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Tag: SBP

  • SBP decides to retain two-year history of borrowers’ default, delayed payments

    SBP decides to retain two-year history of borrowers’ default, delayed payments

    KARACHI: The State Bank of Pakistan (SBP) on Friday announced that it will retain credit history of defaulters and delayed payments in Electronic Credit Information Bureau (eCIB) from July 01, 2021.

    Currently the eCIB is maintaining the credit history of default and delayed payment of borrowers only for one year.

    The SBP in a statement said that from July 2021, State Bank of Pakistan (SBP) has decided to include two years history of negative/overdue information for consumer/individual borrowers’ in the eCIB reports of State Bank of Pakistan in line with international practices. Currently, the eCIB report reflects negative/overdue information for consumer/individual borrowers’ for one year.

    Electronic Credit Information Bureau (eCIB ) of SBP collects and collates credit data on borrowers from its member Financial Institutions (FIs). The financial data is then aggregated in system and the resulting information, in the form of credit reports, is made available online to the member FIs for the purpose of credit assessment, credit scoring and credit risk management. The major purpose of this database is to enable the Financial Institutions (FIs) to know the credit history of their current and prospective customers thus enabling them to make informed and timely lending decisions.

    The decision was undertaken by the SBP to align its eCIB policies with international practices and to meet the Ease of Doing Business Survey (EODB) requirement of displaying at least two years history in the eCIB reports.  The same will help in the enhancement of the credit assessment capability of the member FIs of their current and potential customers. 

    It is very important to note that this change will be adopted on prospective basis and will be effective from July 2021 onwards.  Accordingly, any default, delay in payment, etc. prior to 1st July 2021 will continue to be reflected in the credit report of the customers only for one year. However, defaults, delayed payments, etc. after 1st July 2021 will be shown on the credit reports for two years. All the member FIs are advised to bring the contents of this policy change in the knowledge of their existing and potential customers. Besides, the member FIs should also ensure upfront disclosure to their current and potential customers regarding the eCIB reporting requirement and its implication i.e. (the reflection of overdue/late payments/write off/waiver, etc.) in eCIB reports after settlement of their liabilities.

  • SBP receives $2.5bn of Eurobonds issuance

    SBP receives $2.5bn of Eurobonds issuance

    KARACHI: State Bank of Pakistan (SBP) on Thursday said that it has received government proceeds of $2.5 billion Eurobonds issuance in its account.

    The central bank in a tweet said that as a result of current transfers, the SBP’s foreign exchange reserves are closed above $16 billion on Thursday, the highest level since July 2019.

    Earlier, a statement issued from Islamabad said that Pakistan had entered the international capital market after a gap of over three years by successfully raising USD 2.5 billion through a multi-tranche transaction of 5-, 10- and 30-year Eurobonds.

    The transaction generated great interest as leading global investors from Asia, Middle East, Europe and the US participated in the global investor calls and the order book.

    This is for the first time that Pakistan has adopted a program-based approach with registration of Global Medium-Term Note (GMTN) program. The program will allow Pakistan to tap the market at short notice.

    The Government intends to make full use of this program and become a regular issuer in the International Capital Markets.

  • Country’s foreign exchange reserves ease to $20.679 billion

    Country’s foreign exchange reserves ease to $20.679 billion

    KARACHI: The liquid foreign exchange reserves of the country have declined by $157 million to $20.679 billion by week ended April 02, 2021, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $20.836 billion by week ended March 26, 2021.

    The official reserves of the SBP fell by $146 million to $13.527 million by week ended April 02, 2021 as compared with $13.673 billion a week ago. The SBP attributed the decline to external debt repayments.

    The foreign exchange held by commercial banks also eased by $11 million to $7.152 billion by week ended April 02, 2021 as compared with $7.163 billion a week ago.

  • SBP proposes changes in procedure for repatriation of profit by foreign firms

    SBP proposes changes in procedure for repatriation of profit by foreign firms

    KARACHI: The State Bank of Pakistan (SBP) on Monday issued a draft of Foreign Exchange Manual and proposes changes in procedure for repatriation of profit by foreign firms operating in Pakistan.

    The SBP invited comments on the draft amendments in Foreign Exchange Manual from stakeholders to finalize the changes.

    According to the SBP branches of foreign firms and companies, other than banking companies, operating in Pakistan shall submit application through a bank, intended to be designated for the purpose of remittance of profit/head office expenses to Foreign Exchange Operations Department (FEOD), SBP-Banking Services Corporation for Acknowledgment. Such application shall be accompanied by documentary evidences to the effect that the firm was in existence and conducting business operations in Pakistan prior to 3rd October, 1963 or permission letter from the Board of Investment for conducting business operations in Pakistan if the branches of foreign firms and companies were established in Pakistan on or after 3rd October, 1963.

