Inland remittances transactions: SBP declines permission to ECAP

The State Bank of Pakistan (SBP) has reportedly turned down a request of the Exchange Companies Association of Pakistan (ECAP) seeking permission to handle inland remittances transactions, it is learnt. Sources said that a request was made by the exchange companies during a recent meeting in Ministry of Finance that they should be allowed to handle inland remittance transactions through which a person selling foreign exchange in one city may receive cash transaction in another city.
The SBP response was that inland/domestic remittances are a banking activity and ECs have been established under ''Foreign Exchange Regulation Act 1947'', which essentially relates to foreign exchange business, and no other banking activities like inland remittances/transfer is permissible under the governing statute law. The SBP said that it has already allowed the ECs to expand their network as per related EC licensing framework, and new requests in this regard are also being processed accordingly.
The ECAP has demanded level playing field for the exchange companies by paying Saudi riyal 25 per home remittance transaction, as is being given to commercial banks. Responding to the proposal, the SBP stated that ECs may join the scheme by becoming distribution partners of banks. The objective of the scheme is to facilitate small remitters to cover their transactions related banking cost to promote formal remittances.
Reimbursement of telegraphic charges is a scheme of the Ministry of Finance introduced in 1985 (long before the establishment of ECs). It is being reviewed with the objective to rationalise it, even for the banks, from transaction based approach to volume based approach.
The rationale behind the establishment of exchange companies is to cater for the foreign exchange needs of the individuals according to the related regulatory regime. So far as to commercial/trade related transactions are concerned, they are beyond the scope of the Ecs'' permissible activities. In terms of Section 2 of the Presidential Ordinance of 2002 whereby through an amendment in FERA 1947 exchange companies were allowed to be established in Pakistan, defines "exchange company as a company authorised to deal in foreign currency notes, coins, postal notes, money orders, bank drafts, travellers cheques and transfers". Therefore, the ECs'' demand seeking permission for commercial/trade transaction is beyond their mandate.