day and CNIC are being obtained from all clients. Dr Shahid assured the delegation that all problems would be solved and SBP would also consider lifting the ban on export of these currencies, after the report of newly constituted committee. He also asked the committee to make proposals on this issue. The Governor told the delegation that some issues related to the federal government. However, he would personally take up these issues with ministry of finance to provide level playing field.