KARACHI (June 06 2004): The State Bank has relaxed the rules, for establishment of 'B' category exchange companies, by reducing the amount of paid-up capital and reserves required to keep with SBP.
The State Bank has decided to give relaxation to the existing authorised moneychangers for setting up of 'B' category exchange companies.
According to relaxation allowed, the minimum paid up capital requirement for the establishment of this kind of exchange companies has been reduced to Rs 20 million, from Rs 25 million.
However, later they will have to raise their paid up capital to Rs 25 million by June 30, 2005. 'B' category Exchange Companies will have to keep10 percent (instead of 15 percent) of their paid up capital as 'Reserve Requirement' with the State Bank.
The State Bank has also withdrawn the clause which required that at least 80 percent of the existing authorised moneychangers would have to opt for forming the 'B' category exchange companies.
These relaxation have been allowed by the State Bank after a detailed meeting held between representatives of Authorised Money Changers and the State Bank officials in Karachi on Saturday.
The Executive Director, State Bank of Pakistan, Farhat Saeed chaired the meeting.
The State Bank, in principle, has decided to establish 'B' Category Exchange Companies in order to bring the existing Authorised Moneychangers business within the realm of Exchange Companies so that smooth transition of their existing business is achieved.
It is reiterated that the Licences of the existing Moneychangers would stand expired as on June 30, 2004, and they would cease to function as Moneychangers from July 1, 2004.
They would be allowed sale and purchase of foreign currency notes and coins only. Other salient features of this scheme are as follows:-
'B' category Exchange Company will be required to be incorporated with SECP as a Private Limited Company.
Only Authorised Moneychangers will be allowed to form 'B' category Exchange Companies.
Application processing fee of Rs 100, 000 will be payable to SBP, which would include permission to open up to 5 branches. For additional branches, the company will be required to pay an additional fee of Rs 25, 000 for each branch.
It will be mandatory for an EC (B) to accommodate at least 5 existing Authorised Moneychangers to join hands to form an E.C. (B).
Once an E.C. (B) is allowed to commence its operations, Authorised Moneychangers who have forwarded the request for establishment of said E.C. (B) will have to surrender their Authorised Money Changers Licences at the time of issuance of Licences for the E.C. (B).
All applications submitted to Exchange Policy Department of SBP directly or through SBP BSC's offices should contain copies of individual Moneychanger Licences, proposing to form an E.C. (B).
These steps would also ensure documentation of the Money Changing business in the country while also assuring that various types of risks associated with Money Changing business are properly addressed and covered.
“Detailed F.E. Circular incorporating mechanism for application of the NOC/Licence and Rules & Regulations pertaining to 'B' category Exchange Companies E.C. (B) will be issued on 7th June 2004,” said a release issued by the SBP on Saturday.
Exchange Companies Association of Pakistan has welcomed the new development and said it would help to reduce the fears of moneychangers and attract more into the new shape of exchange companies of B categories.
However, Munaf Kalia, General Secretary of ECAP, said still the option of getting a franchise by a money changer is better than the jointly formation of a new exchange company.