SBP introduces foreign currency and rupee business accounts

KARACHI: The State Bank of Pakistan (SBP) on Monday introduced a separate category of Foreign Currency and Rupee Trade Value Account (FCBVA).

The central bank drew the attention of banks and licensed foreign exchange dealers to Chapter 6 of the Foreign Exchange Handbook, which provided general instructions for opening and maintaining foreign exchange accounts in Pakistan.

The SBP said that in order to facilitate business entities incorporated overseas with majority ownership of non-resident Pakistanis, it has been decided to introduce a separate category of foreign currency account called Foreign Currency Business Value Account .

Accordingly, the following new paragraph 8B has been inserted after paragraph 8A in Chapter 6 of the Exchange Manual:

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Paragraph 8 B. Foreign Currency Trade Value Account (FCBVA):

(I) Authorized Dealers (AD) may open a “Foreign Currency Trading Value Account (FCBVA)” of legal entities incorporated or registered overseas and majority owned and/or controlled (51% or more) by NRP and/or non-residents. POC holders. These entities may be corporations, associations, foundations, limited liability partnerships (LLPs), corporations, trusts, Waqfs and/or other similar legal structures. However, this will not include sole proprietorships or unregistered partnerships. The operations of the Foreign Currency Enterprise Value Account (FCBVA) are governed by the regulations mentioned below:

(II) General Operations

a) DAs may allow FCBVA operations via electronic channels in addition to conventional modes in practice. Ads can also issue a checkbook, if required by authorized account operators.

b) DAs are required to provide real-time online convertibility from FCY to PKR based on the request made by the authorized account operator electronically for eligible account debits. For the sake of transparency, ADs will indicate the exchange rate applicable to the transaction.

c) In the event of inactivity of the FCBVA due to non-operation, DAs must design a mechanism, in accordance with the applicable regulations, to reactivate the account digitally.

d) ADs will ensure regular monitoring of FCBVAs to mitigate ML/FT risks.

(III) Foreign Currency Trade Value Account Credits

a) Remittances received from abroad by bank.

b) Transfer of funds from its own NRBVA maintained in PKR with the same AD

c) Profit, mark-up, yield or proceeds from the sale or maturity of authorized investments made from FCBVA

d) Cancellation of any erroneous FCBVA debit.

(IV) Foreign Currency Trade Value Account Debits

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a) Investment in permitted securities, provided the relevant laws/regulations permit such investment, such as under:

i) Only Registered Government of Pakistan Debt Securities denominated in FCY.

ii) Term deposit scheme/remunerative product denominated in FCY of the same DA.

Funds for the above investments will be transferred by DAs only into eligible products, through instructions received from the authorized account operator for this purpose.

b) Transfer of funds to its own NRBVA maintained in PKR with the same AD.

c) Transfer to any other FCY or PKR account.

d Discount or payments within the available balance, without prior approval of the State Bank of Pakistan.

e) Any payment in PKR in Pakistan. However, any amount so paid may not be credited back to the Account, unless otherwise permitted under the Regulations.

f) Cancellation of any erroneous credit entries.

Similarly, the SBP has also decided to introduce a separate category of Non-Resident Rupee Account called Non-Resident Rupee Business Value Account (NRBVA). Accordingly, sub-paragraph (i) paragraph 2 of the Chapter has been revised and a new paragraph 8A has been inserted after paragraph 8 in Chapter 8 of the Exchange Manual, as shown below:

Subparagraph (i) of paragraph 2. The opening and maintenance of non-resident rupee accounts of persons other than banks is replaced by the following:

“(i) DAs may open and maintain the following categories of non-resident rupee accounts of individuals and entities mentioned in paragraph 1 above:

a) Non-Resident Repatriable Rupee Account (NRAR).

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b) Non-Resident Non-Repatriable Rupee Account (NRAN).

c) NRP Rupee Value Account (NRVA) for non-resident Pakistanis only.

d) NRP Rupee Business Value Account (NRBVA)”

Paragraph 8 A. NRP Rupee Business Value Account (NRBVA)

(I) Authorized Dealers (AD) can open an “NRP Rupee Trade Value Account (NRBVA)” legal entities incorporated or registered overseas and majority owned and/or controlled (51% or more) by NRPs and/or non-resident POC holders. These entities may be corporations, associations, foundations, limited liability partnerships (LLPs), corporations, trusts, Waqfs and/or other similar legal structures. However, this will not include sole proprietorships or unregistered partnerships. Transactions of the non-resident rupee trade value account are governed by the regulations mentioned below:

(II) General Operations

a) DAs may allow operations in the NRBVA via electronic channels in addition to conventional modes in practice.

DAs can also issue a check book, if required by authorized account operators.

b) In the event that NRBVA becomes inactive due to non-operation, DAs should devise a mechanism, in accordance with applicable regulations, to reactivate the account digitally.

c) DAs are required to provide real-time online convertibility from NRBVA to Client FCBVA based on

the request made by the authorized account operator electronically for transfers eligible for the FCBVA. For the sake of transparency, the ADs will indicate the exchange rate applicable to the transaction.

d) ADs will regularly monitor NRBVAs to mitigate ML/FT risk.

(III) NRP Rupee Business Value Account Credits

a) Remittances received from abroad by bank

b) Transfer of funds from own FCBVA with the same AD

c) Profit, mark-up, yield or proceeds from the sale or maturity of authorized investments made from the NRBVA

d) Cancellation of any erroneous NRBVA debit.

(IV) Debits from NRP Rupee Business Value Account

a) Investments in the following, provided the relevant laws/regulations permit such investment:

I. Government of Pakistan Registered Debt Securities (Treasury Bills, GDP, Sukuk and any other government registered debt securities).

ii. Shares listed on the stock exchange(s) in Pakistan.

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iii. Investments in shares of exchange-traded fund(s) and shares of mutual funds registered as Open End Schemes (OES) under the management of asset management companies (AMCs) licensed by the SECP to provide asset management services.

iv. Shares of unlisted company(ies) in Pakistan.

v. Private fund units created and operated by a private fund management company licensed by the SECP to provide private equity and venture capital fund management services.

vi. Term deposit/remunerative products of the AD holding the account.

The transfer of funds for the above investments is authorized by the NRBVA ADs only in eligible products, through special instructions received from the authorized account operator in this regard.

b) Transfer of funds to own FCBVA with the same DA.

c) Transfer to any other FCY or PKR account.

d) Remittance or payments of NRBVA to the extent of available balance without prior approval of State Bank of Pakistan.

e) Any other payment in Pakistan. However, any amount so paid may not be credited back to the Account, unless otherwise permitted under the Regulations.

f) Cancellation of any erroneous credit entries.