State Bank of Pakistan (2024)

CHAPTERVI

PRIVATEFOREIGN CURRENCY ACCOUNTS

1.Opening of Foreign Currency Accounts withBanks in Pakistan.

2.Different Schemes for Foreign Currency Accounts.

3.State Bank’s Forward Cover Scheme.

4.Acceptance of Deposits from foreign banksoperating abroad and overseas branches.

5.Payment of subsidy on account of interestdifferential.

6.F.E. 25 Scheme.

7.Special Foreign Currency Accounts of PrivatePower Projects.

8.Special permission for Foreign Currency Accounts.

9.General permission for Maintenance of Accountsabroad by Resident Pakistanis.

10.Reporting of receipts into and payments fromforeign currency accounts.

11.Reporting of local disbursem*nts from foreigncurrency accounts.

12.Reporting of interest on foreign currencyaccounts.

13.Surrender of Foreign Exchange.

14.Payments by Foreign Nationals in ForeignCurrencies.

15.Foreign Exchange received by Residents inPakistan.

1. Opening of Foreign Currency Accountswith Banks in Pakistan.

(i) AuthorisedDealers may, without prior approval of the State Bank, open withthem foreign currency accounts of the following: -

a)PakistanNationals resident in or outside Pakistan, including those havinga dual nationality.

b)Allforeign nationals, whether residing abroad or in Pakistan.

c)Joint Account in the names of residents and non-residents.

d)Alldiplomatic missions accredited to Pakistan, and their DiplomaticOfficers.

e)AllInternational Organizations in Pakistan.

f)Firmsand companies established/incorporated and functioning in Pakistan,including those having foreign share-holdings except as outlinedin sub-para (v) below.

g)CharitableTrusts, Foundations etc. which are exempted from income tax.

h)Branchesof foreign firms and companies in Pakistan.

i)Non-residentExchange Companies even if owned by a bank or financial institution.

j)Allforeign firms/corporations, other than banks and financial institutionsowned by Banks, incorporated and operating abroad provided theseare owned by persons who are otherwise eligible to open foreigncurrency accounts.

However,the facility is not available to airlines and shipping companiesoperating in/through Pakistan or collecting passage and freightin Pakistan and the investment banks, leasing companies and modarabacompanies including those which have been granted licences todeal in foreign exchange.

(ii)Opening of foreign currency account covered by sub-para (i) issubject to the condition that these are not fed with:

a)anyforeign exchange borrowed under any general or specific permissiongiven by the State Bank, unless otherwise permitted;

b)anypayment for goods exported from Pakistan;

c)proceeds of securities issued or sold to non-residents;

d)anypayment received for services rendered in or from Pakistan;

e)earningsor profits of the overseas offices or branches of Pakistani firmsand companies including banks, investment of resident Pakistanisabroad; and

f)anyforeign exchange purchased from an Authorised Dealer in Pakistanfor any purpose.

(iii)Corporate Bodies/Legal entities cannot generate funds from theKerb market for deposit in their foreign currency accounts.

(iv)Foreign currency accounts can be fed by remittances received fromabroad, travellers cheques issued outside Pakistan (whether inthe name of account holder or in the name of any other person),foreign currency notes and foreign exchange generated by encashmentof securities issued by the Government of Pakistan.

(v)Opening by firms/companies of foreign currency accounts, whichare to be fed through the funds of foreign equity/foreign currencyloans raised for establishment of industrial and other projectsand by contractors who receive payments in foreign exchange fromthe employers, would be as per procedure laid down in paragraph8 of this chapter.

(vi)These accounts are free from all Foreign Exchange restrictions.In other words, account holders have full freedom to operate ontheir accounts to the extent of the balance available in the accountseither for local payments in Rupees or for remittance to any countryand for any purpose or for withdrawals in the shape of foreigncurrency notes and travellers cheques. However, a restrictionwas placed on withdrawal in foreign currency from some categoriesof foreign currency accounts existing as on 28^th May,1998. The instructionsissued vide FE Circular No.12 of 1998, as amended from time totime, would continue to be operative, till the restrictions arelifted. Holders of such accounts are, however, free to transfertheir accounts from one Authorised Dealer to another.

(vii)Accounts can be maintained and payments (excluding local payments)made in any currency of choice of the account holder. Credit Cardfacility can be obtained by the account holders to the extentof the balances held in their respective accounts, for utilizationin and outside Pakistan provided settlement of the bills in respectof expenditure within the country is made in Rupees only and therelevant foreign currency amount is taken by the Authorised Dealersin their daily exchange position.