    After acknowledgement of FEOD, SBP-BSC, the designated Authorized Dealer may remit the profit/head office expenses/winding up proceeds of branch/liaison office after reviewing the information/documents mentioned in succeeding paragraphs.

    (a) Remittance of Profit/Head Office Expenses:

    Applications for remittance of net remittable profits/ head office expenses by the branches of foreign companies other than banks, operating in Pakistan to their Head Offices abroad should be submitted on Form ‘M’ to the designated Authorized Dealer duly supported by the following information/documents:

    a) Audited Financial Statements of the branch(es) in Pakistan with complete notes thereon for the period in question and latest year.

    b) Audited Consolidated Balance Sheet and Profit & Loss Account of the Head Office..

    c) Reconciliation of the Head Office Accounts certified by external auditor.

    d) Tax provision made during the year for (i) the current year and (ii) prior years along with its computation.

    e) A certificate from the auditors in Pakistan that tax provision in the accounts is sufficient to meet all tax liabilities in Pakistan including any tax contingencies, which may arise in future.

    f) Assessment orders for the previous years, if not submitted earlier.

    g) Certificate from the auditors showing the liability for staff gratuity as at the close of accounts and provision there against. If no provision has been made, reasons thereof.

    h) Details of other/miscellaneous income and Head Office expenses if not provided separately in Financial Statements.

    i) Amount charged/claimed on account of Head Office expenses for the current year (if not separately shown in the accounts) and the basis of its calculation alongwith Head Office expenses claimed/allowed by the Income Tax Authorities for the preceding 3 years.

    j) Full particulars of additions, if any, made to fixed assets in Pakistan, during the period and the source of funds utilized for financing such additions.

    k) Confirmation to the effect that sufficient cash flows are available and no credit financing/ loan will be required to fund the remittance of profits/head office expenses.

    l) Certificate from external auditor that amount charged under HO expenses does not contain any interest on actual cost of goods /services provided to branch. Besides, for Head Office expenses, the basis of allocation of expenses and certification from the external auditor of the Group/Head Office is also required certifying the fact that the transfer pricing complies with the OECD guidelines. Further, the local external auditor of applicant would also certify about the services/deliverable received along with compliance of all FBR rules/ regulations (including transfer pricing).

    m) In case branch (es) intend to make remittance of profit in installments, complete schedule thereof will provided.

    n) Certificate from external auditor showing calculation of Head Office expenses in terms of section 105(2) of Income Tax Ordinance 2001 as amended from time to time.

    o) Certificate from external auditor to the effect that tax & legal related contingencies

    (b) Remittance of Winding up proceeds of Branch/Liaison Office:

    Application for remittance of winding up proceeds of Branch/Liaison Office shall be submitted to designated Authorized Dealer upon complete closure/winding up as the case may be along with the following documents in addition to applicable for profit / Head office expenses mentioned above:

    a) External Auditor’s certificate on the following areas with supporting documents wherever applicable:

    (i) Indicating the manner in which the remittable amount has been arrived at duly supported by a statement of assets and liabilities of the applicant indicating therein the manner of disposal of assets;

    (ii) Confirming that all liabilities in Pakistan including arrears of gratuity, tax and other benefits to employees, etc. of the office have been either fully met or adequately provided for.

    (iii) Confirming that all income accruing from the resources of Pakistan (including proceeds of exports) have been repatriated or realized in Pakistan.

    (iv) Confirmation from the applicant/parent company that no legal proceedings in any court/tribunal of Pakistan are pending against the Branch/Liaison Office and there is no legal impediment to the remittance.

    (v) Confirmation to the effect that compliance of applicable regulations of Securities Exchange Commission of Pakistan and Board of Investment regarding closure/winding up of Branch/Liaison office has been observed. An Undertaking from the Principal/Head Office that any liability if identified to be payable as per Laws of Pakistan, the same will be settled by them on first legitimate demand without any delay.

  • Banks may accept container detention, demurrage charges

    Banks may accept container detention, demurrage charges

    KARACHI: The State Bank of Pakistan (SBP) has issued draft amendment to Foreign Exchange Manual under which banks may be allowed to accept container detention charges and demurrage charges in order to facilitate trade in payments.

    The SBP issued the draft amendments and invite stakeholders’ comments before finalizing the foreign exchange manual.

