UPDATED F.E. CIRCULAR
Date 20th June,1998 |
F.E Circular No.25 |
All Authorised Dealers in Foreign
Exchange and Investment Bank Holding
Restricted Authorised Dealer's License.
Dear Sirs,
HOME REMITTANCE AND FOREIGN
CURRENCY ACCOUNTS.
In order to facilitate the flow of home
remittances and mobilize foreign exchange resources the following instructions are issued.
HOME
REMITTANCES AT THE RATE OF Rs. 46/- = $ 1 THROUGH BANKING CHANNELS
All inward remittances of foreign
currency under the Home Remittance Scheme shall be paid by the Authorised Dealers at the
rate of exchange determined by them in terms of F.E. Circulars Nos. 1 and 5 of 1998. The
State bank will pay a cash subsidy to the extent of the difference between the Authorised
Dealers buying rate and Rs. 46/- per U.S. Dollar (and this rate crossed with New York's
closing mid rate for the previous working day in respect of other currencies as published
by the F.E. Rates Committee) which will also be paid by the Authorised Dealers to the
beneficiaries and re-imbursement claimed by them from the State Bank on submission of a
statement showing total currency-wise amounts, the Authorised Dealers clean T.T. buying
rate the amount payable by them and the amount actually paid. The same principle will also
apply to such payments made from non-resident rupee accounts of overseas bank branches and
exchange companies. In other words, payments to the beneficiaries of 'Home Remittance'
from a non-resident rupee account of an overseas bank branch or exchange company will be
made at the face value of the TT/MT/Draft etc, and a cash subsidy to the extent of the
face value multiplied by 46 and divided by the Authorised Dealers T.T. Clean buying rate
for the U.S. Dollar will also be paid on behalf of the State Bank, and re-imbursement
claimed from that State Bank. Detailed item-wise statements of the differential so claimed
shall be maintained by the Authorize dealers for inspection by the Banking Supervision
Department. The State bank will carry out a random check to ensure that the foreign
branches of the Authorised Dealers receive and transfer home remittances promptly and
efficiently. Any negligence or delay will invite strong action by the State bank of
Pakistan.
NEW FOREIGN CURRENCY ACCOUNTS UNDER
NEW RULES.
It has been decided to allow the opening
and free operation of new foreign currency deposit accounts by residents as well as
non-residents under new rules. Commercial Banks holding licenses as Authorised Dealers and
those Non-Bank Financial institutions which have been given restricted Authorised Dealers
licenses for this purpose, are free to accept foreign currency deposits (or issue
certificates of investment, as applicable) from any person (which term includes residents
as well as non-residents, Pakistani and foreign nationals, a firm, company and other legal
entities) in any foreign currency. The NBFIs and banks accepting the funds would not be
required to surrender the same to the State bank nor the State Bank would provide a
forward cover in respect of such accounts. The institutions accepting such funds will be
free to keep / invest the same abroad, in addition to their usual Nostro balances or to
invest / lend it in Pakistan. They will also be free to recover reasonable bank charges on
handling cash transactions in foreign currencies received into or paid out of such
accounts. The balances of new foreign currency accounts will not be required to be
reported to the State Bank of Pakistan in the statement prescribed on pages of Appendix V
of the Foreign Exchange Manual. Instruction regarding reporting for monitoring purposes of
transactions under the new scheme will be issued separately.
The Authorized Dealers will be free to
decide the rate of return that they offer to the depositors. They would also be free to
lend / invest the funds so mobilized in any manner they like and they will also be free to
cover their exchange risk in any manner, as they would be required to maintain a 'square'
position in respect of these funds.
New foreign currency accounts would be
allowed by the Authorised Dealers under the above system with effect from June 22, 1998.
These instructions would also apply to all those account-holders who have been allowed to
continue to operate their foreign currency accounts vide F.E. Circular
Nos. 12 and 17 of 1998 and any subsequent amendment
thereof as well as through letters addressed by the Foreign Exchange Department to the
individual Authorised Dealers / Account-holders. Authorised Dealers will, however,
ensure that the proceeds of goods exported form Pakistan, and payments received for
services rendered in Pakistan are not credited to such accounts.