(viii)Authorised Dealers can mark lien on the foreign currency accountsin respect of banking facilities like credit cards, bank guaranteesand loan/credit etc. availed of by the account holders in andoutside Pakistan. The aggregate amount of the facilities availedof in and outside Pakistan should not, however, exceed the balancein the respective accounts at any point of time and the regulationson credit should be strictly adhered to.

(ix)Head/Principal Offices of Authorised Dealers will send to theState Bank of Pakistan, Central Directorate, Karachi such returnsin respect of these foreign currency accounts as may be prescribedfrom time to time.

2. Different Schemes for Foreign CurrencyAccounts.

Foreigncurrency accounts covered by paragraph (1) could be opened bythe Authorised Dealers upto 28^th May, 1998 under theState Bank’s forward cover scheme, and thereafter under the rulesintroduced vide FE Circular No.25 of June 20, 1998. Separate ledgerswill be maintained by the Authorised Dealers for these foreigncurrency accounts. In addition, Special Foreign Currency Accountscan be opened with the specific or general permission of the StateBank.

3. State Bank’s Forward Cover Scheme.

(i)Under the State Bank’s forward cover scheme, the Authorised Dealerswill fix their own rates of interest for Term Deposits of 3 months,6 months, 12 months, 2 years and 3 years provided they do notexceed the average Bid rates provided by British Banker’s Association(BBA) for the concerned currencies at the close of business onthe previous working day plus the margins prescribed by the StateBank from time to time. The maximum rates for payment of interest,including the margins allowed by the State Bank, are publisheddaily by the Foreign Exchange Rates Committee.

(ii)As regards foreign currency deposits of less than 3 months includingCall Deposits, Savings Bank, Special Notice etc. accounts, AuthorisedDealers shall pay interest on the basis of return last allowedon similar Rupee PLS Accounts provided the rate at which interestis paid does not exceed the interest rate applicable to 3 monthsTerm Deposits of the relevant foreign currency.

(iii)Authorised Dealers shall sell all the deposits in foreign currencyaccounts to the State Bank in multiples of US$ 1,000/-, £ Stg.1,000/-,Euro 1,000/- and J. Yen 250,000/-. State Bank shall cover exchangerisk of all such deposits as well as interest accruing thereonat the option of the Authorised Dealers, subject to payment offee at the time of taking the forward cover at the rate(s) prescribedby the State Bank from time to time. Fee is payable on the fullamount of forward cover obtained notwithstanding whether it isin respect of the amounts of deposit or for both the amount ofdeposit and interest. In case of premature withdrawal of deposit,fee for the unexpired period is refundable.

4. Acceptance ofDeposits from foreign banks operating abroad and overseas branches.

Asan exception to the rules set out in paragraph 1(i) to (j) ofthis chapter, Authorised Dealers can accept foreign currency depositsfrom their overseas branches and foreign banks operating abroad,including financial institutions owned by them, provided the amountand period of maturity of such deposits is not less than thoseprescribed from time to time. Interest on these foreign currencydeposits can be paid by the Authorised Dealers annually, six monthlyor quarterly in accordance with the option exercised by the depositorin writing at the time of placement of deposits. Interest canbe paid at the rate not exceeding the prescribed margins overBid rate for the respective period as provided by the BBA at theclose of business on the working day immediately preceding thedate of deposit as published by the Foreign Exchange Rates Committee.

5. Payment of subsidy on account ofinterest differential.

Wherethe interest paid on foreign currency Term Deposits of 3, 6 and12 months on the basis ofBBA's bid rates as prescribed inthe earlier paragraphs exceeds the return last allowedon similar Rupee PLS Accounts, State Bank shall reimburse theamount of differential on account of the excess to the AuthorisedDealers. For the purpose of claiming reimbursem*nt of the differential,Authorised Dealers should furnish to the Chief Managers' Officesof the State Bank, details of individual foreign currency TermDeposits in the prescribed form (Appendix V-3) while surrenderingthe amount of foreign exchange to the State Bank. This statementwill be submitted in triplicate and bear running serial number.After the interest has been paid, claim for payment of interestdifferential will be lodged by the Authorised Dealers with theChief Managers' Offices of the State Bank in the form given atAppendix V-4.

6. F.E. 25 Scheme.

(i)The amounts of foreign currency deposits accepted outside StateBank’s forward cover scheme i.e. under F.E. Circular No. 25 of1998, are not required to be surrendered to the State Bank andthe Bank will not provide any forward cover for the same. TheAuthorised Dealers accepting such deposits are free to lend, investand place on deposit such funds in Pakistan and abroad subjectto the observance of regulations prescribed under the BankingCompanies Ordinance.

