1. Opening of Foreign Currency Accounts with Banks in Pakistan.

(a) Authorised Dealers may, without the prior approval of the State Bank, open with them foreign currency accounts of Pakistan Nationals resident in or outside Pakistan including those having a dual nationality. These accounts can also be opened in the joint names of residents and non-residents. Resident firms and resident companies including investment banks and the companies incorporated in Pakistan with foreign share-holdings are also eligible to open and maintain foreign currency accounts in Pakistan. Charitable Trusts, Foundations etc. which are exempt from payment of income tax can also open foreign currency accounts in Pakistan. The facility is also available to all diplomatic missions accredited to Pakistan, their Diplomatic Officers, all International Organisations in Pakistan, all foreign nationals residing abroad, all foreign firms/corporations other than banks incorporated and operating abroad provided these are owned by persons who are otherwise eligible to open foreign currency accounts. For example, since banks operating abroad are not eligible to open such accounts, financial institutions etc. owned by banks, cannot also maintain accounts under Foreign Currency Accounts Scheme. Foreign nationals residing in Pakistan and foreign firms and companies registered abroad and operating in Pakistan can also open and maintain foreign currency accounts with the Authorised Dealers provided the foreign exchange credited to such accounts does not represent their earnings abroad in respect of business conducted in Pakistan, or services rendered by such foreign nationals and firms/companies while in Pakistan.

(b) Opening of Foreign Currency Accounts by the firms/companies/contractors etc. which are to be fed through the funds of foreign equity/foreign currency loans raised for establishment of industrial and other projects/payments in foreign exchange to be received by the contractors from the employers for meeting foreign currency component of the contracts would require prior approval of the State Bank as per procedure laid down in paragraph 5 of this Chapter.

(c) The accounts covered by item (a) above are subject to the following terms and conditions:

(i) These accounts can be fed by remittances received from abroad, travellers cheques (whether issued in or outside Pakistan; or whether in the name of account-holder or in the name of any other person), foreign currency notes and foreign exchange generated by encashment of Foreign Exchange Bearer Certificates.

(ii) Foreign exchange released from Pakistan for any purpose and foreign exchange representing sale proceeds of goods exported from Pakistan, earnings of the residents on account of services, earnings/profits of the overseas offices/branches of Pakistani firms/companies and banks etc. will not be eligible for credit to such accounts and the residents will be subject to the existing legal requirements of surrender of such funds to an Authorised Dealer within the prescribed time limit as detailed in paragraph 9 of this Chapter.

(iii) Authorised Dealers will fix their own rates of interest for Term Deposits of 3 months, 6 months, 12 months, 2 years and 3 years provided they do not exceed the Euro-Dollar Deposit Bid rates of Barclays Bank, London at the close of business on the previous working day plus the margins prescribed by the State Bank from time to time. The Barclays Bank Bid rates and the maximum rates for payment of interest including the margins allowed by the State Bank, are published daily by the Foreign Exchange Rates Committee. Interest on the Term Deposits of 2 years and 3 years will be paid on yearly basis.

(iv) As regards foreign currency deposits of less than 3 months including Call Deposits, Savings Bank, Special Notice etc. Accounts, Authorised Dealers shall pay interest on the basis of return last allowed on similar Rupee PLS Accounts provided the rate at which interest is paid does not exceed the interest rate applicable to 3 months Term Deposits. The rate of interest on the above category of deposits shall be fixed on 1st January and 1st July each year and shall remain unchanged during the respective half year. For fixing the rates for payment of interest on £ Stg./D.M./J.Yen deposits, the procedure as laid down above for U.S. Dollar deposits will be adopted.

(v) These accounts are free from all Exchange Control restrictions. In other words, account holders have full freedom to operate on their accounts to the extent of the balance available in the accounts either for local payments in Rupees or for remittance to any country and for any purpose or for drawals in the shape of foreign currency notes and travellers cheques.

(vi) The balances held in foreign currency accounts and income therefrom are exempt from the levy of Wealth Tax and Income Tax and compulsory deduction of Zakat at source.

(vii) Accounts can be maintained and payments made in any currency of choice of the account holder. Credit Card facility can be obtained by the account holders to the extent of the balances held in their respective accounts, for utilization in and outside Pakistan provided settlement of the bills in respect of expenditure within the country is made in Rupees only and the relevant foreign currency amount is taken by the Authorised Dealers in their daily position. Authorised Dealers can also grant rupee loans to the account-holders and issue guarantees in favour of residents/non-residents on behalf of the account-holders.

