The State Bank of Pakistan (SBP) has said that it has with immediate effect revised and streamlined instructions on forward cover facilities being provided by banks against imports and foreign private loans.
The move is aimed at ensuring that the facility is availed for genuine transactions and the customers do not hedge more than the exposure. If the facility was misused, action will be taken against the bank and the customer, SBP said.
According to a circular issued on Wednesday, SBP said maturity of forward contracts against import should coincide with the maturity of letter of credit (LC). In cases where LC is for a period of more than 12 months, the forward cover facility will be for 12 months on rollover basis or the remaining period of LC, whichever is less, subject to the condition that the forward cover should not be for less than one month.
Published in The Express Tribune, December 22nd, 2011.
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