(ii)Authorised Dealers are free to decide the rate of return offeredon such deposits, provided the maximum rate of return does notexceed LIBOR applicable on the date of determination of such return/profit.

7.Special Foreign Currency Accounts of Private Power Projects.

(i)Authorised Dealers may open the following Special Foreign CurrencyAccounts/Off-shore Foreign Currency Accounts of private powerprojects in Pakistan as per the Implementation Agreements (IAs)entered into with Private Power and Infrastructure Board (PPIB),Government of Pakistan. These accounts will be maintained duringthe construction and operation of the projects for the followingpurposes subject to the conditions mentioned against each andthe balances held in such accounts will be retained by the AuthorisedDealers in addition to their Exposure Limits and will also notbe required to be reported under F.E. 25 Scheme:

a)Special Foreign Currency Account in or outside Pakistan.

Thiswill be maintained for deposit of foreign equity and foreign currencyloan under the Loan Agreement registered with the State Bank.The amounts available therein will be utilized for the purposesof the project as provided for in the IAs.

b)Special Foreign Currency Insurance Account.

Thiswill be maintained for depositing amounts required for paymentof insurance/reinsurance premia and for receiving insurance/reinsuranceclaims against covers taken in foreign currency outside Pakistanwith the approval of the Controller of Insurance or with StateBank’s approval from an insurer in Pakistan, provided that amountsnot required for meeting expenditure in foreign exchange willbe repatriated to Pakistan and converted into rupees.

c)Off-Shore Foreign Currency Control Account.

Thiswill be maintained subject to the condition that PPIB/IndependentEngineer would determine for each project the portion of revenuesrequired to meet the foreign currency cost for operating the project.

d)Off-Shore Foreign Currency Operating Account.

Thiswill be maintained subject to the condition that O&M expensesto be remitted/deposited periodically to this account will beapportioned by the PPIB/Independent Engineer.

e)Off-Shore Disputed Payment Escrow Account.

Thiswill be maintained subject to the condition that the balance willbe remitted to Pakistan once the dispute is over.

f)Off-ShoreForeign Currency Debt Payment Account.

Thiswill be maintained for depositing the amount required for DebtService.

g)Off-Shore Debt Service Reserve Account.

Thiswill be maintained subject to the condition that this accountwill be liquidated simultaneously with the retirement of debtand the maximum balance in this account would not exceed the next12 months Debt Service Payment (both Principal and Interest).

h)Off-Shore Foreign Currency Maintenance Reserve Account.

Thiswill be opened and maintained subject to the condition that thisamount will be liquidated simultaneously with the life of theagreement and that this account will hold the maximum of US$ 3million during the term of Power Purchase Agreement.

i)Off-Shore Foreign Currency Dividend Account.

Thiswill be used for receiving remittance of dividends as and whendeclared and paid by the company.

(ii)A monthly statement in the form prescribed at Appendix V-5 willbe submitted for each account separately alongwith a certificatefrom the company’s auditors to the effect that the payments madefrom the accounts are strictly in accordance with or covered underthe IA, Power Purchase Agreement or other agreements, if any,approved by the Government.

(iii)Interest earned on balances held in these accounts will be repatriatedto Pakistan.

(iv)There will be nil balance in the Main Control Account and allother accounts after the expiry of the relevant Agreement Period.

(v)Any earnings from dealing in currency/exchange should also berepatriated to Pakistan.

(vi)Authorised Dealers will ensure that Income Tax, wherever due onpayments made through the accounts, is duly deducted and paidto the Income Tax Authorities.

(vii)Authorised Dealers may also open Special Foreign Currency Accountsof the foreign EPC (Engineering, Procurement and Construction)and O&M (Operation and Maintenance) contractors of the PowerProjects operating in Pakistan with the approval of the Governmentfor receipt of foreign currency amounts under the contracts awardedto them by the Power Projects and its utilization in accordancewith the EPC/O&M contracts.

8.Special permission for Foreign Currency Accounts.

(i)Foreign Oil/Mineral exploration companies and foreign contractorsand their foreign sub-contractors may be allowed by the AuthorisedDealers to open foreign currency accounts under the Scheme describedin paragraph 6 or Special Foreign Currency Accounts subject tothe condition that they will meet all their expenditure in Pakistanincluding salaries of foreign nationals/non-residents in Pak Rupeesonly, out of rupee payments, if any, received by them in termsof their contracts/by converting in the inter-bank market fundsreceived from their Head Offices/by converting funds from theirforeign currency accounts in the inter-bank market.

