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  • SBP directs banks to ensure facilitation in donations for Dam Fund

    SBP directs banks to ensure facilitation in donations for Dam Fund

    KARACHI: State Bank of Pakistan (SBP) on Wednesday directed banks to facilitate people in depositing their donations for Diamer-Bhasha and Mohmand Dam Fund.

    The SBP said that in compliance with the directives of the Supreme Court of Pakistan in the Constitution Petition No.57/2016, the State Bank of Pakistan (SBP) vide Circular No. 04 dated July 10, 2018 and Circular No. 07 dated September 7, 2018 prescribed the mode, manner and channels for collection and deposit of donations to the subject Fund.

    Specifically, following channels were made available to the domestic donors:-

    a) Counters of the banks: Donors may deposit their donations and contributions at the counters of any branch of any bank in Pakistan, including microfinance banks, and remittance of donation so deposited to the principal account of the Fund at SBP within 30 minutes through Pakistan Real- time Interbank Settlement Mechanism;

    b) Alternate Delivery Channels (ADCs): In order to facilitate donors and to obviate the need to visit the branches; Internet Banking, Automatic Teller Machines (ATM) and other ADCs were also activated for collection and subsequent remittance thereof to the Fund Account at SBP; and

    c) Branchless Banking: The commercial and microfinance banks offering Branchless Banking (BB) were directed to facilitate the donors in depositing donations through their BB agents.

    Similarly, Overseas donors were facilitated to deposit their donations by using any of the following channels:-

    a) Wire transfer to SBP Nostro account with NBP, New York;

    b) Transfer through Money Service Bureaus, Money Transfer Operators and Exchange Houses;

    c) Deposit of donations at Pakistan Missions and Embassies abroad;

    d) Deposit of donations at branches of domestic banks abroad; and

    e) Transfer through Debit/Credit Cards

    The apex court in its recent hearing observed that donors still encounter difficulties in depositing their donations, both locally and overseas.

    The banks are directed that instructions, so far issued on the subject, vide circulars referred above must be meticulously complied with especially with regards to display of banners and panaflex advertising “DONATIONS TO THE SUPREME COURT OF PAKISTAN AND PRIME MINISTER OF PAKISTAN’S DIAMER BHASHA AND MOHMAND DAMS FUND ARE ACCEPTED HERE”.

  • Bank deposits by wholesale trade sharply increase by 240%

    Bank deposits by wholesale trade sharply increase by 240%

    KARACHI: The bank deposits by wholesale trade sharply increased by 240 percent in November 2019 owing to higher interest rate and abolishing withholding tax rate on cash withdrawal, market sources said on Wednesday.

    According to data released by State Bank of Pakistan (SBP) on December 17, 2019, the bank deposits by wholesale trade increased to Rs511.45 billion by end of November 2019 as compared with Rs150.24 billion a month ago.

    The market sources said that the sharp increase in deposits by wholesale trade was mainly due to prevailing higher interest rate.

    The SBP in its monetary policy announcement on November 22, 2019 kept the policy rate unchanged at 13.25 percent.

    The sources said that the improvement in economic indicators also helped the confidence building of investors.

    This is also evident in the collection of withholding tax by Federal Board of Revenue (FBR) on profit on debt. The collection of tax from bank deposits registered increase by 204 percent to Rs21.6 billion during July – November 2019/2020 as compared with Rs7.1 billion in the corresponding period of the last fiscal year.

    The market sources also attributed to rise in bank deposits by wholesale trade to abolishing withholding tax on cash withdrawal by the government.

    The withholding tax at 0.3 percent which was applicable on the income tax return filers on withdrawal of cash above Rs50,000 in a day was abolished through Finance Supplementary (Second Amendment) Act, 2019.

    The sources said that majority of people making financial transactions had filed their annual returns to avoid paying withholding taxes or avail reduced rate of withholding tax.

    The filing of income tax returns has increased to record level of 2.71 million for tax year 2018.

