Tag: Foreign Exchange Manual

KARACHI: In order to further streamline the process of remittance of disinvestment proceeds, State Bank of Pakistan (SBP) has decided to further delegate the authority to banks of resident companies for remittance of disinvestment proceeds to non-resident investors, a statement said on Monday.

The SBP invited the attention of the Authorized Dealers (ADs) or banks is to the instructions contained in Para 7(vii), Chapter 20 of Foreign Exchange Manual in terms of which designated Authorized Dealer is allowed for remittance of disinvestment proceeds not exceeding the market value (in case of listed securities)/ break-up value (in case of unlisted securities) favoring the non-residents.

Accordingly, the above referred Para of Chapter-20 ibid has been replaced as follows:

“Subject to observance of the procedure outlined above, the companies issuing/registering transfer of shares in favour of non-residents on repatriation basis, may export the share certificates through the designated Authorized Dealer to the shareholders. The designated Authorized Dealer shall also allow remittances in respect of the following:-

(i) Dividend, net of applicable taxes, as permitted under Chapter 14.

(ii) Disinvestment proceeds, less brokerage / commission and taxes, as under:

A. For disinvestment proceeds not exceeding the market value (in case of listed securities)/ break-up value (in case of unlisted securities), the designated Authorized Dealer shall allow the remittance on submission and review of:

a) Name and address of the non-resident share holder.

b) Name and address of the company whose shares were sold by the non-resident beneficiary, indicating whether it is a listed or unlisted/private limited company and is covered under para 6 ibid. (This requirement may be waived by the Authorized Dealer in case of quoted shares).

c) Name, address and residential status of the buyer of the shares in question.

d) Copy of broker’s memo in case of quoted shares/break-up value certificate of a QCR rated practicing Chartered Accountant in case of unlisted shares.

e) Attested copy of executed Share Purchase Agreement (enforceable at law) between resident buyer and non-resident seller, showing rupee value of shares purchased.

f) Attested copy of latest audited financials of the company whose shares were being sold.

g) Duly filled/ signed M-Form for the rupee value of the remittance in favor of non-resident.

h) An undertaking from the buyer that the transaction is not between related parties. In case the transaction is between related parties, an undertaking that the same has been concluded at an arms-length basis.

i) Authorized Dealer will ensure due diligence of the transaction/ buyer from AML/ CFT perspective.

B. For disinvestment proceeds exceeding the market value (in case of listed securities)/ break-up value (in case of unlisted securities), the designated Authorized Dealer shall allow the remittance after satisfying itself about the genuineness of the transaction by reviewing the following additional documents:

a) Detailed justifications/ rationale/ basis of setting the transaction price per share, from the buyer, in original.

b) Attested copy of detailed valuation/ transaction due diligence by the buyer showing basis, methodology and key valuation metrics used for valuation of shares as per generally accepted best practices for valuation of shares.

c) In case the total remittance of disinvestment proceeds exceeds US Dollar 50 million (or equivalent in other currencies) during a span of six months, the applicant, in addition to above information/ documents, shall also submit an independent/ third party review of the buyer’s valuation, from QCR rated practicing chartered accountant as per the latest generally accepted valuation techniques/ methods for a particular type of industry in which resident company is operating. The review report should at least provide view on the appropriateness of the basis and methodology used in the valuation/ transaction due diligence. Further, the review report should also include local/ global comparable transactions and/or trading multiples of comparable publicly traded companies and key valuation metric(s) comparisons, if available.”

4. Authorized Dealers are advised to bring the above instructions to the knowledge of all their constituents for meticulous compliance.

KARACHI: Sending currency notes and coins into Pakistan by post is illegal and liable to confiscation under updated Foreign Exchange Manual issued by State Bank of Pakistan (SBP).

The SBP said that laws in force are prohibiting the bringing or sending into Pakistan from any place outside Pakistan, of Pakistan and foreign currency notes or bank notes, un-issued or in circulation, or coin, except with the general or special permission of the State Bank.

Under Notification No.-1F.E.2/2017-SB dated the August 30, 2017, State Bank has granted general permission for bringing into Pakistan notes legal tender in Pakistan not exceeding Rs 3,000/- (Rupee Three Thousand Only) from India and Rs 10,000/- (Rupee Ten Thousand Only) from any country other than India, in value, in all per person at any one time.

