State Bank of Pakistan (SBP) has set a minimum authorized and paid-up capital of Rs 20 million for setting up an Exchange Company (EC) of B Category allowing them to have foreign participation in their equity up to 50%.
According to Exchange Company Manuals-2016 released on Wednesday, the central bank would permit exchange companies for repatriation of profits in proportion upto the extent of foreign equity, however these companies should ensure that the funds utilized for enhancement of capital of the company are legitimate under related laws. The central bank said that the affairs of the company shall be run only with the declared capital of the company. Neither the shareholders and Directors of the company shall withdraw funds from the company as loan nor shall they extend loan (subordinated loan) to the company unless specific approval, in writing, from State Bank has been obtained. Prior approval of State Bank regarding enhancement of authorized and paid-up capital by the existing Directors/shareholders will not be required. The Exchange Company may directly approach Securities & Exchange Commission of Pakistan (SECP) for fulfillment of applicable formalities to increase its authorized or paid-up capital.
A 25 percent of the Capital shall be maintained as Statutory Liquidity Reserve (SLR) with the State Bank in the form of unencumbered approved government securities. State Bank would extend current account and SGLA facilities to Exchange Companies. According to SBP, Exchange Companies are authorized to deal in foreign currency notes, coins, postal notes, money orders, bank drafts, travelers’ cheques, transfers and other businesses. Companies can buy and sell foreign exchange from/to individuals in “Ready” value only whereas these can sell foreign exchange to incorporated companies for remittance on account of royalty, Franchise, technical fee, repair and maintenance etc., after obtaining ‘No Objection Certificate’ from the designated Authorized Dealer.