Overseas Pakistanis send around $36 billion annually to Pakistan, providing critical support to the country’s economy. However, instead of rewarding the senders, the government allocates benefits to banks. In the recent federal budget, PKR 87 billion set aside for banks as incentives on remittances sent from abroad.
According to banking sources, banks receive additional funds for marketing and promotion besides the allocated incentives. They also earn by exploiting foreign currency exchange rate differences and holding foreign currency for several days. Banks reportedly earn around PKR 200 billion annually through remittance-related activities.
The State Bank of Pakistan issued new circulars to address these practices. The minimum transaction amount eligible for rewards increased from $100 to $200. The reward rate reduced from 37 Saudi Riyals per $100 to 20 Riyals per $200. A new limit restricts individuals to five free incoming transactions from abroad per day to prevent splitting transactions for extra incentives.
Money transfer banks previously received additional funds if they exceeded remittance targets, earning 17 extra Riyals per $100 for marketing purposes. These funds have now stopped. Banks also benefited from exchange rate differences between interbank and open market rates and delayed conversions of foreign currency into rupees.
The State Bank approved equal incentives for currency dealers. Currency dealers previously received 2 to 3 rupees per dollar compared to banks’ 22 rupees. Malik Bostan, Chairman of the Exchange Companies Association of Pakistan, confirmed that currency dealers bring in $4 billion annually and expect to double this amount within a year after receiving equal incentives.
Zafar Paracha, General Secretary of the Exchange Companies Association, told Hamariweb.com that the real incentive should go to overseas Pakistanis. He stated that Pakistan is the only country where banks are rewarded instead of the remittance senders, unlike India or Bangladesh.
