In a bid to strengthen controls amid the massive fall in rupee’s value in the open market, the State Bank of Pakistan (SBP) on Wednesday decided to introduce structural reforms in the Exchange Companies’ (ECs) sector.
“As part of these reforms, leading banks actively engaged in foreign exchange business will establish wholly-owned Exchange Companies (EC) to cater to the legitimate foreign exchange needs of general public,” said the SBP in a statement.
“Furthermore, various types of existing Exchange Companies and their franchisees will be consolidated and transformed into a single category of Exchange Companies with a well-defined mandate.”
In addition, the SBP also raised the minimum capital requirement for EC from Rs200 million to Rs500 million, raising the barrier to entry for the private sector.
The ECs of category ‘B’ (ECs-B) and franchisees of Exchange Companies have been offered the following options to transform into mainstream Exchange Companies:
“For the above purpose, the ECs-B and Franchises of Exchange Companies will submit their conversion plan and seek NOC from SBP within one month,” the SBP added.
The SBP said the reforms have been introduced to provide better services to the general public and bring transparency and competitiveness in the Exchange Companies’ sector.
“This is expected to strengthen governance, internal controls, and compliance culture in the sector,” it added.
The development comes as the gap between the inter-bank and open-market rates widened to over 7% in recent weeks, well above the prescribed limit by the International Monetary Fund (IMF).
