By Staff Reporter
KARACHI: Pakistan’s central bank has withdrawn two long-running incentive schemes that paid commercial banks to attract overseas remittances, after the cost of the programmes swelled to a level that drew the attention of the International Monetary Fund, according to central bank circulars and sources in the financial sector.
The State Bank of Pakistan (SBP) said in a circular issued on Thursday that the Sohni Dharti Remittance Programme, a rewards scheme launched to encourage banks to channel remittances through formal banking networks, would be wound down over the coming year.
“No further reward points under SDRP will be awarded from the start of FY27, from July 1, 2026,” the SBP said in the circular.
Transactions processed up to June 30, 2026 will still be reported to 1LINK, the domestic payment switch that administers the scheme, so that points can be awarded under the existing rules, the central bank said. Points already accumulated by that date will remain redeemable until June 30, 2027, after which the scheme “will become completely non-functional,” according to the circular.
In a separate circular, the SBP said it was also discontinuing the Telegraphic Transfer Charges Incentive Scheme, a decades-old mechanism that reimbursed banks for waiving transfer charges on remittances sent home by Pakistani workers abroad.
“It is informed that the TTCIS is discontinued with effect from July 1, 2026. However, the Authorised Dealers will continue to implement the scheme at their end while preserving its key features,” the central bank said.
The SBP directed authorised dealers, the banks and financial institutions licensed to handle foreign exchange, to ensure that remittance transactions meeting the criteria set out in the circular remain free of charge for both senders and beneficiaries, even after the formal incentive is removed.
Sources in the financial sector said the annual cost of the TTCIS to the central bank had climbed to between 100 billion and 120 billion rupees a year. They said the scheme had persisted even as banks adopted newer, lower-cost money transfer technologies, and that the payouts were not tied to performance benchmarks, a structure that eventually caught the IMF’s attention.
Pakistan is currently operating under an IMF programme that requires regular reviews of fiscal and monetary policy, including central bank expenditure.
Malik Bostan, chairman of the Exchange Companies Association of Pakistan, welcomed the decision but said the incentive scheme could have been retained in a scaled-back form, with a lower margin applied to remittance transactions rather than being scrapped outright.
A currency trader, who has advised on exchange rate policy, said the central bank had left untouched a separate initiative, the Pakistan Remittance Initiative, through which banks continue to earn the bulk of their profits on remittance flows.
The exact amount banks earn through the Pakistan Remittance Initiative is not publicly disclosed. But a senior banker said one large bank alone had billed 30 billion rupees this year under the initiative, an indication of the scale of incentives still being extended to lenders for attracting foreign exchange into the formal banking system.
Pakistan has posted strong growth in remittance inflows over the past three years, driven in part by a rising number of workers seeking jobs abroad. Remittances totalled $40 billion in the fiscal year ended June 2025 and are expected to reach between $41 billion and $42 billion in the fiscal year that just ended, according to central bank data cited by sources.
“The growth in remittances is almost the same in all countries exporting labour. Pakistan expects more since labour exports continued despite the war in the Gulf region,” the currency trader said.
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