All
Authorised Dealers
in Foreign Exchange,
Dear
Sirs,
FOREIGN
EXCHANGE EXPOSURE LIMIT
In
order to further liberalize and rationalize the operations
of the foreign exchange market. It has been decided to replace
the existing system of Net Open Position by an aggregate
foreign exchange exposure limit for each bank. Under the
new system, the banks shall conduct their foreign exchange
operations within the overall Exposure Limit, set by the
State Bank with reference to paid up capital of the Authorized
Dealers and the limit will be denominated in Pak. Rupees.
It has been decided that the aggregate exposure limit for
every bank shall be equivalent to 10% of its paid-up capital
with maximum and minimum limits of Rs. 500 million and Rs.
50 million respectively. The assigned capital required to
be maintained by branches of foreign banks in Pakistan under
section 13(3) of Banking Companies Ordinance 1962 shall
be deemed paid-up capital for the purpose of this circular.
In the case of banks incorporated in Pakistan the limit
would cover all the branches including overseas branches,
if any.
2.
For the proper management and monitoring of nostro account
the limit for balances held abroad on account of trading
activity, excluding funds mobilized through the scheme introduced
vide FE Circular
No. 25 of
1998, special exporter’s account
and other such deposits which were received under earlier
schemes which were not eligible for forward cover from State
Bank, would be twice the Exposure limit with maximum and
minimum limits of Rs. 1,000 million and Rs. 150 million.
3.
All foreign exchange activities including those arising
out of trade transactions, remittances etc., shall be conducted
within the given Exposure Limit. The banks that have exposure
in excess of the limit now set for them will adjust the
position by June 15, 1999 at the latest.
4.
The guidelines for calculating the exposure limit have already
been intimated to the Authorized Dealers vide our Circular
Letter No. Cir. 11/FEP.16(326)N-98 dated April 03, 1998
with the modification that forward transactions will be
revalued at relevant forward rates instead of spot rates
as has also been required vide our FE
Circular No. 2
of 1999. This means
that the banks will have to revalue on daily basis each
individual outstanding forward transaction by taking the
forward rate for the remaining tenor of the contract.
5.
If the paid-up capital of a bank is increased, it may apply
for the enhancement of its Exposure Nostro limit to the
State Bank.
6.
The New Exposure/Nostro limits are being advised to banks
individually through separate letters.
7.
Please acknowledge receipt.