KARACHI, June 16: The State Bank has instructed foreign exchange companies not to send foreign exchange abroad on behalf of individuals or corporates if these remittances are not on personal accounts of individuals.

The instruction was sent amidst reports that by making outward remittances of foreign exchange that they were not supposed to make, some exchange companies have created a shortage of dollars in the open market. That, in turn, has weakened the rupee in kerb and widened the gap between the official and open market exchange rates thus providing an incentive for dollarization and posing threat to inflows of foreign exchange from overseas Pakistanis through banks.

The central bank says in a letter issued to forex companies that it has observed that some of them were making outward remittances on account of trade related activities/payment of services/commission, etc. The letter reminds these companies that this activity is beyond their scope of operations and asks them to stop it.

Under the rules an exchange company is authorized to make outward remittances only on personal account of individuals i.e. personal finance transactions and not those related to an individual’s trade or business requirements.

Corporate clients may, however, approach such companies for making outward remittances only on account of payment of royalty, technical/franchise fee, provided the companies get an NOC in this effect from the bank.

The SBP’s letter advises all exchange companies not to make outward remittances “on account of trade related activities/ payments against services/commission etc whether on account of individual or on behalf of corporate clients.”