    According to the SBP data the bank deposits of retail trade however slightly fell to Rs234.6 billion by end of November 2019 as compared with Rs241.25 billion in October 2019.

    The overall deposits under the head of wholesale and retail trade, repair of motor vehicles and motorcycles increased to Rs775.6 billion in November 2019 as compared with Rs419.6 billion in October 2019.

  • SBP issues instructions on foreign currency loan by private sector

    SBP issues instructions on foreign currency loan by private sector

    KARACHI: The State Bank of Pakistan (SBP) on Tuesday issued instruction to banks and exchange companies related to foreign currency loan by private sector.

    A circular issued by the central bank said that the chapter 19 of Foreign Exchange Manual 2019 contained that it is required to register all foreign currency (FCY) loans, above USD one (1) million, with Exchange Policy Department, State Bank of Pakistan.

    In this regard, the SBP decided that all FCY loans will be registered by the banks and exchange companies irrespective of the amount. ADs will be responsible to ensure that FCY loans registered by them, are in compliance with all the parameters given against each type of FCY loan, in Chapter 19 of FEM 2019. However, prior permission of SBP will continue to be required for raising following FCY Loans:

    Private sector FCY loans mobilized through securitized instruments, issuance of bonds and financing under Islamic arrangements.

    Long term FCY borrowing by ADs.

    FCY borrowing by other Financial Institutions i.e. NBFIs, DFIs, PSOs, PSPs, Leasing Companies, House Building Finance Companies & Insurance Companies.

    The SBP said that authorized dealers shall also ensure to have independent assessment of each FCY loan proposal/ transaction from money laundering/ terrorism financing risk and foreign exchange risk perspective, by their Compliance or Risk Management Department, prior to its registration. For this purpose, ADs shall conduct appropriate due diligence of the proposal including particulars of lender and shall determine the ultimate beneficial ownership, if it is not a Financial Institution.

    In case, the lending entity is controlled by residents, ADs shall ensure that their investment abroad is in compliance with foreign exchange regulations. Further, ADs shall conduct annual focused Internal Audit of FCY Loan Registration function.

    Further, the minimum tenor of loans raised as PSBA for working capital under Para 7(iii) and FSBA for liquidity management purposes under Para 9(iii) of Chapter 19 of FEM 2019 has been reduced to one month.

    For reporting these foreign private loans (FPL) data on Data Acquisition Portal (DAP), all ADs are required to get Loan Registration Number (LRN) of each loan from Statistics and Data Warehouse Department by 5th of the following month by providing information along with repayment schedule.

    All other terms, conditions and instructions in the matter shall remain unchanged. Accordingly, Chapter 19 of the FEM 2019 has been revised and is attached herewith. ADs are advised to bring the above contents to the notice of all their constituents and ensure meticulous compliance.

  • Foreign investment witnesses massive growth to $2bn in five months

    Foreign investment witnesses massive growth to $2bn in five months

    KARACHI: The inflows of foreign investment registered unprecedented growth to $2 billion during first five months (July – November) of 2019/2020 owing to significant investment in debt securities.

    According to data of foreign investment in Pakistan by State Bank of Pakistan (SBP) on Tuesday, the total investment increased to $2 billion during first five months of current fiscal year as compared with $146.7 million in the same period of the last fiscal year.

    The total foreign private investment registered 493 percent growth to $869.7 million during the period under review as compared with $146.7 million in the same period of the last fiscal year.

    The major component under this head i.e. foreign direct investment grew by 78.1 percent to $850 million during July – November 2019/2020 as compared with $477.3 million in the same period of the last fiscal year.

    The portfolio investment in the equity market registered 106 percent growth to $19.5 million during first five months of current fiscal year as compared with outflow of $330.6 million in the corresponding months of the last fiscal year.

    The debt securities witnessed substantial investment of $1.136 billion during first five months of current fiscal year as compared with nominal amount in the corresponding period of the last fiscal year.

