After a presence of over 150 years in this region, Standard Chartered Bank has reportedly converted its capital from US dollar to Pak rupee since the bank feels that the radical improvement in the macroeconomic situation in Pakistan is of permanent nature.
According to informed sources Standard Chartered is the first foreign bank to take such a momentous decision. The bank had $72 million lying as capital with the State Bank of Pakistan on which it was getting no return.
Foreign banks normally like to hedge their capital against exchange losses in developing countries and therefore like to keep the capital in dollars with the central banks.
Business Recorder understands that this conversion took place at Rs 57.60 per dollar after a detailed study by the local management of the bank.
This study clearly established that the local currency takes a beating when macro-economic imbalances crop up. However, at the same time the interest rates in the country also go up; giving financial institutions the leverage to earn more.
"At the end of the day, there is no loss," said a source. Standard Chartered decision provides the bank the opportunity to increase per party lending limit. Taking a long term view, said the source, "it makes no sense to leave the capital in dollars when the country's forex reserves have risen from $400 million to $12.5 billion and hopefully will touch $20 billion in two to three years".
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