KARACHI, July 31: Money changers are divided over the minimum paid-up capital requirement set for the proposed foreign exchange companies: Big money changers say Rs100 million paid-up capital is affordable but smaller ones represented by Forex Association of Pakistan say it should be lowered to Rs50 million to prevent monopoly.

“We have obtained an application form from SBP and are making consultations on how to meet the requirements laid down in it,” said Anwar Jamal of Galaxy International that has half a dozen outlets.

“We do not see Rs100 million paid-up capital as too high. We believe this requirement would keep non-serious parties away,” he said.

But president of Forex Association of Pakistan Malik Bostan said Rs100 million paid up capital would make it impossible for the majority of money changers to set up exchange companies — even through mergers.

“Currently the paid up capital of money changers operating through more than one branches is Rs5 million. Even if they decide to go for mergers 20 of them will have to join hands to apply for an exchange company. That is impractical. Impossible.”

“We had suggested to SBP to keep the paid up capital of the proposed exchange company at not more than Rs50 million. We think that is enough.”

Malik Bostan who was on the SBP experts committee that has drawn rules for exchange companies claimed that the majority of money changers share his view. “Hardly half a dozen money changers from Karachi — and up to 10 from all over Pakistan are capable of setting up a company with Rs100 million paid up capital. The remaining 460 cannot think of it — not even through mergers,” he remarked.

Bostan said he would convene a meeting of money changers from across Pakistan next week to draw a strategy with regard to the paid up capital requirement and other issues relating to foreign exchange companies. He said money changers also wanted to co-exist with exchange companies but the central bank has given them two years time to merge with these companies or pack up and quit.

“That is not fair.”

Ovais Kalia of Khanani & Kalia International said that being a member of Forex Association of Pakistan he too had favoured Rs50 million paid up capital for exchange companies “But since SBP has now finalized the regulations we have to follow them.”

He said KKI that runs 8 outlets of currency brokering was quite keen on setting up a foreign exchange company adding that it had enough resources to meet the paid up capital requirement.

“But if some shortfall occurs we may ask others to join us.”

Another leading money changer Haji Haroon said his currency brokerage Dubai Exchange was also keen on setting up an exchange company. “We have not obtained the application form as yet but we will fetch it tomorrow. We are definitely interested in setting up an exchange company.”

Dawn contacted two other leading currency brokers to know if they were interested in setting up exchange companies: all of them said they were; but none was ready to go on record. “Let me tell you Rs100 million is not too much for an exchange company,” said one of them.

“I think Rs100 million capital is rather too low — only about $1.7 million. A few million dollars are nothing if you are talking about exchange companies that would not only deal in cash but would also handle electronic transfer of foreign exchange,” he said.

“Besides 25 per cent of the paid up capital would have to be kept with the State Bank as statutory liquid reserves. What is left then? I think minimum paid up capital should have been Rs250 million.”

The big guns among currency brokers interviewed by Dawn over telephone said a higher paid up capital would eliminate chances of money laundering and give birth to a clean and transparent system of money exchange.