The State Bank of Pakistan (SBP) has enhanced the scope of business for banks through its branches, allowing to do business in foreign currencies across the country.
This decision is aimed at regulating the foreign currency exchange and documentation of buyers and sellers of the foreign currencies through a sophisticated manner to reduce leakages in the system.
The public at large usually purchases or sales foreign currencies through various exchange companies while some hotels are given a restricted license to facilitate foreign tourists in meeting their demand for local or foreign currency.
Previously, the banks were not allowed to sell or buy foreign currencies directly from the public except those which had their own exchange companies. The central bank’s decision was revealed in the revised rules of business for foreign exchange dealing in the updated chapters of Foreign Exchange (FE) Manual.
Banks were also told to ensure availability of foreign currencies to sell it to the public.
It is the responsibility of the authorised dealers to ensure adequate foreign currency is available in their authorised branches at all times to meet the requirements of their customers, read the manual.
Exchange Companies Afraid of New Competition
The SBP did not say anything regarding the existence or future role of exchange companies but such companies feel threatened with the latest development.
Currency dealers have said that allowing banks to conduct day-to-day currency business with the general public means there is no need for exchange companies.
“I personally know that some high officials in the government are willing to close down the exchange companies as they hold them responsible for financial indiscipline,” said Secretary General Exchange Companies Association of Pakistan Zafar Paracha.
He said that amendments in the manual are clear indications that exchange companies are not required in this country. But I must say that the general public will suffer since they easily buy foreign currencies from exchange companies and sell them without hurdles. Banks are unable to take care of millions of people when it comes to buying and selling of foreign currencies, Paracha said, adding that banks will charge higher margins as they do currently.
He said that banks are paid Rs. 12-14 per remittance from abroad while exchange companies provide this service without this cost.
We annually provide $10 to $11 billion to the country which includes import of dollars against other foreign currencies, he said. If exchange companies are closed about 25,000 direct employees will lose their jobs and up to 60 thousand indirectly attached to this business will become unemployed.
Overseas Pakistanis & Foreigners Can Bring Foreign Currency in Pakistan
The SBP has allowed all incoming travelers — whether Pakistani or foreign national — to bring foreign currencies to the country without any limit. Foreign currencies and other instruments can be brought after the submission of a declaration to the customs authorities on amounts exceeding $10,000 or equivalent.
Such currencies or instruments may be freely purchased by the Authorised Dealers (banks) against payment in PKR. The authorised dealers may also purchase foreign currencies withdrawn by the account holders from their foreign currency accounts and from the walk-in-customers against payment in PKR subject to the fulfilment of applicable AML/CFT regulations, said the SBP.