Business entities incorporated abroad: SBP introduces two separate categories of forex, PKR accounts

KARACHI: In order to facilitate the business entities incorporated abroad with majority shareholding of non-resident Pakistanis, the State Bank of Pakistan (SBP) has introduced two separate categories of foreign currency and Pak rupee accounts namely Foreign Currency Business Value Account (FCBVA) and Non-Resident Rupee Business Value Account (NRBVA).

Accordingly, the SBP has amended Chapter 6 and Chapter 8 of the Foreign Exchange Manual. Chapter 6 provides general instructions for opening and maintaining foreign currency accounts in Pakistan, while Chapter 8 sets out regulations for opening and maintaining non-resident rupee accounts in Pakistan.

According to a circular, Authorized Dealers (ADs) may open FCBVA of the legal entities incorporated or registered abroad and majority (51 percent or more) owned and/or controlled by NRPs and/or non-resident POC holders. These entities could be companies, associations, foundations, Limited Liability Partnerships (LLPs), societies, Trusts, Waqfs and/or other similar legal arrangements. However, this will not include sole proprietorships or unregistered partnerships.

Operations of the FCBVA will be governed by the regulations and ADs may allow operations in FCBVA through electronic channels besides conventional modes in practice. ADs may also issue cheque book, if required by the authorized account operators.

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ADs are required to provide online real time convertibility from FCY to PKR based on the request made by the authorized account operator electronically for the eligible debits from the account. For the sake of transparency, the ADs will be required to indicate the exchange rate applicable to the transaction.

In case FCBVA becomes dormant due to non-operation, ADs will devise a mechanism, aligned with applicable regulations, to reactivate the account digitally. ADs will ensure regular monitoring of FCBVAs to mitigate Money Laundering and Terrorist Financing risks.

Credits to the Foreign Currency Business Value Account includes remittances received from abroad through banking channels, transfer of funds from its own NRBVA maintained in PKR with same AD, profit, mark-up, return or proceeds of sale or maturity of permissible investments made from FCBVA and reversal of any erroneous debit from FCBVA.

Debits includes, Investment in permissible securities, provided that the relevant laws/regulations permit such investment like FCY denominated Government of Pakistan’s registered debt securities and FCY denominated term deposit/remunerative product scheme.

The funds for these investments will be transferred by the ADs only in the eligible products, through the instructions received from the authorized account operator in this behalf.

In addition, sub-para (i) para 2 of the chapter has been revised and a new para 8A has been inserted after para 8 in Chapter 8 of the Foreign Exchange Manual for Non-Resident Rupee Business Value Account (NRBVA).

As per amendment ADs may open and maintain the non-resident rupee accounts including Non-resident Rupee Account-Repatriable (NRAR), Non-resident Rupee Account-Non-repatriable (NRAN), NRP Rupee Value Account (NRVA) for Non-resident Pakistanis only and NRP Rupee Business Value Account (NRBVA) for the individuals and entities.

Authorized Dealers (ADs) may open NRBVA of the legal entities incorporated or registered abroad and majority (51 percent or more) owned and/or controlled by NRPs and/or non-resident POC holders. These entities could be companies, associations, foundations, Limited liability Partnerships (LLPs), societies, Trusts, Waqfs and/or other similar legal arrangements. However, this will not include sole proprietorships or unregistered partnerships. Operations of Non-Resident Rupee Business Value Account shall be governed by the SBP regulations.

The SBP has advised the ADs to bring these instructions to the notice of all their constituents for meticulous compliance.

Copyright Business Recorder, 2022