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Category: Money & Banking

Money and banking drive economic activity by facilitating transactions, savings, and investments. Banks manage financial resources, offer credit, and regulate money supply, ensuring stability and growth in Pakistan’s financial sector.

  • Rupee falls by five paisas on import demand

    Rupee falls by five paisas on import demand

    KARACHI: The Pak Rupee ended down by five paisas against dollar on Monday owing to higher demand for import and corporate payments, dealers said.

    The rupee ended Rs154.95 to the dollar from last Friday’s closing of Rs154.90 in interbank foreign exchange market.

    Currency dealers said that the market witnessed higher demand for dollar owing to first trading day of the week.

    The dealers however said that the exchange rate might witness an adverse effect due to rising tension in Middle East after killing of Iranian leader in the US attack.

    The foreign currency market was initiated in the range of Rs154.93 and Rs154.98. The market recorded day high of Rs154.98 and low of Rs154.93 and closed at Rs154.95.

    The exchange rate in open market witnessed depreciation in rupee value. The buying and selling of dollar was recorded at Rs155.00/Rs155.30 as compared with last Friday’s closing of Rs154.80/Rs155.10 in cash ready market.

  • Rupee falls nine paisas in early day trading

    Rupee falls nine paisas in early day trading

    The Pakistani rupee weakened by nine paisas against the US dollar in early trading on Monday, driven by increased demand for import and corporate payments. The greenback was being traded at Rs154.99 during morning hours in the interbank foreign exchange market, compared to the previous closing rate of Rs154.90.

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  • SBP issues procedure for loan disbursement to unemployed youth

    SBP issues procedure for loan disbursement to unemployed youth

    KARACHI: State Bank of Pakistan (SBP) on Friday issued procedure for disbursement of loan to unemployed youth under Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES).

    In a circular issued to all chief executives of banks and development financial institutions, the SBP said that executing agencies (EAs) shall evaluate loan applications of unemployed youth as per parameters of PMKJ-YES approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks vide its IH&SMEFD Circular No. 08 of 2019 dated July 11, 2019.

    The loan facility for a borrower shall be sanctioned and disbursed by the EA after completion of documentation formalities.

    These loans shall be entitled for service charges subsidy and credit losses subsidy. No further evaluation on eligibility of borrowers would be conducted by the SBP.

    The government has launched PM Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) to provide concessional loans to youth for establishing or extending business enterprises thereby promoting entrepreneurship and reducing unemployment and poverty in Pakistan.

    The SBP has issued necessary instructions to all banks through IH&SMEFD Circular No. 08 dated July 11, 2019. All loans disbursed under PMKJ-YES shall be reported to SBP under Small Enterprise Financing category.

    Under the Scheme, loans are segregated into two tiers i.e. Tier 1 (T1) loans from Rs. 100,000 to Rs. 0.5 million and Tier 2 (T2) loans – above Rs 0.5 million and up to Rs 5 million.

    The loans will be provided through the banking system at service charges of 6 percent per annum. for TI loans and 8 percent p.a. for T2 loans, while the rate of return for banks working as EAs for PMKJ-YES would be KIBOR (6- Months offer) + 500 bps for T1 loans and KIBOR (6- Months offer) + 400 bps for T2 loans with KIBOR to be reset bi-annually.

    The government shall absorb the difference between the rate of return for EAs and end user rate as service charges subsidy, the SBP said.

    Besides, GOP will also bear credit losses (principal portion only) on the disbursed portfolio of the banks up to 50 percent in case of T1 loans and up to 10 percent in case of T2 loans.

    As per SBP’s Prudential Regulations for Small Enterprise Financing, loans are classified as loss on objective basis (time based criteria) when default period is 18 months or more or on subjective basis.

    Hence, for determination of admissible credit losses against EA’s total PMKJ-YES disbursed portfolio at the end of each quarter, only loan cases classified under loss category as per SBP SME Financing PRs will be considered.

    The SBP said that the payment of service charges subsidy to EAs will be made through SBP’s operational arm viz Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

    The EAs shall prepare and submit claims to DFSD for receiving government service charges subsidy on outstanding principal amount of their regular PMKJ-YES portfolio up to expiry of each individual loan.

    In case of a loan becoming non-performing, no service charges subsidy will be paid after being classified as ‘Loss’ as per SBP PRs for SME Financing.

    The EAs claims shall contain particulars of each individual loan along with calculations of subsidy based on relevant six months KIBOR used. The service charges subsidy claim should be duly vetted by internal audit department of the EA. The audited claim along with a certificate from EA relating to eligibility of borrower for PMKJ-YES and correctness of the subsidy amount shall be submitted to DFSD within 15 working days after the end of respective quarter for payment of service charges subsidy.

