Forex firms allowed forward sale transaction with banks

KARACHI: The State Bank of Pakistan (SBP) has allowed foreign exchange companies to enter into forward sale transaction with banks up to 5 working days against export proceeds in US dollars to help them manage rate risks.

“Authorised dealers may purchase forward the export proceeds in US dollars received from abroad against export of permissible foreign currencies by exchange companies, subject to adherence of following terms and conditions,” the SBP said in a statement.

“Forward purchase facility may be provided up to maximum five working days (including both transaction and settlement days).”

The SBP said authorised dealers may extend the maturity date provided that the total period of forward purchase, including the extended maturity period, does not exceed five working days (including both transaction and settlement days) in case they purchase forward the export proceeds in US dollars against exports of permissible foreign currencies for less than five working days. “However, such extensions will be made by closing out the original contract and booking of a fresh contract at the new rate.”

Forward purchase may be booked before or after the export shipment.

The State Bank said exchange companies are required to bring export proceeds within 5 working days from the date of shipment.

In case forward purchase is booked on or after the shipment date, maximum maturity date of forward purchase facility may be up to 5th working day of date of shipment.

Forward purchase may be booked for full or partial value of export proceeds against export shipment.

“Forward purchase will be booked based on specific export shipment. For this, authorized dealers shall obtain copy of export documents from Exchange Companies.

In case of advance booking, copy of confirmed deal ticket shall be obtained from Exchange Companies, while copy of other export documents shall be obtained subsequent to the shipment,” said the SBP.

“No substitution is allowed for settlement of export proceeds.”

Forward contracts, which are not taken up, may be closed out on the date of maturity at prevailing spot rate.

Exchange gain, if any, will not be passed on to the exchange company, rather the same will be deposited in favor of state Bank of Pakistan by authorized dealer. “In case of exchange loss, the same will be recoverable from Exchange Company by Authorized Dealer.

To this effect, the authorized

dealer should get consent/agreement signed by the concerned Exchange Company before entering into forward contract.

The exchange gain shall be deposited in favor of the State Bank. A consolidated statement regarding all such cases shall be submitted by head/principal office of authorised dealers to the Director, Off-Site Supervision and Enforcement Department on monthly basis.

In addition to above, Authorised dealers may continue to purchase foreign exchange in ready, tom and spot value dates, from exchange companies.”