(viii) Authorised Dealers can mark lien on the foreign currency accounts in respect of banking facilities like Credit Cards, Bank Guarantees and loan/credit etc. availed of by the account holders in and outside Pakistan. The aggregate amount of the facilities availed of in and outside Pakistan should not however, exceed the balance in the respective accounts at any point of time and the instructions on credit-control are strictly followed.

(ix) Authorised Dealers shall sell all the deposits in foreign currency accounts to the State Bank in multiples of US$ 1,000/-, £ Stg.1,000/-, D.M. 1,000/- and J.Yen 250,000/-. State Bank shall cover exchange risk of all such deposits as well as interest accruing thereon.

(x) Head Offices of Authorised Dealers will send to the Policy Division of the Exchange Control Department, State Bank of Pakistan, Central Directorate, Karachi such returns in respect of these foreign currency accounts as may be prescribed by the State Bank from time to time.

(xi) A separate ledger will be maintained by the Authorised Dealers for these foreign currency accounts.

2. Acceptance of Deposits from foreign banks operating abroad and overseas branches.

As an exception to the rule set out in Paragraph 1 above, Authorised Dealers can accept foreign currency deposits of a minimum amount of US$ 5 million (or equivalent in other currencies) from their overseas branches and foreign banks operating abroad, including financial institutions owned by them, provided the period of maturity thereof is not less than a year. Interest on these foreign currency deposits can be paid by the Authorised Dealers in either of the manners indicated below in accordance with the option exercised by the depositor in writing at the time of placement of deposits:

(i) On completion of a period of one year. In this case, interest can be paid at the rate not exceeding by 1/4% the 12 months Euro-Dollar Deposit bid rate of Barclays Bank, London at the close of business on the working day immediately preceding the date of deposit as published by the Foreign Exchange Rates Committee.

(ii) Every quarter or half year. In this case, interest can be paid at the rate not exceeding by 1/4 % the 3/6 months (as the case may be) Euro-Dollar Deposit bid rate of Barclays Bank, London at the close of business on the working day immediately preceding the 1st day of the quarter or half year for which interest is paid, as published by the Foreign Exchange Rates Committee.

3. Payment of subsidy on account of interest differential.

As for surrender of the amounts of deposits to State Bank, instructions contained in para 1 (c) ix above shall apply. Where the interest paid on foreign currency Term Deposits of 3, 6 and 12 months on the basis of Barclays Bank's bid rates as prescribed in paragraph 1 above exceeds the return last allowed on similar Rupee PLS Accounts, State Bank shall reimburse the amount of differential on account of the excess to the Authorised Dealers. For the purpose of claiming reimbursement of the differential, Authorised Dealers should furnish to the Chief Managers' Offices of the State Bank, details of individual foreign currency Term Deposits in the prescribed form (Appendix V-6) while surrendering the amount of foreign exchange to the State Bank. This statement will be submitted in triplicate and bear running serial number. After the interest has been paid, claim for payment of interest differential will be lodged by the Authorised Dealers with the Chief Managers' Offices of the State Bank in the form given at Appendix V—7.

4. General permission for Maintenance of Accounts by Resident Pakistanis.

Pakistan nationals resident in Pakistan are not permitted to open or maintain any foreign currency accounts with banks etc., outside Pakistan. As an exception, they can maintain foreign currency accounts abroad in any country other than Afghanistan, Bangladesh, India and Israel provided the amount does not exceed in the U.S.$ 1000/- or equivalent thereof in other currencies as provided for in Government Notification No. SRO 1016(1)79 dated the 17th October, 1979. These accounts cannot, however, be operated from Pakistan without the prior approval of the State Bank.

5. Special permission for Foreign Currency Accounts - Resident Pakistanis.

In very special cases, permission may be granted by the State Bank on individual applications and merit to firms / companies / contractors for opening and / or maintaining foreign currency accounts with banks in Pakistan for keeping therein the amounts of equity / foreign currency loans raised for establishment of industrial and other projects / payments received in foreign exchange by the contractors from their employers for meeting foreign currency component of the contract pending utilisation of these funds for approved purposes. For this purpose application may be made to the State Bank through an Authorised Dealer stating the purpose for which the account is proposed to be opened or maintained in foreign currency, the sources from which the account will be funded and other relevant information. The maintenance of these special Foreign Currency Accounts will be subject to the terms and conditions as may be specified by the State Bank in the relative permission letter, which would, inter-alia, include the following:

(i) The accounts will be kept outside the scope of Foreign Currency Accounts Scheme.