The State Bank has also granted under Notification No.F.E.30/49-SB dated the November 5, 1949 and Notification No. F.E. 5/92-SB dated the 28th December, 1992 general permission to the travellers to Pakistan, to bring with them without limit foreign currency notes except un-issued notes and coin, except coin which is legal tender in India, which can be brought only up to Rs.5/- in value per person at any one time.

The SBP said that the permission contained above is valid only for bringing in of Pakistan or foreign currency notes or coin by travellers personally with them, but not for sending them into Pakistan by post or otherwise which is illegal.

Currency notes and coin sent by post to Pakistan are liable to be confiscated, which is besides the legal action that will be taken under the Act in such cases.

The SBP said that Pakistan currency notes up to Rs 3,000 and Rs 10,000, which the persons leaving Pakistan are permitted to take with them to India and to any country other than India respectively, are not intended for expenditure in foreign countries, but are meant for immediate expense on their return to Pakistan 3and/or for in-flight purchases on PIA’s international flights.

The central bank directed authorized dealers should bring this to the notice of travellers when issuing exchange to them for travel purposes.

KARACHI: Authorized dealers have been allowed to remit foreign exchange up to $50,000 on account of medical treatment abroad of resident Pakistanis only.

According to Foreign Exchange Manual updated up to March 14, 2019 issued by State Bank of Pakistan (SBP), authorized dealers may remit foreign exchange up to $50,000/- or equivalent in other foreign currencies on account of medical treatment of resident Pakistanis only after satisfying themselves about bona fides of the transaction. Remittances should be sent directly to the account of concerned reputable foreign Hospital via SWIFT, telegraphic transfer or demand draft after obtaining the following documents:

a. Appendix V-72 duly filled in by the patient/next of kin/sponsor.

b. Invoice/estimate of the foreign hospital.

c. A ‘self-declaration’ from the patient, his/her next of kin or from sponsor declaring amount of foreign exchange essentially required for treatment abroad.

According to the foreign exchange manual, in addition, authorized dealers may also release cash foreign exchange equivalent to US$ 5,000/- each to the patient and one attendant which should be duly endorsed on his/her/their passport(s).

In case of foreign exchange requirements for medical treatment abroad in excess of the above limit, the concerned authorized dealer will forward the case to the Director, Foreign Exchange Operations Department, SBP-Banking Services Corporation, Head Office, Karachi along with justification and documentary evidence for consideration.

The authorized dealers will retain all related record including the documents submitted by the applicant as mentioned in this paragraph for on-site inspection by the State Bank’s Inspection Team.

In order to facilitate and guide their individual customers desirous of availing above services, authorized dealers are advised to ensure the following:

a) Information regarding provision of FX services for medical treatment abroad should be displayed at prominent place at each authorized branch of the authorized dealer.

b) Adequate stock of major foreign currencies should be maintained at all authorized branches to meet cash related requirements for such facility.

c) Brochures containing information regarding services related to medical treatment abroad may be made available at all branches. However, such information must be placed at official websites of the authorized dealers alongwith list of branches providing such services.

Further, such list should also be available at all branches of the Authorized Dealer for guidance of customers.

d) The officials dealing with such services should be trained/ made acquainted with the existing foreign exchange rules and regulations governing individual FX needs.

KARACHI: State Bank of Pakistan (SBP) has amended Foreign Exchange Manual and issued revised Chapter 11 of the manual related to dealings in foreign currency notes and coins etc. by the authorized dealers including banks and exchange companies.

Following is the revised chapter 11 issued by the SBP dated July 16, 2019:

1. Introduction.

Authorized Dealer’s license to deal in foreign exchange includes an authorization to deal in foreign currency notes and coins as well. In addition to Authorized Dealers, the State Bank has granted licenses to Exchange Companies and issued restricted authorizations to selected hotels to deal in foreign currency notes and coins etc. as per the scope of business mentioned in their licenses/authorizations.

This chapter sets out the regulations which govern the purchase and sale of foreign currency by the Authorized Dealers.

2. Purchase of foreign currency notes from the public.

All incoming persons, whether Pakistani or foreign national, can bring with them without any limit foreign currencies and other instruments against the submission of a declaration to the Customs authorities on amount exceeding US$ 10,000 or equivalent in terms of SBP Notification No. F.E.1/2012-SB dated the 16th June, 2012, wherever applicable.