It would be permissible for the Authorised
Dealers to lend such funds to borrowers in Pakistan, subject to observance of regulations
prescribed by the Banking Policy & Regulations Department. Before lending any money in
foreign currency to persons / firms etc. in Pakistan observance of usual standards of
prudence, including the ability of the borrower to repay the loan, would be ensured.
In the case of a loan to an exporter, it
would be permissible to adjust the foreign currency proceeds of exports in repayment of
the loan and profits / interest thereon, only if the exporter has surrendered the full
proceeds of the loan to an Authorised Dealer against payment in rupees. In the case of a
loan against imports, the importer can obtain foreign exchange to the extent of the C
& F value of the imports, from an Authorised Dealer, if such import and payment
therefore are covered by the ITC and foreign exchange regulations, and use the same for
repayment of the loan. The payment of profit / interest will, however, have to be made by
him from his own resources. In the case of all other loans, the borrower will pay
profit/interest and repay the loan from his own resources.
With the
coming into force to these instructions, no new account will be opened under the old
scheme nor any fresh credit made into the existing accounts except interest / profit and
items in transit on 28th May, 1998. The existing non-resident foreign currency
accounts of overseas Pakistanis can, however, receive fresh remittances, which can be
withdrawn in rupees as mentioned in F.E. Circular No. 12 of 1998.
The exempted category of account-holders may continue to operate their existing accounts
in accordance with the existing instructions or may open new accounts in terms of this
circular, if they so wish. Forward cover will continue to be provided by the State Bank
for permitted fresh credits in the existing accounts as well as for F.E. 45 deposits.
It has been decided by the Government that
the accounts opened under this scheme will enjoy the protections available under the
Protection of Economic Reforms Act, 1992.
Authorised Dealers will maintain a
separate ledger for the new accounts opened under this scheme, in order to distinguish
them from the existing foreign currency accounts.
The regulations relating to CRR, SLR and
capital adequacy would also apply to these deposits. The figures of assets and liabilities
in foreign currencies would be converted into rupees at the convened Authorised Dealers
buying rate, for the purpose of reporting in the returns prescribed under the SBP Act and
BCO. Those Authorised Dealers which do not quote their own rates for foreign currencies,
(i.e. NBFIs), or which do not quote the rate for any particular currency, may adopt
consistently the rates quoted by another Authorised Dealers.
-
NATIONAL DEBT RETIREMENT PROGRAMME.
As already advised vide F.E. Circular No. 17 and 24 of 1998, there
is no restriction on receipt of fresh deposits under this scheme and the amounts payable
under the scheme shall continue to be paid in the respective foreign currencies on
maturity.
The amount
remitted under the above scheme in profit bearing deposits can, however, be converted into
rupees in the manner stated in paragraph 1(ii) of
F.E. Circular No. 12 of 1998. The restriction on encashment before two years is hereby
withdrawn of the purpose of conversion into rupees. Such encashment will, however, be
subject to the condition that the depositor will adjust the difference of the return
already paid to him on quarterly basis at the rate mentioned in F.E.
Circular No. 2 of 1997 and the rate payable under the foreign currency deposit scheme
for the completed period on quarterly basis for which the deposit has been held. For
instance, if a deposit under the national Debt Retirement Programme was made in US dollar
on 15th July, 1997 for five years, on which return was payable at the rate of
9% per annum, and it is encashed on 17th June, 1998 (i.e. after completion of
three quarters), the deposit would deem to have earned return at the rate payable on a six
months deposit under the FCA Scheme, which was 6.3438 per annum. The difference between
the amount of return already paid and the revised amount admissible would be deducted from
the principal amount before allowing encashment.
The deposits received as Qarz-e-Hasna and
those received for investment in return bearing account can, on maturity, be rolled over
at the request of the depositors. It is also permissible to change the maturity of a
deposit from a lower initial period to a longer period. Such elongation of maturates would
entitle the depositor to receive the higher applicable return even for the previous
quarters. For instance, if a deposit was placed in US dollar for a period of three years
at the rate of 8.00% per annum, and the maturity is increased to five years which attracts
a return at the rate of 9% per annum, the difference of 1% would also be paid for the
earlier quarterly periods
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