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Foreign Banks Demand 10% Commission for Validating LCs

Foreign Banks Demand 10% Commission for Validating LCs

Foreign banks now demand a 10% commission before endorsing letters of credit (LCs) for importable goods Insiders from the banking industry told Bloomberg. Insiders in the banking sector have revealed that foreign banks are now demanding a 10 percent commission for endorsement of letters of credit (LC) for consignment (imported goods). Sources said as reported by Dawn newspaper. This move has come at a time when the country is struggling with fiscal challenges, due to which international financial institutions are losing confidence in the country’s banking system.

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Problems with Foreign Exchange Reserves

Depreciation of the rupee, problems with foreign exchange reserves and credit provision have increased business concerns in Pakistan. LCs issue by Pakistani banks are no longer consider credible by international exporters. Banking professionals claim that such LCs require support from globally recogniz foreign banks.

Deteriorating Economic Conditions

A senior banker said that growing concerns and deteriorating fiscal conditions have weakened Pakistan’s perception abroad, the price is high as foreign banks are now demanding a 10 percent commission on each consignment. Domestic banks have been making significant profits from endorsing local LCs for over a year now as banks in Pakistan have generally lost their credibility.

Foreign Banks
A 10% commission is now being demanded by foreign banks to endorse letters of credit (LC) for importable goods, banking insiders said. Read More

International Monetary Fund

Pakistan lifted import restrictions after signing a $3 billion loan deal with the International Monetary Fund (IMF) in June, but observers said imports under the IMF’s short-term deal were limited. Exemption and directives to maintain a uniform currency exchange rate have intensified the country’s fiscal woes.

Foreign Banks Hiked Commissions

Imports have doubly hit as foreign banks hike commissions and the dollar strengthened against the rupee, highten import costs. The impact is manifesting in many ways, for example, the appreciation of the dollar is increasing the cost of imported fuel, which in turn increases energy prices and has an inflationary impact on the poor. have been.

Complex Economic Issues

Analysts believe that the caretaker government appears unable to address these complex fiscal issues, with political instability complicating matters. Furthermore, rampant corruption along with rampant smuggling of commodities. Like dollars, flour, sugar, and fuel are causing law and order challenges. And a headache for the watchdog government. Unregulate trading in foreign currencies. Has increased the open market rate of the dollar to about 9 percent above. The banking rate, a difference much higher than the decent limit of 1.25 percent under the IMF agreement. This situation created potential snag for the country’s fiscal managers. At that time. well, when they sit down with the IMF team for the next bailout review.

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