    DFSD, SBP BSC shall scrutinize subsidy claim of EAs within 15 working days after receipt of complete information from EAs.

    DFSD shall ascertain that calculations of EAs subsidy claim are correct and applicable KIBOR rate has been used by the EAs.

    Thereafter, DFSD shall submit scrutinized claims to Finance Division for release of funds. After receiving funds from GoP, DFSD will advise SBP BSC Karachi for crediting the subsidy amount in respective EA’s account maintained at SBP BSC Karachi.

    Banking Inspection Department of State Bank during regular inspection of the EAs shall conduct inspection of their PMKJ-YES portfolio on sampling basis using its own sampling techniques.

    SBP inspectors shall randomly select credit files and review them from the perspective of eligibility of borrowers under the Program, status of loan (regular or NPL) and GOP subsidy claim.

    The BID inspection report section on PMKJ-YES shall be used as an important input for reviewing the Scheme and assessing its effectiveness in fulfilling the government objective of promoting youth entrepreneurship in the country.

    On behalf of government, payment of credit losses subsidy to EAs will be made up to 50 percent in case of TI loans and up to 10 percent in case of T2 loans on their disbursed portfolio under the Scheme on quarterly basis through Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

    EAs shall prepare claims for submission to DFSD, SBP BSC for receiving payment on account of credit losses subsidy from the government on their disbursed PMKJ-YES portfolio. The list containing details of individual loans classified as loss as per SBP SME PRs and calculation of credit loss subsidy based on total disbursed PMKJ-YES portfolio of EAs at the end of respective quarter shall be submitted to DFSD. EAs claim in this respect should be duly vetted by their internal audit department. The audited claim along with a certificate from EA relating to correctness of the claimed amount shall be submitted to DFSD within 15 working days after the end of respective quarter.

    DFSD, SBP BSC shall scrutinize credit loss subsidy claim of EAs within 15 working days after receipt of complete information from EAs and ascertain that calculations of EAs loss claim are correct.

    Thereafter, DFSD will forward admissible claims of EAs to Finance Division, GoP, for release of funds. After receiving funds from Finance Division, DFSD will advise SBP BSC Karachi office for crediting the approved subsidy claim in respective EAs account maintained at SBP BSC Karachi Office.

    EAs will return excess amount arising, if any, to DFSD, in case movement in their PMKJ-YES portfolio causes amount of credit loss to be less than/falls below 50 percent in case of T1 loans and 10 percent in case of T2 loans of total disbursed portfolio of EA at the end of reporting Quarter.

  • Rupee falls by two paisas on higher import

    Rupee falls by two paisas on higher import

    KARACHI: The Pak Rupee ended down by two paisas against dollar on Friday owing to payment demand from importers and corporate buyers.

    The rupee ended Rs154.90 to the dollar from previous day’s closing of Rs154.88 in interbank foreign exchange market.

    Currency dealers said that the demand for the greenback was higher during the day for import and corporate payment.

    However, the inflows helped the rupee for further depreciation.

    The foreign currency market was initiated in the range of Rs154.90 and Rs154.95. The market recorded day high of Rs154.95 and low of Rs154.89 and closed at Rs154.90.

    The exchange rate in open market witnessed slight change in rupee value. The buying and selling of the dollar was recorded at Rs154.80/Rs155.10 from previous day’s closing of Rs154.70 and Rs155.00.

  • Rupee eases on import, corporate demand

    Rupee eases on import, corporate demand

    KARACHI: The Pak Rupee eased by three paisas on Thursday owing to higher import and corporate payments, dealers said.

    The rupee ended Rs154.88 to the dollar from Tuesday’s closing of Rs154.85 in interbank foreign exchange market.

    The dealers said that last day the market was remained closed due to bank holiday. Therefore, the demand was higher today for import and corporate payments.

    They said that improved economic indicators would help the rupee against the foreign currency in coming days.

    The exchange rate in open market also witnessed slight change in rupee value. The buying and selling of dollar was recorded at Rs154.70/Rs155.10 from Tuesday’s closing of Rs154.70/Rs155.00 in cash ready market.

  • SBP directs biometric verification of branchless banking accounts by March 31

    SBP directs biometric verification of branchless banking accounts by March 31

    KARACHI: State Bank of Pakistan (SBP) has directed financial institutions to ensure biometric verification of branchless banking customers by March 31, 2020.

