Banks that overcharged for LCs should pay up: PALSP

The Pakistan Association of Large Steel Producers (PALSP) requested the State Bank of Pakistan (SBP) to compensate importers who were overcharged by banks in opening Letters of Credit (LC) at higher spot rates, making windfall profits in the process. In a letter addressed to the SBP governor, PALSP raised its concerns over the issue that has left the steel industry struggling to survive in this economic downturn. The SBP had recently observed that banks were involved in overcharging importers for opening LCs, said Wajid Bukhari, Secretary General PALSP. “Although banks have discretion over the issuance of LCs, the SBP regulates them to determine the rate of exchange at which LCs work,” he said. The SBP took regulatory action against the alleged banks for manipulating the market and making windfall profits at the cost of our struggling industries, he added. The letter further stated that the said exchange rate manipulation impacted the industry tremendously, causing losses amounting to millions of rupees in the span of just one quarter. The steel industry, which was already facing a severe liquidity crunch, was forced to shut down productions as they were unable to break even. This was a huge blow to the national economy as well, said the association.