ZAHEER ABBASI

ISLAMABAD: The State Bank of Pakistan (SBP) does not restrict beneficiaries to sell their foreign currency account proceeds on their respective bank’s counter and they have the choice to sell the proceeds at any authorized dealer (bank) of their choice or in open market at favorable rate.

Sources said that this was submitted by the SBP to the Senate Standing Committee on Finance in reply to a complaint forwarded to it by the committee that a senator’s close relative incurred an exchange rate loss on October 1, 2019 for converting the US dollars received through Society for Worldwide Inter-bank Financial Telecommunication (Swift) Code at the beneficiary bank’s counter.

The senator maintained in his complaint that the private bank forced his brother either to exchange remittances at Rs 154 against one US dollar when the inter-bank exchange rate against each dollar was Rs 156.20 or return the funds to the originating bank in the USA.

The findings of an assessment carried out by the SBP said: (a) the bank had declared in its Schedule of Charges (SoCs) that in case of inward remittance transactions where customers are not involved for rate negotiation, a spread of 1.5% would be charged. Further, the bank informed that the spread was calculated on prevailing inter-bank foreign exchange rate; (b) As per the bank, it applied a spread of 1.47 percent on this transaction which was well within the spread declared by the bank in SoCs and the conversion rate was verbally agreed with the beneficiary at the time of transaction; (c) the beneficiary had the option to withdraw foreign currency from its foreign currency account and sell the same to any authorized dealer (bank) of his choice or in the open market at the rate favorable to him; (d) and beneficiaries are not restricted by the SBP to sell their foreign exchange accounts proceeds on their bank’s counter.

Additionally, the SBP’s inter-bank exchange rate is indicative in nature as it is the weighted average exchange rate paid by banks when they trade foreign currencies with other banks. This may not necessarily be the rate that a bank quotes to its individual customers.