SBP Sets New Limit for Remittance Rebates Under Revised Incentive Scheme

The State Bank of Pakistan (SBP) has revised the terms and conditions of a remittance scheme regarding the rebate structure for financial institutions, including commercial and microfinance banks, exchange companies, etc. The banking regulator has set the minimum size of eligible transactions on account of remittances at $200 for financial institutions to claim the rebate at a flat rate of SAR 20 for each eligible transaction. The new term will come into effect from 1 July 2025. Previously, the incentive base rate was 20 Saudi Riyal (SAR) per $100 transaction in the last financial year and 30 SAR per $100 transaction in 2023-24. It has been observed that inflows of remittances registered record growth in the closing financial year, surging to nearly $35 billion in the first 11 months, with a projection of over $38 billion in the full financial year. Multiple factors contributed to the growth of all-time high remittance inflows, including incentive schemes to financial institutions. Meanwhile, the banking regulator also discontinued incentive schemes to financial institutions on account of marketing, promoting, and Telegraphic Transfer (TT) expenses for the starting financial year. According to the new regulations, financial institutions and their Overseas Correspondent Entities (OCEs) in the transaction chain have not charged their customers (beneficiaries and remitters) any fees, commissions, or charges at any stage of sending or receiving Home Remittance transactions. Transactions sent from the same remitter to the same beneficiary on the same day shall be treated as one transaction, and hence, only one transaction shall be eligible for the Reimbursement of TT Charges, irrespective of the number of transactions. Only five (5) free-of-cost transactions in a month from a single remitter to the same beneficiary through the same OCE shall be allowed under the scheme. The banking sector, along with different stakeholders, is working to develop technological channels to divert the remittances inflows from illegal hawala/ hundi to legal banking channels.