SBP slashes SLR for Exchange companies to 15 per cent

KARACHI (APP): The State Bank of Pakistan, Thursday, decreased Statutory Liquidity Requirement (SLR) for Exchange Companies from 25% to 15 percent of paid-up capital.

The enhanced liquidity with exchange companies will enable them to further channelize home remittances and foreign exchange, said a press statement issued by SPB.

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 USD 1.67 billion for ten months of current year (FY 20-21).

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, it added.

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

The decision has been taken to facilitate Exchange Companies in managing their liquidity and enhance their business profitability, said a circular letter issued by the Exchange Policy Department of SBP. Instructions in Para (3), Chapter (3) of the Exchange Companies Manual has also been updated accordingly, it added.

The instructions contained in the relevant para, earlier, required exchange companies to maintain 25 percent of Paid-up Capital as Statutory Liquidity Reserve (SLR) with the State Bank of Pakistan (SBP).

The amount of SLR may be kept in current account maintained with SBP as well as invested in unencumbered approved government securities through SBP’s Subsidiary General Ledger Account facility.

The circular further informed that the requirement of SLR has been decreased from 25% to 15% of paid-up capital of Exchange Companies. Accordingly, the related instructions contained in the following paras of Exchange Companies Manual been replaced.

Para (3) of Chapter (3) now reads, “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.”

The text of Sub-para (ii)(f) of Para (2) of Chapter (4) was replaced as, “Franchise Deposit’ is treated as “Second Tier Capital” in the books of the Franchiser. For the purpose of calculation of 15% SLR requirement and 50% 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.”