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040212
STATE BANK OF PAKISTAN - EXCHANGE POLICY DEPARTMENT
F.E. Circular Letter No. 01 of 2004
February 12, 2004
The Head Offices/Principal Offices of all
Exchange Companies and Authorised Dealers
in Foreign Exchange
Franchise Arrangements of the Exchange Companies
Attention of the Exchange Companies is invited to rule No. 13 of Annexure II of FE Circular No.09 dated July 30, 2002 in terms of which Exchange Companies were allowed to have Franchise Arrangements with the other entities. In order to facilitate the Exchange Companies, following Franchise Arrangement has been decided to be allowed with immediate effect:
i) Franchiser and Franchisee would enter into a formal agreement which should be duly registered as per existing laws of the land.
ii) Franchisee may be an existing company or partnership/firm or sole proprietorship carrying out only Money Changing business or a new company or partnership/firm or sole proprietorship specifically formed to carryout Money Changing business. It is re-iterated that Money Changers presently allowed to function would cease to exist after 30th June, 2004.
iii) Franchisee by virtue of the Agreement, in consideration of the same, would pay the Franchiser an agreed amount as Franchise Deposit. This Franchise Deposit would be maintained by the Franchiser in his books during the currency of the Agreement.
iv) Franchise Deposit would be treated as “Second Tier Capital” in the books of the Franchiser. For the purpose of calculation of 25% SLR requirement and 50% of the Exposure Limit, this “Second Tier Capital” would be added to the paid up capital of the Franchiser. It may, however, be noted that at any point of time, combined Exposure of Franchiser and Franchisee should not exceed 50% of the sum of paid up capital and Second Tier Capital (Franchise Deposit) of the Exchange Company.
v) Franchiser and Franchisee will have to make arrangement for a completely integrated/compatible computerized system so that Exchange Company may provide a consolidated reporting of exchange business transactions carried out by Franchiser & Franchisee as per requirement of the SBP.
vi) In addition to the clauses of the Franchise Agreement, all the Rules & Regulations specified by the State Bank for the Franchiser shall be equally applicable to the franchisee.
vii) Franchiser will be required to immediately notify to SBP all franchise agreements forwarding a copy to the SBP. In the absence of any objection from SBP, franchiser may deposit requisite enhanced SLR amount with SBP after 15 days from the date of notifying of the Agreement. Only thereafter franchisee would be allowed to commence its operations.
viii) Franchiser would be fully responsible for the activities of the Franchisee and shall also have the right to inspect/visit franchisee’s operations as per their agreement.
ix) State Bank reserves the right to inspect Franchisee’s books of accounts and premises as and when it may deem fit and necessary.
x) In case of any violations of related rules,
SBP shall hold the Franchiser directly responsible for the same, reserving
however the right to take such direct action against Franchisee as it may deem
fit.
Please bring the above to the notice of all your constituents.
Yours faithfully,
(Syed Samar Hasnain)
Joint Director
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