In order to facilitate trade between Pakistan and Iran, State Bank of Pakistan (SBP) and Bank Markazi Jomhouri Islami Iran (BMJII) have devised a payment settlement mechanism to settle the trade transactions between the two countries.
A statement issued here on Tuesday by the State Bank of Pakistan (SBP) said that the mechanism would be available as an additional mode and did not restrict the use of other permissible mechanisms for settlement of the trade transactions as per instructions issued by SBP from time to time.
It said that the key features of this mechanism are as under: -This mechanism will be available for the payment of goods and services traded between Pakistan and Iran. -Transactions eligible for settlement under this mechanism will be denominated in Euro or JPY and based only on documentary Letter of Credits (L/Cs) conforming to the Uniform Customs and Practice for Documentary Credits UCP 600 published by the International Chamber of Commerce (ICC).
The modus operandi for processing of transactions under this mechanism will be as under: a) Payment of imports by Pakistan: Importer’s bank in Pakistan will credit the foreign exchange (i.e. amount due under L/C) in Nostro account of SBP for onward payment to the exporter in Iran and inform the same to SBP as per format attached as Annexure-A.
On confirmation of receipt of funds in Nostro account, SBP will instruct BMJII to pay the exporter’s bank for onward payment to exporter in Iran. b) Receipt of funds against Exports from Pakistan: On receiving payment instructions from importer’s bank in Iran, BMJII will instruct SBP to make payment in Pakistan. SBP, on receiving the instructions from BMJII, will credit the Nostro account of exporter’s bank in Pakistan in FCY. -Participating banks shall ensure that transactions conducted under this mechanism are not proscribed and do not involve individuals/entities proscribed under international sanctions.
Execution of transactions under this mechanism will be subject to compliance of all applicable foreign exchange rules and regulations. The SBP statement further pointed out that the authorized Dealers, interested to work under this mechanism, are advised to send their written consent to the Director, Domestic Markets & Monetary Management Department, State Bank of Pakistan, Karachi latest by May 31, 2017.