All
Authorised Dealers
in Foreign Exchange,
Dear
Sirs,
AMENDMENT
IN F.E CIRCULAR NO.25 OF 1998
Please
refer to the instructions contained in paragraph
B of FE
Circular No. 25 of 1998
regarding new foreign currency accounts under new rules
whereby commercial Banks, holding licences as Authorized
Dealers and those Non-Bank Financial Institutions (NBFIs)
which have been given restricted Authorized Dealers
Licences are free to accept foreign currency deposits from
any person and to invest/lend the same in Pakistan and keep/invest
abroad. The expectation was that foreign currency deposits
so mobilized shall mostly be placed/invested in Pakistan
so that these could promote national economic objectives.
The available data indicate that the bulk of such deposits
have been placed by banks/NBFIs abroad. With no control
of the State Bank on the quality of assets held abroad by
banks/NBFIs, it poses a real problem from a regulatory point
of view.
2.
Accordingly, it has been decided that every bank/NBFI accepting
foreign currency deposits under the scheme introduced vide
FE Circular
No. 25 of
1998 shall use/invest/place them within
Pakistan only. In other words, foreign currency time and
demand liabilities under FE
Circular No. 25
shall not be placed/invested abroad by the authorized dealers.
Banks/NBFIs are permitted to employ the funds for foreign
currency/Rupee lending to borrowers in Pakistan or to other
banks operating in Pakistan who would not transfer these
funds abroad but invest/place within Pakistan. The above
will apply to all new deposits mobilized under the above
scheme with effect from June 3, 1999. Deposits mobilized
before June 3, 1999 will not be subject to the above regulation.
3.
In case a bank/NBFI is unable to profitably deploy the required
part of the funds in Pakistan, the State Bank will be prepared
to accept such amounts as deposits in different maturities.
The State Bank will, effective from June 3, 1999 establish
a window for banks/NBFIs desiring to enter into an agreement
with State Bank of Pakistan and pay suitable remuneration.
The State Bank shall give a guarantee of payment of these
funds in foreign currency on the agreed maturity date.
4.
The funds placed with State Bank will be maintained by the
State Bank in a separate account and shall not be used to
finance balance of payments requirements.
5.
Bank/NBFIs shall submit a statement on weekly basis providing
details of their foreign currency demand and time liabilities
under FE-25
and their placement/investment. A separate circular is being
issued for the provision of necessary date.
6.
Please acknowledge receipt.