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Pakistan eases statutory liquidity reserve requirement for exchange companies

It will help them address cash flow issues

SAMAA | - Posted: May 20, 2021 | Last Updated: 8 months ago
SAMAA |
Posted: May 20, 2021 | Last Updated: 8 months ago

A currency trader counts Pakistani Rupee notes as he prepares an exchange of U.S dollars in Islamabad, Pakistan December 11, 2017. REUTERS/Caren Firouz

The State Bank of Pakistan has revised the Statutory Liquidity Reserve requirement for exchange companies, reducing it from 25% to 15% of their capital.

It was mandatory for exchange companies to put a quarter of the paid-up capital, the worth of their business, with the central bank to settle things smoothly in case they defaulted.

The requirement has been reduced. Exchange companies will now have increased cash with them.

“The remittance inflows (dollars that overseas Pakistanis send home) have increased significantly,” said Zafar Paracha, the secretary of the Exchange Companies Association of Pakistan. “We have been facing difficulty with our cash flows.”

The State Bank said that the enhanced liquidity (cash) with exchange companies will enable them to further channelize home remittances and foreign exchange. 

During the year ending June 2020, exchange companies channelized home remittances of $1.44 billion through their tie-up arrangements abroad, while this figure stands at $1.67 billion for ten months of the current year.

“This regulatory intervention of the State Bank would provide increased liquidity to Exchange Companies to enable them to play their role in increasing the remittances flow and the public will be further facilitated timely and conveniently receiving home remittances from more than 1,200 outlets of Exchange Companies across Pakistan,” the central bank said.

At present, 18 out of 27 A-category exchange companies are providing home remittance services.

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