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Banks that overcharged for LCs must reimburse customers: PALSP

 The State Bank of Pakistan (SBP) was asked by the Pakistan Association of Large Steel Producers (PALSP) to reimburse importers who were overcharged by banks while opening Letters of Credit (LC) at higher spot rates, resulting in unexpected gains.

The PALSP expressed its worries over the problem that has left the steel industry fighting for survival during this economic crisis in a letter sent to the SBP governor.

Wajid Bukhari, Secretary General PALSP, stated that the SBP has lately discovered that banks were involved in overcharging importers for opening LCs.

"The SBP regulates them to decide the rate of exchange at which LCs function, even if banks have discretion over the issuance of LCs," he said. In response to the claimed banks' market manipulation and windfall profit-making at the expense of our struggling industries, the SBP instituted regulatory action against them, he continued.

The letter went on to say that the alleged exchange rate manipulation had a significant negative impact on the sector, resulting in losses worth millions of rupees in only one quarter. The steel sector, which was already experiencing a serious liquidity crisis, was forced to halt operations since they couldn't make a profit. According to the group, the national economy also took a significant hit from this.

In a request for SBP to set up a committee to assess the financial impact brought on by the fraud and alleged manipulation by the involved banks, PALSP stated, "The SBP is requested to fairly compensate the business community, and steel industry in particular, from the fines being collected for the aforementioned offences.

"Banks have been gambling on the rupee parity at the expense of the nation and that has caused losses to the steel industry as well," Arif Habib Commodities CEO Ahsan Mehanti said in an interview with the Express Tribune. LCs established at sums greater than the spot rates went unnoticed, and the responsible banks ought to be punished in addition to making restitution.

Ismail Suttar, president of the Employers Federation of Pakistan, continued, "The requests made by PALSP cannot be met by SBP because the central bank is a regulatory organisation responsible for supervising banks. SBP explicitly states that it does not compensate consumers for contractual duties that they have broken.

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