KARACHI: The State Bank of Pakistan (SBP) Tuesday suspended, with immediate effect, the authorisation of three more exchange companies till further orders on account of serious violation of the central bank’s regulations and instructions.
Owing to the violation of applicable laws and regulations, the central bank had on Monday canceled the license of PBS Exchange Company (Pvt.) Limited.
The new firms facing suspension include AA Exchange Company (Pvt.) Limited, Galaxy Exchange Company (Pvt.) Limited and Al-Hameed International Money Exchange (Pvt.) Limited.
“All the aforementioned exchange companies, their head offices, and all outlets have been debarred from undertaking any kind of business activity during the suspension period,” a central bank statement said.
The SBP’s decision to suspend the licenses of four exchange firms in a span of two days indicates that these companies are involved in illicit forex trading.
A manageable current account deficit brought on by lower imports and foreign currency inflows from multilateral lenders has kept the rupee steady over the past three months.
The Pakistani rupee hit a record low of 307 against the dollar on September 7 in the interbank market. However, the currency stabilised in October as a result of the government tightening its crackdown on illegal dollar trade and hoarding and black marketing of foreign currency. After those engaging in hawala/hundi and illegal forex trading were detained by law authorities, the grey market’s activity slowed down. Currently, the rupee is hovering at 279 per dollar.
In September, the SBP introduced structural reforms in the exchange companies’ sector. A component of the reforms involved the SBP pushing top banks to set up fully owned exchange companies to serve the public’s legitimate need for foreign currency.
Experts expressed concern over the shoddy operational structure and low levels of compliance found in category “B” exchange companies.
The SBP advised both category ‘B’ firms and franchisees to either merge with established full-fledged entities or sell their businesses to the stronger counterparts.
Failing to comply with this directive within the stipulated three-month window will result in the automatic cancellation of licenses for standalone category ‘B’ firm.
The SBP also asked the exchange companies to increase their paid-up capital to a minimum of Rs500 million (excluding losses) by December 31, 2023, up from the current minimum requirement of Rs200 million.
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