All Banks / NBFIs,

Dear Sirs,

Cash Reserve Requirment for Deposits raised under FE Circular 25 of 1998

In order to further liberalize foreign exchange regime it has been decided to allow banks / NBFIs to freely utilize Foreign Currency Deposits mobilized under F.E. 25 for lending / investment /placement in Pakistan and /or abroad with effect from 2nd April 2001. Such deposits if maintained abroad will not count towards banks’ Nostro Limits. As a sequel to this, restrictions imposed by our Exchange Policy Department vide their FE circular No 13 of 1999 stand withdrawn to this extent.

1. Accordingly the State Bank, in exercise of the powers conferred on it under Section 36(1) of the SBP Act 1956, has further decided that effective 2nd April 2001, every bank / NBFI shall be required to maintain cash reserves in US$ equivalent to not less than 25% of their total FE 25 deposits on daily basis with State Bank in the following manner: -

a) 5% Cash Reserve Account (US $)

b) 20% Special Cash Reserve Account (US $)

3. The reserves shall be kept in two separate accounts opened and maintained at the concerned office of the State Bank. While the cash reserve account will be non-remunerative, special cash reserve account will be remunerated by State Bank on daily product basis on rates notified by our Exchange & Debt Management Department at the end of each month. The rates so announced shall be effective for the following month. The banks / NBFIs may approach our Accounts Department for opening of the said accounts.
4. For the purpose of determining of reserve requirements, all deposits mobilized under FE 25 in foreign currencies other than US$, will be converted in US$ at the closing rates of exchange prevailing on the first day of each month of the respective banks / NBFIs. For any subsequent deposits, the prevailing exchange rates on the date of such deposits will apply.
5. Banks / NBFIs will commence reporting of the position of reserves so maintained in their respective weekly statement of position / statement of affairs falling due from the week ending April 7, 2001. The cash reserve held by banks shall be reported by them in the weekly statement of position under the head “Balance with State Bank of Pakistan” under Code 12.01. Separately in the notes to the weekly statement of position, banks will report foreign currency deposits held by them under F.E. 25 of 1998 under a new sub-code # 80.03 as under: -

Code 80.03 (i) Deposits held under F.E. 25 ( in equivalent Pak Rupees )

Code 80.03 (ii) Deposits held under F.E. 25 ( in equivalent US$ )

6. Similarly NBFIs will report the position of their F.E. 25 deposits as a footnote to their “Weekly statement of Affairs” as per following nomenclature: -

Deposits held under F.E. 25 of 1998 (in equivalent Pak Rupees)

Deposits held under F.E. 25 of 1998 (in equivalent US$)

NBFIs will also separately indicate the balance held by them under each of the Cash reserve accounts so maintained with SBP in the notes to their “Weekly Statement of Affairs”. Accordingly a revised weekly statement No.2 viz. “statement showing liquidity position” is enclosed.

7. Banks / NBFIs failing to meet the reserve requirements against F.E. 25 deposits, as prescribed above, shall be liable to levy of fines at scales prescribed under Prudential Regulations No.XXV.

Please acknowledge receipt.

STATEMENT SHOWING LIQUIDITY POSITION

STATEMENT NO.2

NAME OF NBFI :-

ADDRESS :-

NATURE OF BUSINESS :-

Authorised signatory

Name & Designation