(ii)(a) Firms and companies raising foreign equity and foreign currencyloan may be allowed by Authorised Dealers to open special foreigncurrency account for receiving and retaining the foreign fundson submission of information about the source of foreign fundingand the amount required to be retained in foreign currency.The funds available in such foreign currency accounts canbe used by the account holders for making only those types ofpayments which are otherwise permissible in terms of the instructionslaid down in this Manual (e.g. imports, consultancy) and whichare related to the business of the account holder. Any amountnot so used will be required to be converted into rupees in theinter-bank market and no withdrawal will be allowed in the shapeof foreign currency notes.

(b)The concerned Authorised Dealer will be required to submit monthlystatements in the prescribed proforma (Appendix V-5) alongwiththe related import documents, invoices, agreements etc.

9. General permission for Maintenanceof Accounts abroad by Resident Pakistanis.

Pakistannationals resident in Pakistan are not permitted to open or maintainany foreign currency accounts with banks etc., outside Pakistan.As an exception, they can maintain foreign currency accounts abroadin any country other than Afghanistan, Bangladesh, India and Israelprovided the balances held in such accounts do not exceed U.S.$1000/- or equivalent thereof in other currencies as provided inGovernment Notification No. SRO 1016(1) 79 dated the 17th October,1979. These accounts cannot, however, be operated from Pakistanwithout the prior approval of the State Bank.

10. Reporting ofreceipts into and payments from foreign currency accounts.

Receiptof foreign currency amounts for credit to the foreign currencyaccounts under the Forward Cover Scheme should be reported bythe Authorised Dealers as "Purchase" on Schedule 'J'under Code 9718 in the case of accounts opened in terms of paragraph1 and under Code 9828 in respect of accounts opened under specialpermission granted by the State Bank in accordance with the provisionsof paragraphs 7 & 8 ibid. Similarly payments out of the foreigncurrency accounts should be reported by the Authorised Dealersas "Sale" on Schedule E-4 under Code 1718 in the formercase and under Code 1828 in the later case. Transactions in accountscovered by paragraph 6 are not required to be reported in thesummary statements.

11. Reporting oflocal disbursem*nts from foreign currency account.

AuthorisedDealers should report the payments in rupees from foreign currencyaccounts as "Sale" on Schedule E-4 under Code 1718 or1828, as the case may be. The Rupee receipts should simultaneouslybe reported as "Purchase" on relevant schedules undera code appropriate to the purpose of the receipt.

12. Reporting ofinterest on foreign currency accounts.

Interestpaid by Authorised Dealers on Foreign Currency Accounts shouldbe reported as "Sale" on Schedule E - 4 of the monthlyforeign exchange returns under Code 1226.

13.Surrender of Foreign Exchange.

In exercise of the powers conferred by Section 9 of theAct, the Government have issued Notification No. SRO 1016(1) 79dated the 17th October, 1979 (Appendix II-8) requiring all citizensof Pakistan and other persons residing in Pakistan continuouslyfor six months or more, who become the owner of any foreign exchangewhether held in Pakistan or abroad, to sell such foreign exchangeto an Authorised Dealer within three months of the date of acquisitionby them of such foreign exchange. The provisions of the aforesaidnotification do not apply to the following cases viz:

(i)Foreign exchange held abroad by foreign diplomats and foreignnationals employed in Embassies and Missions of foreign countriesin Pakistan.

(ii)Foreign exchange held abroad by foreign nationals or foreign businesshouses, except to the extent that it represents their earningsabroad in respect of business conducted in Pakistan or servicesrendered while in Pakistan.

(iii)Foreign exchange held by residents in Pakistan in countries otherthan Afghanistan, Bangladesh, India and Israel provided the amountdoes not exceed in the aggregate U.S. $1000/- or equivalent thereofin other currencies.

(iv)Afghan currency whether held in or outside Pakistan.

Forthe purposes of the aforesaid notification the term "residentsin Pakistan" excludes citizens of Pakistan in foreign countriesso long as they stay outside Pakistan, but includes foreign nationalswho reside continuously in Pakistan for six months or more.

14.Payments by Foreign Nationals in Foreign Currencies.

Paymentsin foreign currency by foreign nationals residing in Pakistanto or on behalf of residents of Pakistan whether Pakistanis orforeign nationals are prohibited. Foreign nationals should not,therefore, directly or indirectly, make foreign currency availableto the residents or to other persons on their behalf against paymentin Rupees. Such payments are prohibited even from their foreigncurrency accounts which they are permitted to maintain and operatefrom Pakistan.

15.Foreign Exchange received by Residents in Pakistan.

Paymentsin foreign exchange received by an Authorised Dealer on behalfof a resident in Pakistan must not be retained in foreign exchangebut must be converted into Rupees unless the State Bank has givengeneral or special permission to the beneficiary to retain theforeign exchange received by him.