    According to the draft amendments made to 14 chapter:

    4A –Remittances of Container Detention Charges by Foreign Shipping Companies

    i. Authorized Dealers may accept container detention charges (CDC) directly from the customers of shipping companies/ agents (having valid shipping/agency license as stated under Para 1 (iv) ibid and valid agency agreement) in a separate PKR account opened for this purpose only. No other deposits whatsoever shall be made in such accounts by ADs.

    ii. Authorized Dealers may allow monthly remittance of CDC (net of disbursements, refunds, and income tax paid/payable) of up to USD 50,000/- on Form-M to foreign principals of those foreign shipping companies/agents which are collected in the above mentioned accounts on submission of application along with the following documents: –

    a. Applicable Tariff Rate Sheet;

    b. Summary of Detention Charges along with copy of invoices

    c. F.P Shipment & Breakdown of Disbursement

    d. Copiesy of Tax payment Rreceipt, agency agreement, valid customs shipping agent license.

    e. Auditors’ certificate from QCR rated audit firm confirming payment of income tax, genuineness of transactions and no duplication of payments (only for remittance beyond foreign exchange equivalent to PKR 1 Million or equivalent/-)

    f. Any CDC invoice involving detention charges above 100 days will require valid justification along with documentary evidence.

    g. An undertaking to repatriate back to Pakistan, the amount found by the State Bank, on post-facto checking, to have been remitted in excess of the entitlement.

    h. In case of Transit Trade, PRC evidencing receipt of equivalent PKR from the final destination country.

    Applications for monthly remittances beyond USD 50,000/- shall be forwarded to FEOD as per prescribed format along with relevant documents for approval.

    4B – Remittances of Demurrage Charges

    Authorized Dealers may allow monthly remittance of demurrage charges (net of allowed lay time and other deductions-if any, and income tax paid/payable) upto USD 50,0000 on Form-M to the Owner/Operator/Commercial Operator of vessels/ships/tankers on submission of application along with the following documents: –

    a. Valid charter party agreement (if applicable),

    b. Copy of the Invoice/ debit note

    c. Lay time calculation time sheet verified from third party

    d. Port statement of fact

    e. Copy of B/L, GD, Bill of Entry.

    f. Proceeds Realization Certificate (PRC) for port disbursement charges

    g. F.P Shipment & Breakdown of Disbursement

    h. An undertaking to repatriate back to Pakistan, the amount found by the State Bank, on post-facto checking, to have been remitted in excess of the entitlement.

    Applications for remittances beyond USD 50,000/- shall be forwarded to FEOD as per prescribed format along with relevant documents for approval.

    4C – Remittances of Surplus Port Disbursement Funds by Foreign Shipping Companies

    Authorized Dealer may allow remittance of surplus amount of port disbursement funds held by local offices of shipping companies/ agents back to their principals on Form-M, subject to valid Agency agreement/authorization letter and shipping license, after the payment of port dues/charges and duly reported on the F.P. Statement upon submission of application along with the following documents: –

    a. Customs & Port Charges Clearance with invoices

    b. Proceed Realization Certificate in Original

    c. Copy of Swift Message

    d. Copy of Schedule J/O-3

    e. F.P Shipment & Breakdown of Disbursement

    4D – Disbursement of Cash to Master of Ship arriving at Pakistani Ports

    Authorized Dealer may disburse cash to master of ship arriving in Pakistan out of remittance received by them from owner of the ship/ shipping lined abroad on submission of application along with the following documents: –

    a. Copy of Passport of the Master of the Vessel

    b. Copy of Crew List containing their names, passport numbers, country etc.

    c. Proceed Realization Certificate in Original

    d. Copy of Swift Message for amount realized

    Authorized Dealers will retain all the documents mentioned in Para 4 and its subparagraphs along with Form ‘M’ submitted by foreign shipping companies/ agents. The original Form ‘M’ shall be submitted as usual through schedule E-4 while reporting the transaction in the monthly Foreign Exchange Returns

    Any irregularity detected and advised by the State Bank shall be rectified by the concerned shipping company/agent within ninety days or the amount under objection will be repatriated or adjusted from subsequent remittance, as applicable.

    Authorized Dealers shall also ensure proper due diligence of the above mentioned remittances from AML/CFT and foreign exchange risk perspective through Compliance or Risk Management Department including but not limited to particulars of remitter/ beneficiary and shall determine the ultimate beneficial ownership/ relationship between entities.

  • SBP issues five-year strategic plan for growth of Islamic banking

    SBP issues five-year strategic plan for growth of Islamic banking

    KARACHI: State Bank of Pakistan (SBP) on Monday issued third five-year Strategic Plan for the Islamic Banking Industry.

