$2,000 and above: Exchange Companies must conduct sale transactions through banking channels: SBP

KARACHI: In order to further strengthen the regulatory regime for Exchange Companies and promote the banking channels, the State Bank of Pakistan (SBP) has restricted Exchange Companies for cash sale transactions of worth $ 2000 and above.

As per the SBP’s fresh directives, ECs are now required to conduct all foreign currency sale transactions of $ 2,000 or above against PKRs through banking channels.

The State Bank has advised the Exchange Companies that all foreign currency sale transactions of $2,000/- or above (equivalent in other currencies) against PKR should only be conducted through payment modes, such as bank transfer/cheques from the personal bank account of the customer aimed to further enhance transparency and promote documentation in the foreign exchange transactions.

This step is also focused on encouraging the general public to use various banking channels, which are generally, more secure, to fulfill their genuine foreign exchange needs.

The SBP has announced to amended the instructions contained in Para 9 (i)(g) and Para 9 (iii)(g) of Chapter 3; and Para 12(i)(d) of Chapter 8 of the Exchange Companies Manual for Exchange Companies and Exchange Companies of ‘B’ Category.

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In order to further streamline the regulatory regime for Exchange Companies, and encourage customers to use banking channels for purchase of foreign exchange from Exchange Companies, the existing regulations prescribing the scope of business of Exchange Companies have been amended, which will be effective immediately, the SBP.

As per Para 9(i)(g) Chapter 3 of Exchange Companies Manual, now all foreign currency sale transactions of USD 2,000 or above or equivalent in other currencies against PKR will be conducted by the Exchange Companies through bank transfer or cheque from the personal account of the customer.

According to SBP, the transaction or instrument reference number and the name of the bank transferring funds or issuing the instrument will be mentioned on the transaction receipt, issued by Exchange Companies, along with identification document number of the customer.

In addition, under Para 9(iii)(g) Chapter 3 of Exchange Companies Manual, all foreign currency sale transactions for outward remittance of USD 2,000 or above or equivalent in other currencies against PKR will be conducted by the Exchange Companies through bank transfer/cheque from the personal account of the customer. The exchange company will be required to mention the transaction or instrument reference number and the name of the bank transferring funds or issuing the instrument on the transaction receipt along with identification document number of the customer.

Similarly, as per Para 12(i)(d) Chapter 8 of Exchange Companies Manual, all foreign currency sale transactions of USD 2,000 or above or equivalent in other currencies against PKR will be conducted by the Exchange Companies of ‘B’ Category through bank transfer/cheque from the personal account of the customer.

“The transaction or instrument reference number and the name of the bank transferring funds or issuing the instrument shall be mentioned on the transaction receipt along with identification document number of the customer,” the SBP directed the Exchange Companies of “B” Category.

The SBP has warned the Exchange Companies that failure to comply with these instructions shall attract regulatory action under the relevant provisions of the Foreign Exchange Regulation Act, 1947.

Malik Bostan, Chairman Forex Association of Pakistan has welcomed the SBP’s move saying that Exchange Companies will support all such initiatives to overcome the ongoing cash crisis.

He said that exchange companies are already fully in compliance with the SBP’s directives and this will help further streamline the currency business through the banking channel.

He requested the SBP for strict monitoring of online transactions through credit cards, which is rapidly increasing. “We have asked the SBP for a strict check and balance of online trading through credit cards to control the outflow of US dollar,” he added. Bostan said that he is in touch with federal minister for finance Miftah Ismail and SBP officials to increase the inflows of dollars in the country.

Copyright Business Recorder, 2022