2.2 Institutional Roles: SBP, EPD, FEOD & Inter-Agency Coordination

SBP Act 1956 versus FERA 1947: two statutes, one central bank

Candidates lose easy marks by treating “SBP” as a single law. The State Bank of Pakistan Act, 1956 is the organic statute of the central bank: it establishes the State Bank, and it is the home of functions such as dealing in gold, silver and approved foreign exchange and Special Drawing Rights (including the section 17 references that FERA itself uses when it defines “foreign exchange”). SBP also manages foreign exchange reserves and related market operations under that institutional mandate. FERA 1947 is a different instrument. It is a control statute. It tells persons in Pakistan what they may not do with payments, FX, securities, currency and bullion unless permission or exemption exists, and it appoints the State Bank as the day-to-day administrator of that control.

Manual Chapter 1, paragraph 7, is the sentence to memorise: under the Act (FERA), the State Bank is responsible for day-to-day administration of foreign exchange policy, exercised through its Exchange Policy Department (EPD). Foreign exchange operational matters are handled through the Foreign Exchange Operations Department (FEOD), SBP Banking Services Corporation (SBP-BSC), Head Office, Karachi. SBP-BSC is the operational arm created under the SBP Banking Services Corporation Ordinance, 2001; it is not a second central bank and it is not a substitute for EPD on policy.

Federal Government directions also sit above the operating departments. FERA section 25 lets the Federal Government give the State Bank general or special directions for the purposes of the Act, and the State Bank must comply. That is why an Import Policy Order issued by the Ministry of Commerce, or a Gazette notification under FERA, can bind an AD even when last year’s Manual PDF still shows an older paragraph.

What this split means on a Monday morning in an AD

If the question is “may we, as a class of banks, do this product at all?” or “please waive a Manual limit,” you are in EPD territory. If the question is “this particular exporter’s bill is overdue; this particular open-account import needs an operational view; this particular public-sector contract needs an EEC,” you are in FEOD territory. If litigation on non-realisation has started, Chapter 1 sends the overdue export file to FEAD. Sending all three to “SBP, I.I. Chundrigar Road” without a department is how files bounce.

Exchange Policy Department: policy, circulars, licences, waivers

EPD is the policy brain. FE Circulars and EPD Circular Letters that rewrite Manual paragraphs are EPD instruments. AD licences for scheduled banks and restricted authorizations for DFIs and hotels are listed in Chapter 1 Annexure A as EPD matters. So are policy waivers, cases with no explicit Manual guideline, many investment and FCY-borrowing policy files, merchanting-trade LC issues that exceed delegated authority, CIF/CIP or transferable LC clarifications, and designation of ADs for dividend/disinvestment remittances to non-resident shareholders.

Chapter 1 is strict about how an AD writes to EPD. Refer only what the bank is not authorised to approve. Satisfy yourself about bonafides, beneficial ownership, correctness of statements, and genuineness before you write. Use prescribed forms and documents. References seeking clarification, and all cases other than routine prescribed statements, must be signed at least at the level of the respective Departmental / Business / Group Head. Files that skip that protocol are returned in original. A relationship manager in Faisalabad who emails EPD a half-complete waiver because the customer is “waiting at the counter” has not started a valid reference.

FEOD of SBP-BSC: operations, overdue follow-up, complaints, field offices

FEOD is where export realisation clocks, import operational exceptions, and a long list of commercial and private remittance operational files actually live. Annexure B of Chapter 1 is the AD’s routing list: realisation of export proceeds beyond six months, adjustments and refunds of export advances, export overdue cases and related litigation (until FEAD takes over after litigation starts), open-account imports, LCs for import of services, Exchange Entitlement Certificates, operational EIF/EFE matters still in the Manual’s operational lists, many Appendix X service remittances, oil and gas related purchases, and a long tail of operational insurance, guarantee, and assignment-account items.

Overdue follow-up is not a courtesy call programme. Non-realisation of exports is a FERA offence path (section 12 and the 23B track). FEOD’s job is to run the operational chase and, where the Manual and circulars require, to complain. FEAD then adjudicates. ADs are independently exposed under section 23K if their own reporting, due diligence, or instruction-compliance failed. Treat FEOD queries as supervisory operations, not as optional correspondence.

FEOD field-office jurisdiction (Manual Chapter 1)

The Manual still publishes a geographic map. Use the office that owns the division, not the office nearest the customer’s cousin.

A Sialkot AD that sends a Narowal exporter’s overdue pack to Lahore “because the Group Head sits there” is ignoring published jurisdiction. Field offices exist so operational files are worked where the trade sits.

FEOD also handles complaints in the operational sense: exporter/importer disputes about realisation, refund of unused advances, and the evidence trail that later supports a FEAD complaint. Keep the file complete. Section 3(4) declarations, SWIFT, PSW financial-instrument history, and shipping evidence are what FEOD and FEAD will read, not a relationship memo.

Customs/FBR, SECP, Ministry of Commerce: the AD is not the only gate

Foreign trade in Pakistan is a multi-statute operation. FERA and the FE Manual govern how value is paid, received, and reported. They do not repeal the Customs Act, 1969, the sales-tax and income-tax machinery of the Federal Board of Revenue, company law administered by the Securities and Exchange Commission of Pakistan, or the Imports and Exports (Control) Act, 1950.

Pakistan Customs / FBR. Goods cross the border on a Goods Declaration in the Pakistan Single Window environment. Duties, taxes, prohibited and restricted lists at the tariff line, and Customs valuation live here. FERA section 8(3) even deems certain currency and bullion import/export restrictions to have been imposed under section 16 of the Customs Act, 1969, without prejudice to FERA section 23. An AD that has a clean Form I but a blocked GD has not “done trade”; the consignment is still a Customs file. Conversely, a GD that is green-channelled does not prove that FERA purpose-use, advance-import clocks, or export-realisation rules were met.

Ministry of Commerce. Import Policy Orders and Export Policy Orders are made under section 3 of the Imports and Exports (Control) Act, 1950. The current named orders opened for this chapter are the Import Policy Order, 2022 (S.R.O. 545(I)/2022) and the Export Policy Order, 2022 (S.R.O. 544(I)/2022), as amended by later SROs. IPO/EPO decide whether a product may be imported or exported at all, and on what conditions. Cash-margin lists and some import restrictions are circular-driven at the SBP layer; do not recite a frozen HS list from memory. The AD’s job is to check the current IPO/EPO plus the current SBP circular, not to assume that last year’s textile exception still exists.

SECP. Exchange Company formation under FERA section 3AA is a company-law event: SBP issues a no-objection to SECP after SECP intimates that it has received an application to form the company. RFEC still sends existing ECs to SECP for authorised and paid-up capital increases, with a follow-up information pack to SBP. Foreign-company branch and liaison setups, and the corporate identity of importers/exporters, are SECP facts the AD’s CDD file must match. A “trading concern” that is not the legal person named on the GD and on the financial instrument is a coordination failure, not a formatting issue.

Who an AD writes to for what

Official meetings called by SBP or SBP-BSC are not optional networking. Manual Chapter 2 requires that the concerned executives or senior officials attend when called so the institution’s stance is on the table. Sending a junior substitute to a FEOD overdue review because the Group Head is in a credit committee is a governance miss, not a diary conflict.

The practical exam picture is a triangle. EPD writes the rule. FEOD polices the transaction. Customs and Commerce decide whether the goods may move. SECP tells you who the legal person is. The AD sits in the middle and is paid to know which vertex owns the bottleneck.