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SBP moves to limit abuse of remittance-boosting scheme

KARACHI: Banks making a quick buck by splitting remittance transactions would now find it harder to continue the practice after the State Bank of Pakistan (SBP) has changed the criteria for receiving reimbursement of telegraphic transaction (TT) charges.

An SBP circular issued on Tuesday said that under the new criteria, banks will now be paid the processing fee only if the amount remitted is above $200, which is double the previous limit of $100.

The State Bank has also reduced the per-transaction fee to 20 Saudi riyals from 25.

Banks are paid fee by the SBP on each transaction as the practice helps boost remittances coming into the country from overseas Pakistanis. However, a number of banks misuse the scheme by splitting the transactions into $100 of the same individual on the same date to avail undue benefits.

This facility has been grossly misused for several years after the introduction of Pakistan Remittance Initiative (PRI), which was jointly initiated in August 2009 by the SBP, the finance minister and the ministry for overseas Pakistanis.

The amount so wrongly charged was in billions of rupees. It was detected by auditors, held back for some time, but was then finally paid to the banks.

The SBP circular said: “Only one transaction shall be eligible for the reimbursement of TT charges irrespective of the number of transactions sent from the same remitter to the same beneficiary on the same day.”

It added that it should be ensured that no transaction is split to avail undue benefit under the scheme.

However, the risk of abuse by banks still exists as the SBP has not come out with any clear idea how to stop misuse of splitting amount of remittances in several transactions. The new measure only increases the minimum amount for a transaction to $200 or equivalent in other currencies.

Currency dealers said it seemed difficult that banks would not continue the practice of splitting transactions.

“In case a claim is found to contain transactions below $200 or equivalent in other currencies or split transactions detected at any stage, the SBP shall have the right to recover such amount from our current account maintained with them,” said the circular, offering no punishment for the cheat involve in the misuse through the splitting of transactions.

The SBP said banks and the correspondent entities will not charge their customers any fee or other charges at any stage for sending or receiving the home remittances.

The central bank will make sure that the reimbursement claim being submitted has been duly audited by our internal audit department, said the circular.

Banks will submit their claims of the preceding month for reimbursement of TT charges against home remittances by 20th day of the next month. The SBP wants to make sure that the claims contain accurate identities of both the remitter and the beneficiary.