Credit card settlements to use interbank dollar rate

The State Bank of Pakistan (SBP) has allowed banks to acquire US dollars from the interbank market for the settlement of card-based cross-border transactions with the International Payment System, apparently to bring down the dollar rate in the open market. The SBP issued a circular on Wednesday, which indicates that this is a short-term move as the permission granted to banks will end on July 31. However, currency experts and bankers dealing in the currency business said it was a vital move, particularly due to the higher rate of the dollar in the open market. The open market dollar rate is elevated by Rs30 to Rs35 per dollar. “It has been decided to allow authorised dealers to purchase US dollars from interbank for settlement of card-based cross-border transactions with IPS (International Payment System),” the SBP circular said. Banks have been buying dollars from exchange companies for the last 17 years, while last year several banks were found artificially increasing the dollar rates for their own financial gain. The SBP had allowed the banks to purchase dollars from exchange companies through a circular issued on May 17, 2006.