    In a circular issued on Tuesday directed all banks and microfinance banks to complete biometric verification of all level-1 accounts by March 31, 2020. In case biometric verification is not performed, the financial institutions shall convert all these accounts to Level – 0 with effect from April 01, 2020.

    The transaction limits for Level – 1 accounts are as follow:

    a. Rs. 50,000 per day [This limit shall not be applicable on: (i)credit from employers for salaried persons against proof of employment and (ii) payment to trusted merchants including schools and hospitals etc.]

    b. Rs. 200,000 per month

    The transaction limits for Level-0 accounts are as follow:

    a. Rs. 25,000 per day

    b. Rs. 50,000 per month

    c. Rs. 200,000 per year

    d. Rs. 200,000/- maximum balance limit

    The financial institutions operating branchless banking are required to follow regulations related to Know Your Customer (KYC)/Account Opening requirements and conditions:

    For Level-0 accounts:

    a) Verification of customer identity from NADRA

    b) Pre-screening the name and CNIC against proscribed/designated persons and entities as per the Statutory Notifications issued by Federal Government from time to time.

    c) Call Back Confirmation or generation of One-Time Password (OTP) for verification in remote account opening.

    For Level-1 accounts:

    a) Biometric Verification of customer from NADRA

    b) Pre-screening the name and CNIC against proscribed/designated persons and entities as per the Statutory Notifications issued by Federal Government from time to time.

    c) Call Back Confirmation or generation of One-Time Password (OTP) for verification in remote account opening.

    The SBP said that financial institutions shall keep all necessary record obtained through CDD measures, account files and business correspondence and results of any analysis undertaken, for at least ten years following the termination of the business relationship.

    The central bank further said that the financial institutions shall ensure that documents, data or information collected under the CDD process is kept up to date and relevant, by undertaking reviews of existing records.

  • SBP updates guidelines related to UNSC resolutions

    SBP updates guidelines related to UNSC resolutions

    KARACHI: State Bank of Pakistan (SBP) on Tuesday updated guidelines for banks related compliance on notification issued under United Nations Security Council (UNSC) Resolutions.

    The SBP issued circular addressing chief executives and presidents of banks, development financial institutions and microfinance banks, referring to the guidelines on Compliance of Government of Pakistan’s Notifications issued under United Nations Security Council (UNSC) Resolutions, issued vide BPRD Circular No. 03 of 2015 as amended from time to time.

    The SBP said that in order to further enhance the understanding of Targeted Financial Sanctions regimes for Terrorism Financing and Proliferation Financing, under UNSC Resolutions, and to further align said regimes with the requirements embodied in FATF Recommendations, SBP has decided to update the subject guidelines.

  • Rupee makes gain on last day of year 2019

    Rupee makes gain on last day of year 2019

    KARACHI: The Pak Rupee gained seven paisas against dollar on Tuesday to close the year 2019. The local currency appreciated despite demand for import and corporate payments, dealers said.

    The rupee ended Rs154.85 to the dollar from previous day’s closing of Rs154.92 in interbank foreign exchange market.

    Currency dealers said that the rupee witnessed pressure during the day due to demand for import and corporate payments.

    However, inflows and positive economic indicators helped the rupee to close the year with gain.

    The foreign currency market was initiated in the range of Rs154.90/Rs154.95. The market recorded day high of Rs154.92 and low of Rs154.85 and closed at Rs154.85.

    The exchange rate in open market witnessed no change in the local currency. The buying and selling of the dollar was recorded at Rs154.70/Rs155.00, the same previous day’s level, in cash ready market.

  • SBP directs MFBs to ensure verification of customers

    SBP directs MFBs to ensure verification of customers

    KARACHI: State Bank of Pakistan (SBP) on Tuesday issued orders to microfinance banks (MFBs) to ensure verification of customers in order to mitigate various risks arising from money laundering and financing terrorism.

    A circular issued by the central bank referred it previous instructions issued through Circular No. 02 dated October 05, 2018 to mitigate various risks arising from money laundering and financing of terrorism.

    As stipulated under Regulation M-1, ongoing Customer Due Diligence (CDD) is an essential aspect of effective KYC/CDD procedures and applies to all customers to whom the MFB is offering any type of service(s).

    Accordingly, it is reiterated that MFBs must ensure strict observance of all applicable instructions including identification and verification of customers and their beneficial owner(s) and obtain information on the purpose and intended nature of business relationship.

    The monitoring mechanism in place at MFBs should be adequately resourced and strengthened to ensure that the transactions being conducted in the accounts are consistent with the MFB’s knowledge of their customer, business, risk profile and the source of funds.