    The strategic plan has set headline targets for Islamic banking industry to be achieved by 2025. These include: (i) 30 percent share in both assets and deposits of overall banking industry, (ii) 35 percent share in branch network of overall banking industry, and (iii) 10 percent and 8 percent share of SMEs and Agriculture financing respectively, in private sector financing of Islamic banking industry.

    In order to steer the growth of Islamic banking on sound footings, SBP has been providing proactive guidance through issuance of Strategic Plans for the Islamic banking industry; so far, two five-year Strategic Plans have been issued.

    This third Strategic Plan for Islamic banking industry (2021-25) aims to set a strategic direction for the industry to strengthen the existing progressive momentum and lead the industry to the next level of growth. The plan has been developed in close coordination and consultation with all key relevant stakeholders.

    The strategic plan envisages achieving the aforementioned specified targets by focusing on six strategic pillars namely: (i) strengthening legal landscape, (ii) enhancing conduciveness of regulatory framework, (iii) reinforcing comprehensive Shariah governance framework, (iv) improving liquidity management framework, (v) expanding outreach & market development, and (vi) bolstering human capital & raising awareness.

    The Islamic banking industry has widened its footprint in banking system of the country. Currently, 22 Islamic banking institutions (5 full-fledged Islamic banks and 17 conventional banks having standalone Islamic banking branches) are offering Shariah compliant products and services through a network of 3,456 branches and 1,638 Islamic banking windows (dedicated counters at conventional branches) spread across 124 districts of the country. In terms of share, the Islamic banking industry has acquired a market share of 17 percent and 18.3 percent in assets and deposits of overall banking industry, respectively by end December 2020.

    State Bank aims at making Islamic banking one third of the overall banking industry by 2025. Keeping in view the potential towards ensuring broad based economic growth and development, Islamic banking has remained a top priority area for the SBP. The plan provides a consensus based agenda and strategy to make Islamic banking an efficient and practical solution for consumers. It also contains an extensive focus on improving the public perception of Islamic banking as a distinct and viable system capable of catering to the varied financial services needs of various segments of the society that would significantly contribute to increasing overall financial inclusion in Pakistan.

    The plan also emphasizes that Islamic banking institutions must develop  innovative products based on distinctive Shariah characteristics to cater to underserved sectors particularly SMEs and Agriculture, which are critical for growth of the country’s economy.

    The Islamic banking industry is expected to fully capitalize on the potential of Islamic finance to attain the shared vision of a vibrant and sustainable Islamic banking sector in Pakistan.

  • SBP revises instructions for financing wheat procurement

    SBP revises instructions for financing wheat procurement

    KARACHI: The State Bank of Pakistan (SBP) has issued notification to revise instructions regarding bank financing for wheat procurement by the private sector.

    The SBP issued circular No. 02 of 2021 for amending the instructions issued on March 19, 2021 for financing wheat procurement by the private sector.

    Following amendments have been notified by the SBP:

    I. For private sector participation in the wheat procurement season 2021, banks are required to strictly fulfill the following minimum conditions for extending financing to eligible borrowers (licensed and functional flour mills duly evidenced by some documentation or licensed wheat traders registered with concerned authority/department);

    a. Fresh financing for procurement of wheat shall start from commencement of wheat procurement season 2021 in respective provinces. Banks will provide financing to eligible borrowers for the procurement of indigenous wheat for the harvest season of 2021 (April 01-June 30, 2021). The financing facility would be extended to the eligible borrowers for procurement of indigenous and imported wheat from July 01, 2021 subject to other conditions mentioned in this circular.

    b. Banks may provide financing facility to functional flour mills for purchase of indigenous wheat from their authorized representative and respective Food Department against supply of wheat by them. Quantum of such loan shall not be more than the value of wheat to be supplied by the respective Food Department or actual purchase from wheat traders, commensurate to the milling capacity of each mill. Banks will also monitor that existing stock of wheat purchased by the concerned functional flour mill, has been grinded and that the by-products of wheat (financed against bank loan) have also been released to the market gradually to repay the loans so obtained.

    c. Banks will ensure that the subject financing will be used only for intended purposes. However, there is no restriction on banks for extending financing to flour mills for purpose other than procurement of wheat. Banks may provide financing to flour mills for general requirements like overhead expenses, however, banks will ensure that such financing is not used for procurement of wheat or to acquire wheat stocks/by-products of wheat.

    d. Financing to private sector for procurement of wheat shall be provided against pledge of fresh wheat stock only and hypothecation / charge of moveable or immovable property would not be acceptable as collateral for such financing. Moreover, banks will ensure that no revaluation of the pledged stock is considered for release of any differential financing amount to the borrowers against stock of wheat already pledged with the banks.

