PTBP Web Desk
In a major step toward promoting a cashless economy and strengthening financial transparency, the State Bank of Pakistan (SBP) has significantly revised its regulations governing the sale of foreign currency by exchange companies (ECs). Under the new directive, residents purchasing foreign currency (FCY) for the purpose of depositing it into their foreign currency bank accounts will now be required to complete the transaction exclusively through account-to-account transfers.
This regulatory adjustment—issued through a circular on Friday—marks an important shift in Pakistan’s foreign exchange landscape. The central bank emphasized that the move aligns with its broader objectives of improving documentation, enhancing anti-money laundering (AML) controls, and ensuring more efficient monitoring of foreign currency flows.
The SBP circular referred specifically to Para 5, Chapter 7 of the Regulatory Framework for Exchange Companies (RFEC), noting that existing instructions have now been amended to introduce an entirely cashless mechanism for FCY sale transactions meant for deposit into FCY accounts.
The circular stated:
“In order to promote cashless economy, it has been decided that, henceforth, all FCY sale transactions to resident citizens of Pakistan for the purpose of deposit into FCY account will be executed through account-to-account transfer.”
With this announcement, the previously applicable rule—allowing customers to receive foreign currency in cash even when the ultimate purpose was depositing it into a bank account—has been formally discontinued.
Before this revision, exchange companies were permitted to sell foreign currency in cash if buyers met certain regulatory conditions. These included:
- Mandatory CNIC (ID) verification
- Biometric verification for transactions of $500 or above
- Requirement for bank-funded Pakistan-currency payments for FCY purchases worth $2,000 or more
This system, while regulated, still relied heavily on cash transactions, which posed challenges to documentation, AML compliance, and verification of source of funds.
Under the new policy, experts indicate that money changers will no longer provide cash to customers intending to deposit FCY into their accounts. Instead, transactions must be completed through direct electronic transfers, ensuring full transparency.
Reacting to the policy shift, Syed Ali Imran, a corporate and investment banking professional, described the update as a meaningful step forward in modernizing Pakistan’s financial framework. In his social media commentary, he noted that routing FCY deposit flows entirely through bank accounts enhances traceability and strengthens AML controls.
According to Imran, “shifting all deposit flows onto banking rails makes the source and destination easier to verify.”
He further explained that the move supports macro-level monitoring of foreign currency deposits across banks, enabling the SBP to gain clearer insights into foreign exchange patterns. This improved data availability, he said, enhances the ability of policymakers to calibrate future monetary and exchange rate policies.
Additionally, he highlighted the operational benefits for exchange companies, noting that reduced reliance on physical cash lowers risks related to theft, reconciliation, and handling errors. By pushing customers toward electronic transactions, the system also encourages greater financial inclusion, as individuals increasingly rely on formal banking channels.
The SBP’s decision aligns with its ongoing strategy to move Pakistan toward greater digitization and decrease the economy’s dependence on cash. By mandating bank-to-bank transfers for FCY purchases intended for deposits, the central bank aims to:
- Improve compliance with international financial regulations
- Support the fight against money laundering
- Enhance the banking sector’s ability to track foreign currency inflows
- Encourage the public to utilize formal banking services
The emphasis on formal banking channels also helps Pakistan align with global best practices recommended by institutions such as the Financial Action Task Force (FATF).
While financial experts widely support the reform, they also acknowledge that the transition may pose short-term challenges, particularly for individuals who rely heavily on cash or lack bank accounts.
Imran noted that although the regulation targets account holders, those accustomed to depositing FCY through cash would now face additional procedural steps, including the need for bank instruments such as cross cheques or electronic transfers.
For many consumers—especially those operating outside the formal banking system—the shift could introduce friction and delays, prompting calls for broader financial education and easier access to digital banking services.
The SBP has instructed all exchange companies to ensure that the revised guidelines are:
- Fully communicated to all relevant staff
- Implemented without delay
- Incorporated into their standard operating procedures
The central bank’s directive underscores a clear commitment to modernizing Pakistan’s currency management practices while reducing the vulnerabilities associated with cash-based transactions.