Such currencies/instruments may be freely purchased by the Authorized Dealers against payment in PKR. Authorized Dealers may also purchase foreign currencies withdrawn by the account holders from their foreign currency accounts and from the walk-in-customer against payment in PKR subject to fulfillment of applicable AML/CFT regulations/guidelines issued by the State Bank.

Authorized Dealers should issue a certificate of currency encashment on the prescribed form (Appendix V-9).

In cases where the foreign currency offered for sale by a traveller had been originally obtained from an Authorized Dealer, the repurchase should be endorsed on the traveller’s passport in the case of Pakistan nationals only.

3. Purchase of foreign currency notes and coins etc. from other Authorized Dealers, Exchange Companies and Hotels.

Authorized Dealers may also purchase foreign currency notes, coins and other instruments freely from other Authorized Dealers, Exchange Companies and hotels licensed/authorized by the State Bank.

4. Disposal of non-convertible currency notes.

Many countries have restrictions on import of their own currency notes and do not allow their repatriation through banking system. Surplus collection of such foreign currency notes can be disposed of in the international centres at market rates.

Authorized Dealers should arrange with their overseas branches or correspondents to keep them fully informed of such restrictions on such currencies’ import, repatriation and also about demonetization, currency re-organization etc. in foreign countries. Such information may also be passed on by the Authorized Dealers to those Exchange Companies/hotels which are their customers.

5. Availability of adequate stock of foreign currency notes with the Authorized Dealers.

It is the responsibility of Authorized Dealers to ensure that adequate stocks of foreign currency notes are available with their authorized branches at all times for meeting the requirements of their customers.

For this purpose, Authorized Dealers may replenish their stocks of foreign currency notes either by purchasing the same from other Authorized Dealers/Exchange Companies or by importing them from their overseas branches and correspondents.

6 Ensuring quality of foreign currency notes.

In order to ensure provision of good quality notes to the public, Authorized Dealers should avoid stapling of foreign currency notes and deliver the same from their counters in unstapled condition with proper banding of note packets, if so required.

7. Sale of foreign currency notes to the public.

Authorized Dealers may sell foreign currency notes to persons proceeding abroad within the amount of foreign exchange allowed through special permission by the State Bank or under the authority delegated to them in Chapter 17 subject to compliance of the related provisions.

8. Sale of foreign currency notes and coins etc. to other Authorized Dealers.

Authorized Dealers may freely sell foreign currency notes, coins and other instruments to other Authorized Dealers.

9. Disposal of surplus foreign currency notes.

When Authorized Dealers are unable to dispose of their holdings of foreign currency notes by sale to the public or other Authorized Dealers, they may dispose of the same by receiving credit thereagainst in their Nostro accounts as per the following:

i) By exporting surplus foreign currency notes to their branches, correspondents or agents abroad.

ii) By selling surplus foreign currency notes to the Exchange Companies operating in Pakistan.

10. Acceptance of surplus foreign currency notes by SBP-Banking Services Corporation from the Authorized Dealers.

Authorized Dealers are also allowed to sell their surplus foreign currency notes (US Dollar, UK Pound Sterling, Euro and UAE Dirham) to SBP–Banking Services Corporation, Karachi Office as per the following procedure:

i. Authorized Dealers having above-mentioned surplus foreign currencies will approach the SBP-Banking Services Corporation, Karachi Office.

ii. Packets of foreign currency notes (100 pieces) only in the denomination of 50 and above will be acceptable.

iii. The packets will be opened and notes will be counted by the staff of SBP – Banking Services Corporation, Karachi Office in the presence of the representative of the concerned Authorized Dealer.

iv. Counted currency notes will be re-packed and sealed under the joint signatures of representatives of the concerned Authorized Dealer and official of SBP-Banking Services Corporation, Karachi Office.

v. The Authorized Dealer will remain responsible for any forged/counterfeit notes, if found subsequently in the deposited currency.

vi. SBP will provide credit of the counter value in the Nostro Account of the AD in the same value date, on confirmation of balances from SBP-Banking Services Corporation, Karachi Office.