    e. Banks are also allowed to provide financing facilities for wheat procurement by the seed processing plants duly evidenced by the testing certificates issued by the Federal Seed Certification and Registration Department, in line with their lending policies and the capacity/production plans of the seed processing plants ensuring that such stock of wheat will be used for processing purposes.

    f. These loans will be fully settled on or before 31st March 2022, positively.

    g. In order to curb the possibility of hoarding, banks shall:

    i. require client(s) to disclose their storage location and verify the same.

    ii. strictly monitor the wheat stock held by the client vide periodical and random inspections of wheat pledged with the bank as well as the gradual release of wheat stock to generate cash for the purpose of repayment of bank loan. SBP may acquire stock reports from banks to verify their authenticity/genuineness as and when desired.

    iii. be under obligation to immediately recall the advances allowed to the private sector in case of hoarding of wheat.

    iv. ensure that no financing is allowed to client for retirement of loans availed from other banks.

    v. ensure that their clients are in strict compliance with the guidelines of respective government (Federal/Provincial) for release of wheat stock and are not involved in any other activity which may cause speculation of wheat/flour price in market.

    h. The lending shall be in compliance with applicable laws, Prudential Regulations and other instructions of SBP issued from time to time.

    II. Banks will submit a monthly statement in respect of financing to private sector for wheat procurement to this department as per attached format (Annexure-A) within ten working days from the close of the relevant month.

    III. Any violation of the above instructions will attract administrative and/or penal action under the provisions of BCO, 1962 and other relevant laws.

  • Pakistan’s foreign exchange reserves increase by $401 million to $20.836 billion

    Pakistan’s foreign exchange reserves increase by $401 million to $20.836 billion

    KARACHI – In a significant development, Pakistan’s liquid foreign exchange reserves witnessed a robust increase of $401 million, reaching $20.836 billion by the week ending March 26, 2021, according to the State Bank of Pakistan (SBP).

    (more…)
  • Call centers: SBP issues instructions to banks for customers’ protection

    Call centers: SBP issues instructions to banks for customers’ protection

    KARACHI: The State Bank of Pakistan (SBP) on Thursday issued instruction to banks for protection of customers’ identity while making communication through call centers.

    The SBP said that to ensure confidentiality of consumers’ data, banks will put in place adequate controls at their call centers including continuous CCTV vigilance, physical entry and exit checks, restriction on portable devices like cell phones, controlled accessibility to printers and emails.

    Banks will allow their call center staff access to customers’ data on a ‘Need-to-Know’ basis only i.e. restricted only to the customers contacting the call center.

    Proper logs of access to customer’s information will be maintained and monitored to detect unauthorized access.  Moreover, banks will ensure masking of the Credit or Debit card numbers so that the call agents could only view the last four digits of the cards.

    SBP has also instructed banks to deploy sufficient call center resources to ensure a satisfactory customer experience. For this, the banks will have adequate IT controls and contingency and disaster recovery set-ups for their call centers.

    All inbound and outbound calls at the call centers will be recorded and the record will be retained at least for one year.  Banks will also ensure that their call centers are adequately staffed with proper trainings, particularly on digital fraud management, relevant policies and initiatives of banks and query and complaint handling.

    To improve call center management, banks will have proper policy and oversight mechanisms in place and performance will be regularly monitored. The banks will put in place key performance indicators for reviewing performance of call centers with appropriate benchmarks as per international best practices. Banks will also have a comprehensive policy and Standard Operating Procedures (SOPs) on call center management duly approved by their Board of Directors and CEO.

    The SBP said that call centers are rapidly becoming customers’ top choice to communicate with their Banks. Over time, the use of call centers by customers to seek information, guidance and redressal of complaints from their banks has increased significantly.

    On the other hand, the technological advancements are helping the banks to provide self-banking solutions through call centers. The growing importance of call centers in bank-customer relationship makes it imperative for the banks to efficiently manage their call centers for enhanced customer experience. Recently, SBP conducted a thematic review of the call center management at banks.  In the light of findings of the review, it has issued today regulatory instructions to banks on call center management.

    To bring ease in lodging complaints, all the banks are encouraged to deploy toll-free numbers for their call centers besides making sure that call center numbers are displayed prominently on banks’ premises and websites.

    Banks are also required to take measures to reduce the call wait time i.e. the time before connecting to an agent, as much as possible to avoid inconvenience to the customers.

    Further, banks will also ensure that call agents do not refuse to lodge complaint and a proper complaint number is provided to all the complainants.