SBP introduces incentives to attract more remittances
The State Bank of Pakistan (SBP) has unveiled a set of new
incentives, effective as of June 1, 2023, aimed at encouraging banks and
authorized exchange companies to attract additional remittances from overseas
Pakistanis. This move is expected to bolster and stabilize remittance inflows.
In a circular distributed to all authorized foreign exchange
dealers (primarily commercial banks), microfinance banks (MFBs), and exchange
companies, SBP announced that financial institutions contributing to the growth
of home remittances compared to the previous year (FY2022-23) would receive a
performance-based incentive by the end of the current financial year.
The cash incentive will be as follows:
For incremental home remittances up to 5%, Rs1 per US dollar
For incremental home remittances between 5% and 10%, Rs2 per
US dollar
For incremental home remittances exceeding 10%, Rs3 per US
dollar
This incentive scheme will be ongoing from FY2023-24 onward,
according to the circular.
In another circular directed to authorized foreign exchange
dealers and MFBs, the central bank stated that it would reimburse TT
(telegraphic transfer) charges for eligible home remittance transactions at a
rate of 30 Saudi riyals.
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This increase in TT charges will apply to home remittance
transactions received in Pakistan, starting 30 days from the date of the
circular's issuance. Currently, TT charges stand at 20 Saudi riyals for
transactions ranging from $100 to $200 or their equivalent in other foreign
currencies.
However, the circular also announced the discontinuation of
the incentive for airtime equivalent to Rs2 per US dollar, effective 30 days
from the date of issuance. This incentive had been extended to all banks and
MFBs under branchless banking regulations (M-Wallet Scheme) to promote home
remittances.
Previously, remittances had experienced a 22% decline,
dropping to $4.12 billion in the first two months (Jul-Aug) of the current
fiscal year, compared to $5.26 billion during the same period in the previous
year. Financial experts attributed this decline to the strengthening of the
illicit currency market and the Hawala-Hundi network in Pakistan and the Middle
East, which are major sources of remittances to Pakistan.
In recent weeks, the caretaker government has launched a
crackdown on currency smugglers and hoarders with the support of the army,
leading to a notable 5% appreciation of the Pakistani rupee over the past 12
working days. The rupee now stands at a five-week high at Rs292.78/$ in the
interbank market as of Thursday.
The country’s
remittances may see an increase of 10-20 percent
Additionally, the central bank reported a $56 million
improvement in its foreign exchange reserves, which now total $7.69 billion.
Previously, these reserves had been decreasing continuously for seven weeks.
The SBP has also raised the rate of return on investments in
Naya Pakistan Certificates (NPCs), specifically designed for non-resident
Pakistanis. These saving certificates are accessed through the Roshan Digital
Account (RDA) and now offer returns of up to 6% in three foreign currencies as
well as Pakistani currency.
SBP Governor Jameel Ahmad announced that 10 banks have been
invited to establish rupee-dollar exchange companies to serve individuals, as
banks hold ample foreign currencies compared to exchange companies. He added
that Category 'B' exchange companies have been instructed to either advance to
full-fledged companies, merge to form full-fledged firms, or sell their
business, as the licenses for standalone Category 'B' companies will be
canceled after the given 30-day timeframe.
Source: Dawn