KARACHI: The State Bank of Pakistan (SBP) has enhanced incentives for banks and exchange companies to increase home remittances which have been declining for more than a year.
The central bank on Thursday issued two circulars for banks and exchange companies.
“For any incremental home remittance of the financial institution (FI) up to five per cent, between five and 10pc, and over 10pc, the cash incentive would be Re1, Rs2 and Rs3 per US dollar, respectively, for each slab,” said the SBP.
These incentives are also available for exchange companies.
September inflows likely to cross $2.5bn amid forex crackdown
The SBP said that to encourage domestic FIs to enhance their marketing efforts for mobilising home remittances through formal channels, the government has approved the revisions in the scheme.
A performance-based incentive will be granted, by the end of FY24, to those FIs whose home remittance mobilisation efforts result in growth. The scheme will be effective from FY24 onwards on a perpetual basis.
In a separate circular, the SBP offered higher incentives for Saudi riyal. The TT charges per $100 have been increased from $25 to $30 for banks and other FIs.
“It has been decided that reimbursement of TT charges rate for eligible home remittance transactions, shall be SAR 30,” said the SBP circular.
This increase in TT charges rate will be effective for home remittance transactions, received in Pakistan, after 30 days from the date of issuance of this circular.
The effort to improve the remittances is in the wake of bad performance in FY23 when the remittances fell by $4.2 billion. It is believed that most of the remittances were channelled towards the grey market as it was offering up to Rs20 and more per dollar. The grey market remained at its peak during the entire fiscal year.
Now the crackdown against illegal currency trading and smuggling stabilised the exchange rate and the dollar started depreciating in both interbank and open markets.
Bankers believe the inflows of remittances have increased and the amount could be around $2.5bn in September.
Rupee gains vs dollar
The exchange rate remained in favour of the local currency as the dollar depreciated in both interbank and open markets. The State Bank reported that the dollar lost Rs1.10 to close at Rs292.78 on Thursday.
The open market reported the closing price at Rs296 against Rs297 a day earlier.
The open market is facing thin trading due to reports about the close vigilance by law enforcement agencies. The currency traders said the reports that foreign currency sellers are being chased by the agencies to know the sources of foreign currencies have created fears.
SBP reserves rise
The foreign exchange reserves of the State Bank increased by $56 million to $7.695bn during the week ended on Sept 15.
The total liquid foreign reserves held by the country stood at $13.186bn including $5.491bn of commercial banks.
Published in Dawn, September 22th, 2023