The
Head /Principal Offices of all
Authorized Dealers in Foreign Exchange
Dear
Sir /Madam,
Borrowings
in Foreign Currency by Authorized Dealers
In
order to facilitate the Authorized Dealers (ADs), it is
decided to allow ADs to raise foreign currency (FCY) borrowing
from International Financial Institutions for converting
into PKR and using the same (PKR) for liquidity management.
While borrowing such FCY funds, ADs are required to ensure
the following:
1.
ADs are allowed to borrow foreign currency to a maximum
of 50% of their unimpaired Capital as per their last Audited
Financial Accounts.
2. The borrowing is permitted in currencies namely USD,
EUR, GBP and JPY.
3. The minimum tenor of the FCY borrowing should not be
less than 1 year. The borrowing bank (AD) will be allowed
to make payment of the principal amount in bullet at maturity
or may start repayment of principal in installment after
one year. However, frequency of the interest payment may
be made in accordance with the related repayment schedule.
4. Interest may be payable at a rate not exceeding the relevant
LIBOR + 1.50%. Any exception to the above rate should be
referred to Exchange Policy Department, SBP for prior approval.
5. ADs will not be allowed to offer any security/collateral/guarantee
whatsoever to the lenders as the borrowing will be clean
and based on balance sheet strength of the borrowing bank
(AD).
6. Borrowing bank (AD) will not be allowed to sell such
FCY funds out-rightly in the interbank market or to the
customers. Similarly, such FCY funds cannot be used by borrowing
bank for extending any FCY trade loan facility.
7. Borrowing bank (AD) will be allowed to enter into FCY/PKR
sell/buy Swaps in the interbank market. Though, the tenor
of these Swaps may range from 1- month to 1-year, however,
at any point in time, the outstanding amount of related
Net Forward Purchases should not be lower than the FCY amount
borrowed under this arrangement.
8. ADs are advised to monthly report FCY transactions on
the enclosed format to Banking Surveillance Department and
Exchange Policy Department by 10th day of the following
month.
The
above permission is being granted to the ADs for their liquidity
management. However, ADs are expected to exercise utmost
prudence while entering into such arrangements.