  • SBP clarifies misconceptions on foreign investment in debt securities

    SBP clarifies misconceptions on foreign investment in debt securities

    KARACHI: State Bank of Pakistan (SBP) on Monday said that the risks posed by foreign investment in debt securities at current levels are limited due to various reasons.

    The SBP said that risks posed by such investments are limited at current levels on account of the following reasons.

    “First, the current level of such investments at $1.2 billion accounts for less than 2 percent of the total outstanding marketable government securities and less than 0.5 percent of GDP.

    “Second, this investment accounts for less than one-fifth of the increase in SBP’s net reserve buffers at current levels; the bulk of the increase in the net reserve buffers is accounted for by the continued current account improvement.

    “Third, the tenor of such investments has been increasing with more investments in longer dated instruments as investors’ confidence grows. Finally, the simplification of taxation for investment in government securities that was recently approved by the ECC, will promote greater interest in investments in longer dated maturities.”

    The SBP issued a statement pointing out several misconceptions about the implications of international investors’ investments in the debt markets of Pakistan.

    State Bank of Pakistan would like to clarify as under:

    International investors have been investing in Pakistan’s equity markets for a long time. Such investments are considered portfolio investments, just like investments in debt instruments, and use the same framework of Special Convertible Rupee Account (SCRA). Such investors have been able to move capital in and out of our financial markets without problems for the Pakistan economy.

    Recently, international investors have started investing in debt instruments issued by the government of Pakistan. This is largely a manifestation of their growing confidence in the positive outlook for the economy. As endorsed by international financial institutions, including the IMF, the ADB and the World Bank, and rating agencies, our reform program is beginning to show results.

    One key aspect of this reform program has been the shift to a market based exchange rate system since May 2019 which has addressed previous concerns regarding the sustainability of the exchange rate regime.

    Together with the continued improvement in our balance of payments and reserve buffers, this has raised the comfort level of international investors to invest in local currency denominated financial assets. It should be noted that interest rates have been higher in the past—for example interest rates were around 13.75 percent on average in FY11—but our debt markets did not attract interest from international investors.

    Investment in government securities by international investors provides several benefits to the economy. First, such investment helps to deepen capital markets by increasing the pool of funds available in the local market and diversifies the investor-base.

    Second, such investment helps to allow banks to deploy available funds for lending to the private sector since there is growing competition from international investors for placements in government securities.

    Third, such interest by international investors raises the demand for government securities and accordingly lowers yields and reduces the cost of borrowing for the government. Fourth, the growing role of international investors in the local debt market may serve as a positive feedback mechanism for further improving domestic practices, policies, systems and institutions in line with international best practices.

    There are several emerging market economies that have attracted investments from international investors in much greater amounts on a sustainable basis in their local currency debt markets and have used them as a major stimulus in their macroeconomic development. The SBP continues to monitor developments in the financial sector carefully and stands ready to take action against any risks.

  • SBP directs banks to ensure liquidity for rupee

    SBP directs banks to ensure liquidity for rupee

    KARACHI: The State Bank of Pakistan (SBP) has directed to ensure sufficient liquidity for settlement of rupee forward maturities.

    In a circular issued to all president and chief executives of the banks, the central bank issued instructions related to settlement of Pak Rupee forward maturities.

    The SBP said that as per existing practice, the Pak Rupee maturities in respect of forward leg of foreign exchange interbank contracts (PKR forward maturities) are settled on End-of-Day (EOD) basis.

    Apart from not being in line with international best practice, the EOD basis also carries associated risk of unjustified intraday float.

    “In view of above, it has been decided that PKR forward maturities would be settled on Start-of-Day (SOD) basis effective December 23, 2019 and onwards.”

    The banks shall ensure sufficient liquidity in their respective Pak Rupee accounts maintained with SBPBSC-Karachi Office on the settlement date of PKR forward maturities in order to avoid intraday liquidity shortages.

  • Pakistan’s foreign exchange reserves increase despite $1bn Sukuk repayment

    Pakistan’s foreign exchange reserves increase despite $1bn Sukuk repayment

    KARACHI: The foreign exchange reserves of the country have increased by $55 million by the week ended December 06, 2019 despite repayment of $1 billion against International Sukuk.

