Importers overcharged: SBP completes probe against banks, Senate panel told

ISLAMABAD: The Senate Standing Committee on Finance was informed that the State Bank of Pakistan (SBP) has completed the inspection against the banks involved in extra charging of dollar rates from the importers.

This was informed by the SBP deputy governor to the finance committee of the Senate meeting presided over by Saleem Mandviwalla, on Wednesday, while briefing on the SBP report on banks scam of extra US dollar rates being charged from the customers for the opening of LCs.

The SBP deputy governor said that an investigation has been completed and “no illegal activity has been observed”, however, the banks’ act was “irresponsible”.

He said that the banks’ role was irresponsible on rupee depreciation and profiteering, the SBP deputy governor said that the upcoming budget may tax the profits of banks making extra profits on the dollar or enforcement by the SBP as decided by the government.

The committee was further informed that the SBP has moved to market-based foreign exchange (FX) regime, in which, the spread charge on foreign exchange sale/purchase transaction is generally determined by the banks on the basis of market conditions like forex liquidity and short net open forex positions of the banks were the main reasons of charging higher spreads by the banks during May to August 2022.

The meeting was told that the SBP has conducted a limited scope inspection of the matter and furnished its report to the Finance Division. It was observed that the overall increase in foreign exchange income of the banks was mainly driven by higher spreads due to heightened volatility, however. In some cases, the banks charged higher spreads.

The SBP was in the process of imposing monetary penalties on the banks. It was also apprised that the SBP has initiated enforcement action against the banks involved in accordance with its supervisory framework.

Moreover, in order to ensure that the banks follow a reasonable and transparent approach in pricing their transactions and to improve the market conduct in future, the SBP held meetings with the banks and warned them about their practices and advised them to rationalise the spreads being charged to the customers. The committee sought a report in black and white and decided to drop the agenda item.

While discussing the progress of EXIM bank the SBP governor ensured that the transaction will commence within two weeks, it was apprised that the bank has planned to start the operations in a three-phased manner. In the first phase, the bank will introduce Export Credit Insurance products to the exporters.

In the second phase, lending products and trade guarantee products will be introduced and in the final phase Islamic financing products.

It was apprised that currently, the SBP is engaged with EXIM Bank on the issues like deficiencies in existing IT infrastructure in terms of its integration, cyber security measures and absence of Core Banking System besides deployment on internal controls mechanism.

The finance secretary said that the absence of the board of directors should not be a hindrance in commencing the transaction. The committee also regretted that as yet the ZBTL and the National Bank have not been appointed a president and wondered about this delay.

On the matter of recommendation made by the Committee on Dawlance (Pvt) Limited and AvagatKimya (Pvt) Limited, it was apprised that the companies have taken up with the concerned banks for amicable resolution in line with the applicable laws, rules, and regulations.

While discussing the matter of import of vintage cars still parked at dry port because the government is not giving clearance, it was apprised that the matter involves the requirements of IPO 2016, which falls in the domain of the Ministry of Commerce. The ministry may deem it appropriate to take up the matter with the federal cabinet for relaxation in the IPO.

The Senate Standing Committee on Finance and Revenue in a report on the status of the budget recommendation of the Senate of Pakistan for the last five years (2018-22) apprised the committee that during the tenure of Senator Farooq H Naek as the chairman committee (2018-2020), out of total 185 recommendations to the National Assembly, only 63 has been fully implemented.

Similarly, in the tenure of Senator Muhammad Talha Mahmood (2021) 56 recommendations were totally implemented out of 136. In the fiscal year 2022 under Senator Saleem Mandviwalla’s chairmanship, 54 recommendations have been presented out of which 25 have been totally implemented.

Earlier in the meeting, a detailed briefing was presented on crypto-currency. The chairman committee remarked that we should not outrightly object to the mechanism of crypto-currency and bring it to the country’s advantage and regulate it by drafting legislation.

Federal Minister of State for Finance Aisha Ghaus Pasha said crypto-currency is not a legal tender and the FATF is not in favour. Dr Inayat Hussain said that the rules of crypto are such that no government can control it.

It was briefed that over nine million people which is around 4.1 of Pakistan’s population own crypto-currency and so far worth 20 billion dollars of crypto exchange has taken place.

Deputy Governor of the SBP said that examining the models of other countries on the issue of crypto-currency, 91 million users or Rs20 billion worth of crypto transactions is an exaggeration, he added.

The meeting was attended by senators, Saadia Abbasi, Anwarul Haq Kakar, and Kamil Ali Agha.

Federal Minister of State for Finance Aisha Ghaus Pasha, SBP deputy governor, and senior officials from the ministry and other concerned departments were also in attendance.

Copyright Business Recorder, 2023