KARACHI, Dec 19: Both local and foreign banks in Pakistan are now using fresh foreign currency accounts more for investment and less for financing purposes.

Senior bankers say at the end of November about 41 per cent of total FCY deposits of $2.408 billion was placed at home and abroad — and 35 per cent was under use for financing exports and imports.

They say that the situation was altogether different at end- June when 46 per cent of FCY deposits of $2.296 billion was under use for financing purpose and 32 per cent was placed at home or abroad.

“What has changed the pattern is primarily the exchange rate stability seen in the September quarter,” said treasurer of a local bank. “When there is volatility in exchange rate importers and exporters go for foreign currency loans — when not they borrow in rupees,” he explained.

In July-September, the rupee remained almost unchanged against the dollar removing one big reason for the exporters to avail of FCY loans. The fact that the mark-up on export finance also fell during September quarter was another reason. With the fall in six-month treasury bills yield — that serves as a benchmark for fixing monthly export finance rate — the maximum rate fell to three per cent in August 2003. It remains still unchanged.

Bankers say major corporates with a clean repayment history manage to get export loans at even 2.50-2.75 per cent. “At this level the difference between FCY export loans and rupee loans falls to quarter to half percentage point,” says treasurer of a foreign bank. “That is why the exporters reduce their foreign currency borrowing which requires more detailed reporting and monitoring,” he explains.

The State Bank allowed banks to use FCY deposits for giving trade loans to ensure that rising inflows of foreign currency do not remain unemployed and businessmen may diversify borrowings currency wise.

Initially, businessmen, particularly the exporters availed of this opportunity in a big way because FCY loans were priced cheaper than the rupee loans. The exchange rate volatility — the fear of abrupt change in the rupee value viz-a-viz foreign currency also fuelled it.

That was why FCY trade loans crossed a billion-dollar-mark at end-June this year as these were acquired in the previous quarters when rupee export finance rates were higher and the rupee was up against the dollar.

At end-June, $1.056 billion worth of trade loans claimed 46 per cent of total foreign currency deposits of $2.296 billion.

PLACEMENTS: Against this $737 million or 32 per cent of the total FCY deposits were placed at home or abroad, according to the latest SBP statistics.