    The foreign exchange reserves of the country increased by $55 million to $16.048 billion by week ended December 06, 2019 as compared with $15.993 billion a week ago, State Bank of Pakistan (SBP) said on Thursday.

    During the week ending December 06, 2019, SBP made a repayment of Pakistan International Sukuk of $1,000 million.

    After accounting for multilateral and other official inflows during the week, SBP reserves increased by US$121 million to US$9.233 billion. The SBP’s foreign exchange reserves were $9.113 billion a week ago.

    The SBP said that on 09-December-2019 it received US$1.3 billion from Asian Development Bank. These funds will be part of the SBP weekly reserves data as of 13-December-2019, to be released on 19-December-2019.

    The reserves held by commercial bank decline by $65.8 million to $6.814 billion by week ended December 06, 2019 as compared with $6.88 billion a week ago.

  • SBP relaxes condition on advance payment against imports

    SBP relaxes condition on advance payment against imports

    KARACHI: State Bank of Pakistan (SBP) on Thursday amended instructions regarding advance payment against imports in order to facilitate manufacturers.

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  • SBP imposes Rs1.35 billion as monetary penalty on commercial banks

    SBP imposes Rs1.35 billion as monetary penalty on commercial banks

    KARACHI: State Bank of Pakistan (SBP) has imposed monetary penalty to the tune of Rs1.35 billion on commercial banks in five months for violating regulatory environment.

    The central bank on Wednesday issued significant enforcement measures by imposing monetary penalty on banks for violating rules, regulations and other regulatory environment.

    The SBP imposed Rs192.66 million as penalty on four banks during the month of November 2019 for violating mainly regulations related to Customers Due Diligence (CDD) and Know Your Customer (KYC).

    The SBP from July 2019 started public disclosure of penal action against banks. “Enforcement actions are an integral part of regulatory regime which involves imposition of monetary penalties and other actions against institutions and individuals for violations of laws, rules, regulations, guidelines or directives issued by SBP from time to time,” according to a circular issued by the central bank.

    In order to bring more transparency and strengthen market discipline, SBP has decided to publicly disclose significant enforcement actions

    With the latest penal action the total amount of penalty during first five months (July – November) 2019 increased to Rs1,351.28 million.

    According to the highlights of significant enforcement actions by the SBP during November 2019, the central bank imposed Rs192 million as monetary penalties.

    The central bank on November 05, 2019 imposed penalty amount of Rs60.8 million on Allied Bank Limited for violating CDD/KYC.

    “In addition to penal action, the bank has been advised to conduct an internal inquiry on breaches of regulatory requirements and take a disciplinary action against the delinquent officials,” the SBP said.

    The central bank o n November 06, 2019 imposed an amount of Rs91.85 million on MCB Bank Limited for violating CDD/KYC.

    “In addition to penal action, the bank has been advised to conduct an internal inquiry on certain breaches/violation of regulatory requirements. Further, the bank has been advised to strengthen its process related to KYC/CDD, in order to avoid recurrence of such violations in future.”

    The SBP on November 06, 2019 imposed penalty of Rs14 million on the Bank of Punjab for violating CDD/KYC.

    “In addition to penal action, the bank has been advised to strengthen its process related to KYC/CDD, in order to avoid recurrence of such violations in future.”

    The SBP on November 07, 2019 imposed monetary penalty of Rs26 million on Habib Bank Limited for violating CDD/KYC.

    “In addition to penal action, the bank has been advised timelines to bring improvements in its systems/controls to avoid recurrence of such violations in future.”

  • Overseas Pakistanis send $9.298 billion in five months

    Overseas Pakistanis send $9.298 billion in five months

    The State Bank of Pakistan (SBP) reported on Tuesday that overseas Pakistani sent $9.298 billion during the first five months of the current fiscal year, spanning from July to November. This figure compares closely with the $9.282 billion received during the same period in the preceding year.

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