KARACHI: The State Bank of Pakistan (SBP) on Wednesday said it has started a crackdown on exchange companies (ECs) in the light of findings from ongoing inspections and mystery shopping.

In a statement, the central bank stated that due to recent volatility in the exchange rate and the difference between the interbank rate and the rate offered by ECs and banks to their customers, it has increased its monitoring of ECs and banks’ foreign exchange operations.

In this respect, the SBP started inspections of a number of exchange companies and banks on Monday (Aug 1), it added.

There was clear evidence that banks were involved in minting money as they were charging much higher dollar rates than the rates shown by the State Bank. Moreover, some importers were getting dollars easily to open Letters of Credit, while many were facing difficulties arranging dollars even from outside the banking channels.

On Tuesday (August 2), the SBP suspended the operations of four branches of two ECs (Galaxy Exchange Co and Al-Hameed International Money Exchange Co) for violation of its regulations.

The SBP has also imposed monetary penalties on some ECs in the recent past. “Besides, due to violations of SBP instructions, arrangements of 13 franchises have been terminated by six different ECs in the recent past,” said the SBP.

The SBP has also started conducting mystery shopping exercises throughout Pakistan to investigate the apprehensions that some ECs are not selling foreign currency to their customers.

A meeting of the Exchange Companies Association of Pakistan has also been called for August 4.

“If needed, the SBP would augment its enforcement actions on the ECs and the banks in light of the findings of the on-going inspections and mystery shopping,” said the SBP.

Published in Dawn, August 4th, 2022