SBP launches initiative to boost remittances

SBP launches initiative to boost remittances
SBP launches initiative to boost remittances

KARACHI: For boosting the flow of home remittances through formal channels and improving foreign exchange liquidity in the interbank market, the State Bank of Pakistan (SBP) on Friday unveiled an incentives scheme for the exchange companies (ECs).

“Under the scheme, ECs will be required to surrender 100pc of the home remittances mobilised in the interbank market, and in return, they will receive Re1 against each US dollar surrendered,” said the SBP.

Earlier, ECs were required to surrender a minimum of 15pc of the home remittances in the interbank market. To implement the scheme, the SBP has now amended its regulation governing the disbursement of inward remittances by ECs.

Now the exchange companies will surrender 100pc of foreign currency received by them on account of inward home remittances, in equivalent US dollars, in the interbank market on the same day.


“The scheme would be effective immediately,” said a circular issued by the SBP on Friday.

Exchange companies to get Re1 per US dollar

“The incentive of Re1 for each US dollar surrendered in the interbank market will be fixed irrespective of the exchange rate, however, it is clarified that the incentive will not be allowed to exceed 1pc of the exchange rate in case of rupee appreciation,” said the circular.

Slow dollar demand
“This is a good step and we have been demoing for a long time to provide us incentives like they do for banks,” said Malik Bostan, Chairman Exchange Companies Association of Pakistan.

He claims the banks are provided Rs6 per dollar for bringing in $100.

He, however, said that there would be no negative impact on the availability of dollars in the open market with this decision.

“We already surrender up to 90pc of inward remittances as demand for dollars is at a minimum level in the open market,” said Bostan.

In FY21, the ECs deposited $4.5 billion into the banks, and out of this $2bn was inward remittances, he said.

The demand in the open market is slow also due to the involvement of the Federal Investigation Agency (FIA) which has been collecting data of large buyers of dollars.

“We are also demanding the State Bank of Pakistan to provide us at least 100 Money Transfer Operators (MTOs) that will boost remittances,” said Bostan, adding that the ECs are working with only five MTOs while another six are under consideration.

“Since ECs mobilise a significant amount of home remittances, this scheme will help to improve foreign exchange liquidity in the interbank market and the incentive provided is expected to encourage all exchange companies to bring more and more home remittances by reaching out to a wider set of remitters and their beneficiaries in Pakistan,” said the SBP.

The EC shall open and maintain a separate foreign currency account for receiving inward home remittances through MTOs and surrendering the foreign exchange in the interbank market, said the circular.

Source: Dawn