ISLAMABAD: Despite record remittances of $38.3 billion in FY25, the government has decided to reduce the reward paid to banks and exchange companies facilitating overseas inflows through official channels, the State Bank of Pakistan (SBP) informed the Senate Standing Committee on Finance on Wednesday.
SBP Deputy Governor Inayat Hussain told the committee that the reward structure — previously set at 20, 27, and 35 riyals per incremental transaction — has now been revised to a flat rate of 20 riyals across all transaction sizes. Moreover, the minimum eligible transaction threshold is being raised from $100 to $200.
Senator Saleem Mandviwalla, who chaired the meeting, noted that while remittances had doubled since the launch of the Pakistan Remittances Initiative (PRI) in 2009-10 — from around $18–19bn to $38.3bn — the annual reward payout to financial institutions had soared disproportionately from Rs15–16bn to Rs130bn. He said this warranted a review, arguing that more benefits should be directed to the remitter to encourage formal inflows.
Mr Inayat acknowledged the cost concerns but cautioned that reducing incentives could risk pushing remittances back toward unofficial channels. He also explained that some global remitting services, such as MoneyGram and WallStreet, initially stayed outside the PRI due to system constraints but eventually joined as flows shifted.
Remittance incentive slashed to flat 20 riyals; senators push for local card adoption and greater remitter benefit
In August 2024, the government introduced a new incentive model for formal remittances, combining fixed and variable rewards. Under the revised framework, banks received 20 riyals per transaction above $100, with additional reimbursements of 8 riyals per incremental transaction for up to 10pc or $100m growth, and 7 more riyals beyond that threshold—taking total rewards as high as 35 riyals for top-performing institutions.
Mr Inayat also warned against manipulation by banks, noting that the reward mechanism was based on individual transactions rather than total volume. Senators argued this could encourage artificial splitting of large remittances and suggested linking incentives to overall transaction counts instead.
The committee also discussed the widespread issuance of foreign debit cards and urged commercial banks to prioritise PayPak, Pakistan’s domestic payment network, to curb unnecessary outflows of foreign exchange.
Senators criticised banks for failing to offer customers the PayPak option when opening accounts. Mr Inayat claimed customers were given a choice, but senators presented account-opening forms to dispute that. The committee recommended the mandatory inclusion of PayPak options for all debit card applicants and suggested allowing simultaneous use of both PayPak and international cards for domestic and foreign transactions, respectively.
Mr Inayat said the issue required a balanced approach to ensure a level playing field for all operators, including foreign firms. Senators, however, argued that banks were effectively nudging customers toward international card networks, resulting in foreign exchange losses.
The committee also addressed several other issues, including barter trade with Iran, allegations of FBR rewards, and harassment claims.
Published in Dawn, July 10th, 2025
