SBP restricts regulations around remittances to curtail banks’ profits
Overseas Pakistanis remit approximately $36
billion annually, providing vital support to Pakistan’s economy. However,
recent government policies have disproportionately benefited banks rather than
the senders themselves. In the latest federal budget, PKR 87 billion was
allocated as incentives to banks for handling remittances from abroad.
According to banking insiders, banks also
receive additional funds for marketing and promotional activities beyond these
incentives. They further profit by leveraging foreign currency exchange rate
differentials and by holding foreign currency deposits for several days. Estimates
suggest that banks earn around PKR 200 billion annually from remittance-related
activities.
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To address these concerns, the State Bank of
Pakistan (SBP) has introduced new regulations. The minimum transaction amount
eligible for rewards has been raised from $100 to $200, while the reward rate
has been reduced from 37 Saudi Riyals per $100 to 20 Riyals per $200.
Additionally, a new cap limits individuals to five free incoming transactions
per day to prevent the splitting of transactions aimed at maximizing
incentives.
Previously, money transfer banks received
extra funds if they surpassed remittance targets, earning an additional 17
Riyals per $100 for marketing purposes—these payments have now been
discontinued. Banks also benefited from the spread between interbank and open
market exchange rates, as well as from delays in converting foreign currency
into Pakistani Rupees.
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The SBP has also extended equal incentive
rates to currency dealers, who had previously received only 2 to 3 Rupees per
dollar compared to banks’ 22 Rupees. Malik Bostan, Chairman of the Exchange
Companies Association of Pakistan, confirmed that currency dealers currently
bring in $4 billion annually and expect to double this figure within a year
with the new incentives.
Zafar Paracha, General Secretary of the
Exchange Companies Association, told Hamariweb.com that the true incentives
should be directed to overseas Pakistanis, the actual remittance senders. He
pointed out that Pakistan is unique in rewarding banks instead of the senders
themselves, unlike countries such as India and Bangladesh.
Source: Hamariweb