KARACHI: In order to facilitate Exchange Companies in managing their liquidity and enhance business profitability, the State Bank of Pakistan (SBP) has revised Statutory Liquidity Reserve (SLR) requirement of Exchange Companies downward.

As per Para (3), Chapter (3) of the Exchange Companies Manual, Exchange Companies were required to maintain 25 percent of paid-up capital as Statutory Liquidity Reserve (SLR) with the SBP. The Exchange Companies were allowed to keep amount of SLR in current account maintained with the SBP as well as invested in unencumbered approved government securities through the SBP’s Subsidiary General Ledger Account (SGLA) facility.

Now, the State Bank has decided to reduce SLR requirement of Exchange Companies by 10 percent, ie, from 25 percent to 15 percent of their capital to enable them to channelise increased volume of home remittances. The SBP believes that the enhanced liquidity with exchange companies will enable them to further channelise home remittances and foreign exchange.

During the year ended June 2020 Exchange Companies, through their tie up arrangements abroad, have channelized home remittances of $ 1.44 billion, while this figure stands at $ 1.67 billion for ten months of current year (FY21).

This regulatory intervention of 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 in timely and conveniently receiving home remittances from more than 1,200 outlets of Exchange Companies across Pakistan.

According to a circular issued on Thursday, as per SBP directives, Para (3), Chapter (3) of the Exchange Companies Manual stand replaced.

Now, under Para (3) of Chapter (3), Fifteen (15) percent of the paid-up Capital shall be maintained as Statutory Liquidity Reserve (SLR) with the State Bank in the form of cash and/or unencumbered approved government securities. State Bank would extend current account and SGLA facilities to Exchange Companies.”

Under Sub-para (ii)(f) of Para (2) of Chapter (4), “Franchise Deposit’ is treated as “Second Tier Capital” in the books of the Franchiser. For the purpose of calculation of 15 percent SLR requirement and 50 percent of the Exposure Limit, this “Second Tier Capital” is added to the paid-up capital of the Franchiser. At any point of time, combined exposure of Franchiser and Franchisee should not exceed 50% of the sum of paid-up capital and Second Tier Capital (Franchise Deposit) of the Exchange Company.”

At present, out of twenty-seven exchange companies of ‘A’ category, 18 Exchange Companies are providing home remittances services.