(ii) The bank with whom account is opened shall maintain only a "Proforma Account" in its local books and actual amount will be held outside Pakistan (Cover Account). The amount of deposit will not thus be reflected in the local books of the bank.

(iii) Interest earned abroad on the balance held in the account will be converted and paid into Pak. Rupees.

(iv) The exemption of interest income from levy of taxes etc. shall not be available to this account.

(v) The facility of forward cover from State Bank of Pakistan will not be admissible.

(vi) The balance remaining in the account on completion of the Contract / Project will be converted into Pak. Rupees.

(vii) All details representing payments outside Pakistan will be put through the "Cover Account" and the corresponding debit entries will be made in the "Proforma Account" for the benefit of the account holder and submission of periodical statements to the Control.

(viii) In case of conversion of foreign currency balances into Pak. Rupees the required foreign currency amount will be debited to the relative "Cover Account" and credited to the regular foreign currency account of the bank concerned. The bank concerned will make rupee payments against the relative foreign currency receipts and will report the amount involved on Schedule 'J' as inward remittance in the monthly Foreign Exchange Returns under the head "Private Transfers n.e.s." under Code No.9617. Simultaneously, the foreign currency amount in question will be entered to the debit of the respective "Proforma Account".

6. Reporting of receipts into and payments from foreign currency accounts.

Receipt of foreign currency amounts for credit to the foreign currency accounts should be reported by the Authorised Dealers as "Purchase" on Schedule 'J' under Code 9718 in the case of accounts opened in terms of para 1 above and under Code 9828 in respect of accounts opened under special permission granted by the State Bank in accordance with the provisions of paragraph 5 above. Similarly payments out of the foreign currency accounts should be reported by the Authorised Dealers as "Sale" on Schedule E—4 under Code 1718 in the former case and under Code 1828 in the later case.

7. Reporting of local disbursements from the foreign currency accounts.

8. Payment of interest on Foreign Currency Accounts.

9. Surrender of Foreign Exchange.

In exercise of the powers conferred by Section 9 of the Act, the Government have issued Notification No. SRO 1016(1)79 dated the 17th October, 1979 (Appendix II—8) requiring all citizens of Pakistan and other persons residing in Pakistan continuously for six months or more, who become the owner of any foreign exchange whether held in Pakistan or abroad, to sell such foreign exchange to an Authorised Dealer within three months of the date of acquisition by them of such foreign exchange. The provisions of the aforesaid notification do not apply to the following cases viz:

(i) Foreign exchange held abroad by foreign diplomats and foreign nationals employed in Embassies and Missions of foreign countries in Pakistan.

(ii) Foreign exchange held abroad by foreign nationals or foreign business houses, except to the extent that it represents their earnings abroad in respect of business conducted in Pakistan or services rendered while in Pakistan.

(iii) Foreign exchange held by residents in Pakistan in countries other than Afghanistan, Bangladesh, India and Israel provided the amount does not exceed in the aggregate U.S. $1000/- or equivalent thereof in other currencies.

(iv) Afghan currency whether held in or outside Pakistan.

For the purposes of the aforesaid notification the term "residents in Pakistan" excludes citizens of Pakistan in foreign countries so long as they stay outside Pakistan, but includes foreign nationals who reside continuously in Pakistan for six months or more.

1O. Foreign Currency Accounts of Foreign Nationals.

Foreign nationals resident in Pakistan other than persons of Indo-Pakistan origin holding dual nationality can open and / or maintain foreign currency accounts with banks in or outside Pakistan. They can also operate on these accounts from Pakistan under the general permission granted by the State Bank vice Notification No.74/59-SB dated the 25th February, 1959 issued pursuant to sub-section 1 of Section 4 of the Act.

11. Payments by Foreign Nationals in Foreign Currencies.

Payments in foreign currency by foreign nationals residing in Pakistan to or on behalf of residents of Pakistan whether Pakistanis or foreign nationals are prohibited. Foreign nationals should not, therefore, directly or indirectly, make foreign currency available to the residents or to other persons on their behalf against payment in Rupees. Such payments are prohibited even from their foreign currency accounts which they are permitted to maintain and operate from Pakistan.