SLR requirement for exchange firms reduced

KARACHI: The State Bank of Pakistan (SBP) has revised the Statutory Liquidity Reserve (SLR) requirement of exchange companies from 25 percent to 15 percent of their capital, a statement said on Thursday.

The enhanced liquidity with exchange companies would enable them to further channelise home remittances and foreign exchange.

During the year ended June 2020, the exchange firms, through their tie up arrangements abroad, have channelised home remittances of $1.44 billion, while this figure stands at $1.67 billion for July-April of the current fiscal year.

The related instructions contained in the Exchange Companies Manual stand replaced, as under:

“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.”

“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 percent of the sum of paid up capital and second tier capital (franchise deposit) of the exchange company."

This regulatory intervention of SBP would provide increased liquidity to exchange companies to enable them to play their role in increasing the remittances flow and the public would be further facilitated in timely and conveniently receiving home remittances from more than 1,200 outlets of such companies across Pakistan, the SBP said.

At present, out of 27 exchange companies of ‘A’ category, 18 exchange companies were providing home remittances services, it added.