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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.

'Serious violations': SBP suspends authorisation of two currency exchange companies for 3 months

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

Comments

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Hussain Naqvi Sep 24, 2022 01:37pm
AslamoAlikum: Excellent step towards documented economy. دیرآیَد دُرَسْت آیَد Regards
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Owais Sep 24, 2022 02:34pm
Very good step by SBP n Govt
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wanker Sep 24, 2022 05:01pm
What about foreigners who don't have bank accounts in Pakistan? How are they supposed to buy foreign currency?
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Anonymous Sep 24, 2022 05:08pm
From 5,000 USD to 2,000 USD, while PKR/USD keep rising. Instead of giving a roadmap for foreign investment, govt. is taking regressive actions to artificially suppress dollar transactions.
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Ishfaq Aziz Sep 24, 2022 06:06pm
@wanker, First, They are required to open an account with any bank by providing their foreign source of income. i
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Ishfaq Aziz Sep 24, 2022 06:08pm
@wanker, First he have to open an account with any bank by providing their foreign source of income. all other means are under black money. its really good decision yet been taken.
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Ishfaq Aziz Sep 24, 2022 06:13pm
@wanker, First, They have to open an With any bank by providing their foreign source of income.
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Adnan Aziz Sep 24, 2022 08:30pm
In crisis situations, various departments lose their senses and this is one example. SBP should use its brains and avoid creating a situation worse than that once prevailed in former communist regimes. As regards informal economy and the so-called undocumented economy, it makes and will continue to make a very major part of Pakistan's economy. For want of space I cannot write more here but I wish I could. I see only problems and problems as time passes and wonder if one should migrate elsewhere.
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Abdul Aziz khosa Sep 24, 2022 11:06pm
It is very good step taken by SBP cos 1.it not only makes the process easy,fights against money laundering but also ensures safety against carrying of hard cash from bank to the exchange company which is vulnerable to robbers,street criminals. 2. One point which is of much consideration The time involved in transfer of funds from the customer bank to the Exchange company. I wonder,the customer wld hv to wait for transfer of funds to the receipt till realization by the bank or otherwise
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Abbas Sep 25, 2022 12:56am
Exchange companies will vanish and grey mkt will grow only. Single transaction will take ages . In the province like Kpk where Sbp wanted most kyc Now what will they get ?
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Abbas Sep 25, 2022 01:23am
It will b a better option that customer should come to the counter with instrument copy along with the cash and bank statement. This will make transaction bit easy . While now customer will IST come and confirm the deal than will go to his bank for the transfer and will again come back with the proof and to pick his currency. After that money changer will IST confirm the transaction with his bank and then will send his rider to his bank and bring back the cash . This seems v v difficult.
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Osama Malik Sep 27, 2022 06:44am
The people who are hailing this dumb move have no idea of the conditions prevailing on the ground in the country. This is an extremely stupid move which will force even those exchange companies who keep away from hundi/hawala to think twice about breaking the law to recover their lost incomes. Furthermore, who can say that exchange companies will follow this stupid regulation? Also, we all know that the service standards of banks in Pakistan are at rock-bottom, so involving banks in this process will only increase pain for all parties involved. SBP has over the last 12 months greatly limited the scope of exchange companies' business and introduced burdensome conditions on the sale of foreign currencies. First, they set a limit of USD 10,000. Then biometric verification of the customer was mandated and finally documentation collection from the customer confirming the purpose of the transaction was made necessary. Despite all these poorly thought-out rules and regulations, the dollar did not stop flying high as the demand for dollars in the country has to do with factors outside the exchange companies' ambit. Instead of fixing the macroeconomic mess that its incompetence has put Pakistan in, the SBP chooses to harass and trouble soft targets: exchange companies and the general public.
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Rizwan T Sep 27, 2022 03:00pm
Regressive step. Will only give further rise to the grey market. FX companies are the co-culprits to begin with.
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