KARACHI: The State Bank has allowed exchange companies to charge up to one per cent as spread between buying and selling, surprising even currency dealers who were doing business with half a per cent spread.
However, Exchange Companies Association of Pakistan’s (ECAP) Secretary Zaffar Paracha said the SBP had taken the decision on the demand of exchange companies.
“The spread between buying and selling rates of the US dollar, pound sterling, euro, Saudi riyal and the UAE dirham will not exceed 1pc of their buying rate,” said an SBP circular issued on Tuesday to all exchange companies. “For all other foreign currencies, exchange companies will ensure to maintain a competitive spread.”
Mr Paracha said the exchange companies were earlier bound to charge 25 paisa as spread on buying and selling, a restriction imposed about one-and-a-half years ago.
“This spread of 25 paisa failed to serve the purpose. It was much higher for a small currency having a value of about Rs3 to Rs4 but it was too small for a currency like having a value of about Rs400,” he said.
He said the ECAP did demand removal of this restriction but “it was not to earn higher profit”.
Currency dealers said 1pc spread is too high since they were doing business with half a per cent spread — earning 75 paisa on a currency having a value of Rs150 for example.
The decision would improve exchange companies’ profitability, particularly in Ramazan which sees remittances and hard currencies come in the country on a large scale.
The size of the currency market is estimated to be around $15-20 million per day.
Currency dealer Anwar Jamal, who appreciated the SBP’s decision, said: “It was the demand of the exchange companies to remove the restriction of 25 paisa spread but we cannot deny that they would earn higher profits.”
However, the 25-paisa restriction had not been in practice since the exchange companies were charging more than that.
“It must be ensured that prevailing exchange rates applicable on sale/purchase of major foreign currencies are displayed through notice/display board at a prominent place in each outlet of the exchange company,” said the SBP circular.
“Daily report being submitted to the Exchange Policy Department as per the circular may be discontinued,” it said.