In a major step to curb cash-based dollar dealings, the State Bank of Pakistan (SBP) has ordered banks and exchange companies to stop handing over physical foreign currency and instead transfer all purchased dollars directly into customers’ accounts. The move aims to strengthen documentation, improve traceability of foreign currency flows and support Pakistan’s shift toward a cashless economy.
The directive, issued through an SBP circular, marks one of the strictest changes in recent months. It follows ongoing efforts by the central bank to curb speculative activity in the currency market and reduce informal dollar hoarding, a problem that has historically weakened the rupee.
Under the new rules, any resident Pakistani buying foreign currency for deposit into their FCY account will only receive the amount through account-to-account transfer.
“Cash handovers will no longer be allowed for FCY deposits,” exchange dealers quoted from the SBP instructions. Those without FCY accounts will not be able to purchase cash dollars for depositing purposes.
However, the SBP clarified that the purchase of dollars for travel, education, medical needs or religious pilgrimage remains permitted though buyers must provide documentation, biometric verification and a declared purpose for any cash purchase above $500.
Industry insiders say the policy will strengthen bank-owned exchange companies, which already enjoy regulatory support. The new streamlined transfer system is expected to divert more customers toward these bank-linked outlets.
Currency experts caution that the shift may slow down processing times, especially for euros and pounds. Cheque clearance for non-dollar currencies could take up to 25 days when deposited across different banks, while dollar transfers may still take at least five days.
Money changers fear the decision will hurt their business, arguing that banning them from holding cash dollars in bank accounts makes it harder to compete with bank-affiliated exchange companies, potentially reshaping the entire retail currency market.