For increasing remittance inflows: SBP ups cash incentives for banks, MFBs and ECs

KARACHI: The State Bank of Pakistan (SBP) on Thursday announced increase in the financial incentives for banks, Microfinance Banks and Exchange Companies to bring more home remittances into the country.

Under these incentives, the SBP has increased the performance based cash incentive up to Rs 3 per USD on 15 percent growth in home remittances during this fiscal year.

In addition reimbursement of TT charges against each $100 transaction has been increased to 30 Saudi Riyal (SAR) to encourage domestic financial institutions (FIs) to enhance their marketing efforts for mobilizing home remittances through formal channels.

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Home remittances were declined by 14 percent from $31.278 billion in FY22 to $27.027 billion in FY23. Remittances also sharply fell 21.6 percent to $4.12 billion during the first two months of this fiscal year (FY24). Therefore, SBP has taken these measures to enhance the home remittances as the country needs healthy foreign inflows to overcome the ongoing foreign exchange crisis.

According to SBP, it has been decided that reimbursement of TT charges rate for eligible home remittance transactions will be SAR 30 against each transaction of $100. This increase in TT charges rate will be effective for home remittance transactions, received in Pakistan, after thirty days from the date of announcement.

Previously, banks were getting SAR 10 against the amount of home remittance transactions equal to and above $100 but less than USD 200 (or equivalent in other currencies). In addition, SAR 20 was being paid as reimbursement of TT charges against the home remittance transaction equal to and above USD 200 (or equivalent in other currencies).

However, now all authorized dealers in foreign exchange and Microfinance Banks will get SAR 30 as reimbursement of T.T Charges against home remittances transactions of $100 and above or equivalent in other currencies.

As per eligible criteria for reimbursement of TT Charges, the bank and their overseas correspondent entity will be required not to charge their customers (beneficiary & remitter) any fee, commission and charges etc. at any stage of sending or receiving Home Remittance transactions.

The amount of Home Remittance transactions will not be below USD 100 or equivalent in other currencies. Transactions sent from the same remitter to the same beneficiary on the same day shall be treated as one transaction and hence only one transaction will be eligible for the Reimbursement of TT Charges; irrespective of the number of transactions. The transactions will contain accurate identity of both remitter and beneficiary.

In addition, the SBP has also announced to increase the cash incentive for achieving growth in home remittances during this fiscal year.

In order to encourage domestic financial institutions (FIs) to enhance their marketing efforts for mobilizing home remittances through formal channels, the Government of Pakistan has decided to increase the cash incentives for all Authorized Dealers in Foreign Exchange, Microfinance Banks and Exchange Companies.

A performance based incentive will be granted, by the end of this financial year (FY24), to those financial institutions whose home remittance mobilization efforts result in growth in their home remittances from the previous year (FY23).

For any incremental home remittance of the financial institution up to five percent, between five and ten percent, and over ten percent, the cash incentive would be Rs1, Rs2 and Rs3 per USD, respectively, for each slab. The scheme will be effective from FY24 onward on a perpetual basis.

During the fiscal year (FY22), Authorized Dealers, Microfinance Banks and Exchange Companies were getting Rs 0.5 against each incremental USD over 5 percent growth in FY22 compared with the levels achieved in FY21. Now they will get a cash incentive of Rs 1 each incremental USD mobilized up to 5 percent growth in FY24.

Over 10 percent growth cash incentive will be Rs 2 per dollar during FY24 up from Rs 0.75 per each incremental USD in FY22. In addition, over 15 percent growth in home remittances, Authorized Dealers, Microfinance Banks and Exchange Companies will get Rs 3 per dollar compared to the previous incentive of Rs 1. However, the incentive of airtime equivalent to Rs. 2 per USD allowed by the Government of Pakistan stands discontinued after thirty days.

The claims of the scheme until the discontinuation date, submitted on or before January 31, 2023 will be reimbursed as per the existing procedure. However, no claim would be accepted after this deadline.

The SBP has advised all Authorized Dealers and Microfinance Banks to bring these changes to the notice of all their constituents.

Copyright Business Recorder, 2023