SBP brings incentives to attract remittances

By Salman Siddiqui
Published in The Express Tribune on September 22, 2023

KARACHI:  The central bank has announced new incentives effective from June 1, 2023 to encourage banks and authorised exchange companies to attract additional remittances from overseas Pakistanis, which is expected to stabilise and give a fresh boost to inflows.

In a circular sent to all authorised foreign exchange dealers (mostly commercial banks), microfinance banks (MFBs) and exchange companies on Thursday, the State Bank of Pakistan (SBP) announced that a performance-based incentive would be granted, by the end of current financial year, to those financial institutions whose efforts resulted in a growth in home remittances compared to the previous year (FY2022-23).

“For any incremental home remittance of the FIs (financial institutions) up to 5%, between 5% and 10%, and over 10%, the cash incentive would be Rs1, Rs2 and Rs3 per US dollar, respectively, for each slab.”

The scheme would come into effect from FY2023-24 onwards on a perpetual basis, the circular read.

In another circular addressed to all authorised foreign exchange dealers and MFBs, the central bank said it had decided that the reimbursement of TT (telegraphic transfer) charges for eligible home remittance transactions would be 30 Saudi riyals.

The increase in TT charges would be effective for home remittance transactions, received in Pakistan, after 30 days from the date of issuance of the circular, it said.

At present, TT charges are 20 Saudi riyals for transactions between $100 and $200 or the equivalent amount in other foreign currencies, it has been learnt.

The central bank, however, announced the discontinuation of the incentive of airtime equivalent to Rs2 per US dollar after 30 days from the date of issuance of the letter.

The incentive was being offered by the government to all banks and MFBs under branchless banking regulations – M-Wallet Scheme – for the promotion of home remittances.

Earlier, the remittances slumped 22% to $4.12 billion in the first two months (Jul-Aug) of current fiscal year compared to $5.26 billion in the same period of last year.

Financial experts attributed the slowdown in inflows to strengthening of the illicit currency market and Hawala-Hundi network in Pakistan and the Middle East from where most of the remittances came to Pakistan.

Over the past couple of weeks, the caretaker government has been engaged in a crackdown on currency smugglers and hoarders with strong support from the army. This has delivered desired results as the Pakistani rupee has appreciated by almost 5% in the past 12 working days, standing at a five-week high at Rs292.78/$ in the inter-bank market on Thursday.

The central bank reported on Thursday an improvement of $56 million in its foreign exchange reserves that reached $7.69 billion. Earlier, the reserves had slid continuously for seven weeks.

The central bank has also increased the rate of return on investments in Naya Pakistan Certificates (NPCs), designed specifically for non-resident Pakistanis. Investments in these saving certificates come through the Roshan Digital Account (RDA).

The return has been increased up to 6% on the certificates being offered in three foreign currencies as well as in Pakistani currency.

SBP Governor Jameel Ahmad on Wednesday said that the central bank had invited 10 banks to establish rupee-dollar exchange companies and facilitate individuals as banks had ample foreign currencies unlike the exchange companies.

He added that Category ‘B’ exchange companies had been asked to either graduate to become full-fledged companies, merge to form full-fledged firms or sell their business as licences of the standalone Category ‘B’ companies would be cancelled at the completion of the given 30-day time frame.

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