    With the objective to know the ultimate beneficial ownership of accounts/ transactions, the MFBs shall enhance their efforts to obtain relevant information and examine background and purpose of all complex, unusual large transactions and unusual patterns of transactions, which do not commensurate with customer profile or have no apparent economic or visible lawful purpose.

    MFBs are also advised to refer to the SECP Circular No. 16 of 2018 dated August 29, 2018 (https://www.secp.gov.pk/laws/circulars/) through which the Commission has directed all companies to enhance their efforts to obtain and maintain up-to-date information relating to their ultimate beneficial owners, i.e. natural persons or individuals who ultimately own or control the company.

    Therefore, MFBs may also seek such ultimate beneficial ownership information from their relevant customers during the CDD process.

    Moreover, with the view to further strengthen the measures already in place and mitigate the money laundering and terrorist financing risks, MFBs are advised to immediately take following steps:

    1. a) Ensure optimal utilization of biometric technology and carry out biometric verification of the existing customers (if already not done) as per following timelines and thresholds:
    PriorityCategory of CustomersThresholdTimeline
    High PriorityListed /Public Limited CompaniesAccount turnover exceeding PKR 1,000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.31st January, 2020
    Private Limited CompaniesAccount turnover exceeding PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
    All customers except Public/Private Limited CompaniesAccount turnover exceeding PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
    Medium PriorityListed /Public Limited CompaniesAccount turnover from PKR 500 million to PKR 1000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.31st March, 2020
    Private Limited CompaniesAccount turnover from PKR 250 million to PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
    All customers except Public/Private Limited CompaniesAccount turnover from PKR 100 million to PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
    NormalAll other accounts not covered in the above categories30th June, 2020

    Note

    Biometric verification of persons authorized to open and operate the account of legal entities or legal arrangements shall be conducted.

    In case of customers whose eligible identity documents are other than biometrically verifiable documents, re-validation/ verification of identity shall be done based on documents, data or information obtained from customer and/or from reliable and independent sources having regard to MFB’s own assessment of materiality and risk.

    Submit compliance status in respect of biometric verification of their existing/legacy portfolio of customers within 15 days of aforesaid timelines.

    Furthermore, MFBs are advised to adhere to the following instructions regarding biometric verification of existing customers presently outside Pakistan:

     Type of CustomerTreatment
    a)Non-resident Pakistanis (NRPs)

     

    As defined in Income Tax Ordinance, 2001 – Chapter 5, Division II, Section 82

    		For customers who fall under the definition of NRP, the MFB may obtain a signed undertaking from the customer invariably containing the following:

     

    • Customer’s NRP status along with proof (i.e. copy of valid passport, visa, exit stamp, resident permit, etc.).

    • Copy of valid identity document.

    • Account number(s) of the customer’s account(s) maintained with the bank as per customer record.

    • Undertaking by the customer to inform the bank of any change in residency status.

    The MFB, after verification of the customer’s signature from its record, shall accordingly update/ reflect the NRP status in the customer profile.

    For such customers, as an alternative to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer.

    b)Resident Pakistanis temporarily outside PakistanFor customers who do not qualify under the definition of NRP, but are currently/ temporarily outside Pakistan for any reason, the MFB may obtain reasonable evidence/ proof from the customer regarding his/ her absence from the country (i.e. copy of valid passport, visa, exit stamp, resident permit, etc.) and the expected date of return.

     

    For such customers, as an alternate to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer.

    The MFB may retain the NADRA Verisys in place of biometric verification until the customer returns, subject to reasonable time limit (not more than six months) to be defined by MFB. Biometric verification of such customers shall be done immediately upon the customer’s return to the country.

    c)Joint Accounts
    where one account holder is outside Pakistan (NRP/ temporarily)    		For joint account holders, treatment of biometric verification should be done according to the status of respective individual. Biometric verification should be conducted for the joint account holder who is resident Pakistani, while for other joint account holders, the relevant procedure described at (a) and (b) above should be adopted.

    Moreover, MFBs may operate accounts on the basis of NADRA Verisys in genuine cases, in line with Frequently Asked Questions (FAQ No. 8, Annexure – I) on Use of Biometric Technology, provided MFBs are satisfied and proper reason/ proof is recorded/ retained by them.

    For such cases in line with Para-7 above, in the absence of biometric verification, MFB may ensure that requisite identification document has been obtained, marked as ‘original seen’ by their staff and verified through NADRA Verisys.

    Moreover an undertaking should be obtained from the customer declaring that the particulars provided to the MFB are correct and that their staff has verified the same. The declaration should be endorsed by the Branch Manager and should be available in the bank’s centralized record.