KARACHI: To enhance the flow of home remittances, the State Bank of Pakistan (SBP) has revamped the incentive structure for banks and Exchange Companies (ECs). Under the new system, both banks and ECs will receive two types of incentives - Fixed Component Incentives and Variable Component Incentives.
Under the fixed incentives, ECs will now receive Rs 2 for every USD of remittances surrendered to the SBP’s designated banks, while banks will get a reimbursement of SAR 20 against all eligible home remittance transactions of USD 100 and above.
Home remittances are a major source of income for families of expatriate Pakistanis and contribute significantly in the country’s economic activities.
Two remittance incentive schemes: ECC approves revisions
The SBP together with the Government has introduced various policy initiatives, from time to time, to increase the flow of home remittances through formal channels. In this regard, to further incentivize the Banks (Authorised Dealers) and Microfinance Bank (MFBs) to maximize their efforts for increasing remittance inflows, it has been decided that under the fixed component, a reimbursement of SAR 20 will be made for all eligible home remittance transactions of USD 100 and above.
Under the Variable Component for banks and MFBs, an additional reimbursement of SAR 08, per incremental eligible transaction, will be made for up to 10 percent or USD 100 million growth in home remittances over the previous year (whichever is lower).
Further, additional reimbursement of SAR 07, per incremental eligible transaction, will be made for growth exceeding 10 percent or USD 100 million in home remittances over the previous year.
The performance of ADs/MFBs will be evaluated by SBP on a monthly basis and payments would be reimbursed accordingly. Any required adjustment in payments, on a consolidated basis, would be made in the last quarter of the Fiscal Year.
The above revisions shall take effect from October 01, 2024. The operational instructions related to implementation of the T.T Charges scheme will be communicated separately.
Similarly, in addition to fixed incentives, the SBP has also announced variable incentives for the Exchange Companies to encourage them to bring more home remittances through formal channels.
With a view to further incentivize ECs in enhancing their home remittance mobilization efforts, it has been decided to revise the current incentive structure and now under the Fixed Component, ECs will be provided a base rate of PKR 2 for each USD of home remittances surrendered to SBP designated bank. Previously, the incentive was Rs 1 for each USD of home remittances surrendered to designated banks.
Under the Variable Component incentive, ECs will be paid PKR 3 for each incremental USD surrendered to SBP designated bank(s), for growth in home remittances up to 5 percent or USD 25 million (whichever is lower), in comparison to previous year.
Further, PKR 4 per USD will be paid against incremental remittances above 5 percent or over USD 25 million, in comparison to previous year.
According to SBP the performance of ECs will be evaluated by SBP on a monthly basis and payments would be reimbursed accordingly. Any required adjustment in payments, on a consolidated basis, would be made in the last quarter of the Fiscal Year.
The current revisions will take effect from October 1, 2024, however, SBP said that operational instructions related to implementation of the incentive scheme for ECs will be communicated separately.
Copyright Business Recorder, 2024