Action against currency speculation: SBP reduces two banks' NOP, warns others

KARACHI: The State Bank of Pakistan (SBP) has taken action against two banks by reducing Net Open Position (NOP) and warning other banks not to take unnecessary position against the rupee, as a result the rupee strengthened by 70 paisa against dollar in inter-bank market on Tuesday.

The dollar rate declined to Rs 90.10 in inter-bank market from Rs 90.80. Although the dollar posted huge decline in the inter-bank market because of SBP move, the demand for dollars remained unabated due to growing political uncertainty in Islamabad. As a result, the rupee value against dollar stood at 91.20 in the open market.

According to sources, the Nestro limits of NIB Bank and Samba Bank were reduced by SBP on Tuesday. Officials of the State bank called treasurers of all major banks to inform them of possible SBP action in case the central bank sees that banks are speculating in rupee and creating demand for dollars without booking/backing of trade deals.

The SBP action was meant to pressurise the banks to bring back dollars held abroad to undertake commitments given to the traders against import letters of credit (LCs), they added.

According to open market sources, politicians and officials who have money to hide are aggressively persuading the Hundi and Hawala dealers for transfers of funds to abroad, especially to Dubai.

Besides rupee depreciation, real state prices have also rebounded as large numbers of people with tax evaded money are seeking to park their wealth in real state.

According to a real state broker, the difference between the registered price of property and the transaction price is gradually increasing and has reached a huge level. A thousand yards plot in Phase 8 of DHA Karachi is registered on value of Rs 1.6 million, whereas the actual transaction price was Rs 25 million, he said.

The money market appreciated the SBP's move against the NOP and said that it will put positive results on the currency market. "It was our demand to check and take action against the NOPs of banks as there were some complaints that banks were holding over limit stocks of foreign currency".

NOP is the net balance sheet exposure of a bank in foreign currency.