All Banks/NBFIs 

Dear Sir,

PRUDENTIAL REGULATION-XXVIII FOREIGN
CURRENCY DEPOSITS UNDER FE 25-1998

Please refer to para “f” of BSD Circular No.21 dated 14^th May, 2001 on the captioned subject. 

2.         While our stated direction for banks is to grow the local currency deposits and contain the FE-25 foreign currency deposits, the 11 September 2001 event and its implications on global and local financial markets have prompted us to introduce some flexibility to and widen the scope of the FE-25 Scheme and the relevant Prudential Regulation. It has, therefore, been decided that while computing the 20% cap on FE-25 deposits against local currency deposits, the foreign currency deposits mobilized under FE-25 and utilized for financing of trade related activities will be netted-off.  Therefore, the clause “f” of Prudential Regulation No. XXVIII  has been amended which may now be read as: 

“Foreign currency deposits mobilized under FE-25 schemes after netting-off the deposits utilized to finance trade related activities such as financing against Import and Export documents, should not at any point exceed twenty percent of the local currency deposits of the banks / NBFIs at the close of business on the last working day of the preceding quarter.” 

3.         The banks/NBFIs who will still be in breach of this new requirement as on 1^st January 2002 shall ensure compliance by 1^st July, 2002. 

4.            Effective 5^th January, 2002 all banks will report the equivalent Pak rupee amount (with a foot note on $ equivalent) of FE-25 deposits utilized for trade related activities under newly created code No. 80-05 of their Weekly Statement of Position submitted to this department. 

5.         Other instructions on the subject shall, however, remain unchanged. 

6.         Please acknowledge receipt.