11. Provision of foreign currency notes by SBP-Banking Services Corporation to the Authorized Dealers.

Authorized Dealers may purchase foreign currency notes from SBP-Banking Services Corporation, Karachi Office after giving credit of counter value in SBP’s Nostro account in the respective currency.

SBP-Banking Services Corporation, Karachi Office will provide foreign currency notes to the Authorized Dealer on having confirmation from the State Bank to the above effect.

KARACHI: State Bank of Pakistan (SBP) has revised blocked accounts of non-resident Pakistanis under Foreign Exchange Manual and laid down procedure for investment of amount from such blocked account.

The SBP on Wednesday issued revised chapters of Foreign Exchange Manual and said that balances held in blocked accounts may be invested in approved government debt securities” expressed to be payable in Rupees or in fixed deposit with the bank in which the account is held subject to the prior approval of the State Bank.

Such investment must be made through the bank with whom the blocked account is kept and registered in the name of the non-resident account holder or his/her nominee(s) in Pakistan.

“The securities should not be held in bearer form and should not be sold or transferred without the permission of the State Bank. The income generated through investments in securities and sale proceeds of such securities must only be credited to the blocked account of the respective non-resident,” the SBP said.

The SBP said that section 6 of the Foreign Exchange Regulation Act, 1947 empowers the State Bank to block the accounts in Pakistan of any person resident outside Pakistan and direct that payment of any sums due to that person shall only be made to a blocked account.

In other words, amounts due to a person resident outside Pakistan, to whom remittances cannot be allowed, shall be credited to the blocked accounts of that person to ensure that the funds are not directly remitted or otherwise used in a manner contrary to the provisions of the Act.

The SBP defined as a “blocked account” means an account opened as a blocked account at any office or branch in Pakistan of a bank authorized in this behalf by the State Bank or an account blocked by the order of the State Bank.

All Authorized Dealers are permitted to open and maintain blocked accounts subject to the conditions laid down in subsequent paragraphs of this chapter. In certain cases, banks other than the Authorized Dealers may also be authorized by the State Bank to open and maintain blocked accounts.

The State Bank may direct an authorized dealer to open a new or designate an existing account as “Blocked Account”. A blocked account may also be opened as a joint account in the name of a resident and a non-resident. No blocked account may be un-blocked or an existing ‘free’ account may be blocked by an Authorized Dealer except under the directions from the State Bank.

Sub-section (1)(b) of Section 6 of the Act provides that where the State Bank has directed that any payment due to a non-resident may be made to a blocked account in his name with a bank in Pakistan, the crediting of the sum to the blocked account shall, to the extent of the sum credited, be a good discharge to the person making the payment.

The central bank said that the State Bank may not approve certain remittances in settlement of liabilities to a particular person resident outside Pakistan. Payments in discharge of such liabilities to such person may be allowed to be made to a blocked account subject to such terms and conditions as may be specified by the State Bank.

Where the State Bank directs that a payment be made to a blocked account, it may be made either:

(i) by a banker’s payment order/cheque marked ‘payable to blocked account of ____________________only’ or

(ii) by a crossed cheque or warrant drawn in favour of the beneficiary and marked with the words “Payable to blocked account of payee only.”

(iii) Where such a cheque or warrant is sent to the payee, it is desirable that the payee should arrange for the opening of a blocked account with an Authorized Dealer in Pakistan before forwarding the instrument to that bank for collection. Application mentioning the name of the payee as the transferee and clearly marked ‘Blocked Account’ must be submitted to the State Bank for prior approval. The collecting bank must endorse cheques, warrants or drafts so marked “received for the credit of blocked account at ………………………… (Bank and Branch)” before presenting them for payment. The paying bank shall not pay such instruments, unless they are approved by the State Bank for payment to a blocked account. After payment has been made, the bank must endorse the instrument as “Payment made to blocked account at ………………………… (Bank and Branch)”. The amount which the State Bank has directed to be credited to a blocked account, must be immobilized pending the opening of the account and may not be used for any other purpose except with the prior approval of the State Bank.

The State Bank may issue special instructions regarding operations on blocked accounts. In the absence of any such special instructions, no payments into or withdrawal from blocked accounts may be made unless prior approval of the State Bank has been obtained.

KARACHI: The laws have prohibited export from Pakistan of jewellery or precious stones except with the general or special permission of the State Bank (SBP).