Aamir Qureshi—AFP
The State Bank of Pakistan (SBP) on Wednesday announced an intent to introduce structural reforms for foreign exchange companies, stressing this was aimed at ensuring “transparency” in the sector.
“As part of these reforms, leading banks actively engaged in foreign exchange business will establish wholly owned exchange companies to cater to the legitimate foreign exchange needs of general public,” it said in a statement. The process, it said, would include a consolidation and transformation of various types of existing exchange companies and their franchisees into a single category with a well-defined mandate.
“In addition, the minimum capital requirement for exchange companies has been increased from Rs. 200 million to Rs. 500 million,” it said, adding ‘B’ category exchange companies and franchisees had two options to transform into mainstream exchange companies.
“[B category exchange companies] may graduate to exchange companies after meeting all regulatory requirements, within three months; otherwise, their license would be cancelled,” it said. “Franchisees of exchange companies may either merge or sell operations to the concerned franchiser company, within three months after meeting all regulatory requirements,” it said, as a second option.
“For the above purpose, the [B category and franchisees] will submit their conversion plan and seek NOC [no-objection certificate] from SBP within one month,” it said. “The above reforms have been introduced to provide better services to the general public and bring transparency and competitiveness in the exchange companies’ sector. This is expected to strengthen governance, internal controls, and compliance culture in the sector,” it added.
The SBP statement follows meetings between Pakistan Army chief Gen. Asim Munir and prominent businessmen during which he assured a crackdown against dollar smuggling and hoarding to reduce the pressure on the national currency and stem the rupee’s rampant devaluation. Following the launch of the crackdown, the Pakistani rupee has gained ground against the U.S. dollar in the open market, reducing the gap between it and the interbank market to less than 1.5%, as committed to the International Monetary Fund.
Overall, the dollar has depreciated over Rs. 20 this week in the open market.