9.3 Chapter 22 Returns, Inspection & FERA Enforcement

Chapter 22 is the ledger of every FX booking

A PSW FI that never appears on a Chapter 22 return is an incomplete transaction. The current Chapter 22 PDF, Returns of All Foreign Exchange Transactions (sbp.org.pk Chapter-22), opens with a record-keeping duty: ADs must maintain proper books of all dealings in foreign exchange, including transactions on non-resident accounts. They must take utmost care in compilation so that all transactions are correctly and duly reported, and they must send the returns on due dates.

Reporting is designed around actual entries in the currency accounts, so there are no suspense items left off the summary. Export bills under irrevocable LCs are reported as purchases when the currency account is posted, supported by Schedule A-1 / A-2 / A-3 and Forms ‘E’ — not when the salesperson “knows the LC will be fine.” Collection bills the AD has purchased are reported as outright export purchases after realisation is advised and the currency account is posted. Import bills under confirmed irrevocable LCs are reported as sales when documents are received and the currency account is debited, not when the importer later retires the bill. Collection import bills go on Schedule E-2 with original Form ‘I’. DDs and MTs, inward or outward, wait for the currency-account entry. Non-resident rupee accounts of foreign banks, including barter accounts, follow the same paragraph 3 logic.

Summary statements the Head Office actually bags

Paragraph 5 requires a summarised statement for each currency in which a position is maintained, plus a summary of transactions on rupee accounts of non-resident banks, for each month, reaching the respective area office of the Foreign Exchange Operations Department from Head/Principal Offices by the 5th of the following month. The three named summaries are:

Paragraph 12 then tightens despatch. Statements are made as on the last day of each month. They should reach SBP-BSC / State Bank by the 3rd of the following month from branches and by the 5th from Head Offices. Each type of statement travels in a separate envelope, labelled on the back left with AD name, period-end date, statement type, and currency (example: XYZ Bank, period ended 30-06-2015, S-1, U.S. $). Statements completed early may be sent without waiting for the rest. Barter in foreign currency still rides on S-1. Opening and closing balances come from the AD’s currency accounts; Cr. means credit balances with agents abroad (debit in own books); Dr. is the reverse. Customer FE-25 balances are excluded from the AD’s S-1 balance. Holdings of currency notes are omitted from S-1 except where the note movement itself hits the currency account (import of notes reported on Form ‘M’ / E-3; notes sent abroad for credit reported on Form R/IRV / Schedule J).

Supporting schedules — only letters Chapter 22 actually prints

Paragraph 7 lists the schedules that must accompany the summaries. Do not invent a Schedule Q or a Schedule X.

Receipts

• A-1 (V-107, combined heading A-1/O-1): export proceeds where Form ‘E’ is certified against the purchase; listed in triplicate with Form ‘E’ number and amount.
• A-2 (V-108): purchases with no Form ‘E’ certified yet — advance payments (Advance Payment Voucher, Appendix V-23) and part realisations / “Export Receipts: Form ‘E’ not attached” (V-114).
• A-3 (V-109): Form ‘E’ certified for re-export of imported goods.
• Totals of A-2 and A-3 are brought forward to A-1; the A-1 grand total must agree with the summary. If there are no certified Forms ‘E’, A-1 is still completed showing nil plus the A-2 total.
• B (V-115): purchases of a currency against sale of other foreign currencies.
• C (V-116): currencies purchased from ADs or Pakistani branches that maintain a separate currency position.
• D (V-117): currencies purchased from and sold to SBP.
• H (V-120): currencies bought against credit to non-resident bank rupee accounts; rupee total must agree with the credit side of S-4.
• J (V-110, combined J/O-3): all receipts other than exports — Forms R and IRV. R is used for amounts over USD 25,000 (or equivalent) other than family-maintenance remittances and exports, after EPD Circular Letter No. 07 of 2026 (6 April 2026) revised the Form R and IRV thresholds from USD 10,000. For USD 25,000 and under (other than family maintenance) and for all family-maintenance amounts, the AD prepares one IRV per currency, country, and purpose for the whole month. Inward remittances from individuals to individuals may be treated as unrequited family-maintenance transfers unless the beneficiary voluntarily discloses another purpose. Ultimate Controlling Parent / ultimate remitter status and country ride on Form R and Schedule J/O-3, including through the DWH portal (DAG 4) under monthly ITRS from 30 November 2011.

Payments

• E-2 (V-111): ‘I’ Forms (imports).
• E-3 (V-112): T-1 Forms.
• E-4 (V-113): ‘M’ Forms.
• F (V-118): sale of a currency against purchase of other foreign currencies.
• G (V-119): currencies sold to ADs or Pakistani branches with a separate position.
• EL-2 / EL-3 (V-132): reimbursable loans/credits (EL-2) and suppliers’ credit down payments (EL-3); these items also appear on S-1 but must not be repeated on E-2.
• LAC-NR (V-130) plus Summary Statement LAC-NR (V-131): imports under loans, credits, and grants where no remittance is involved, including invisible charges listed at the end of the schedule.

Non-resident rupee plumbing

• L (V-124): debits to non-resident bank rupee accounts covering transfers to other such accounts.
• M (V-125): debits to those accounts against sales of foreign currencies.
• N (V-126): closing balances of non-resident bank rupee accounts, grouped by country or currency group.
• R (V-129): credits covering transfers from other non-resident bank rupee accounts.
• K (V-123): not attached to S-1/S-4/S-6. It is the quarterly return of operations on private non-resident rupee accounts (other than bank accounts reported on S-4), due to the FEOD area office by 12 April, 12 July, 12 October, and 12 January. Totals of debits and credits must agree with Forms A-7. Categories: Indian nationals (other than bank branches/correspondents) and non-Indian nationals (same exclusion).

Branch O/P schedules. Branches that do not keep an independent currency position prepare combined A-1/O-1, A-2/O-2, J/O-3, E-2/P-2, EL2/EL3-P-2, E-3/P-3, and E-4/P-4 in quadruplicate. Originals through triplicates (with O/P letters deleted) go to the FEOD area office with the summary; quadruplicates (with A/J/E letters deleted) go to the office whose foreign-currency account was operated. That office amends O and P for timing differences. Head/Principal Office may submit O and P within seven days after the summary — i.e. summaries still on the 5th, O/P by the 17th.

Other Chapter 22 returns. Fortnightly outstanding import commitments (V-134 to V-137) as on the 15th and last day of each month, reaching FEOD Karachi by the 22nd and the 7th, split into specific allocation and private-sector imports. Yearly blocked accounts (V-138) and blocked securities (V-139) as at 31 December, reaching the State Bank not later than 7 January; nil returns are required. Exchange position is kept as at close of business on Appendix V-133.

ITRS, the Code Guide, and FEOD inspection

FE Circular No. 08 of 19 April 2003 moved coding onto the IMF Balance of Payments Manual 5th Edition. Code Lists 4 and 6 (visible exports and imports on A-1/A-2/A-3 and related import schedules) were replaced with HS codes. Code List 5 (invisible receipts on Schedule J) and Code List 7 (invisible payments on E-3/E-4) follow BPM5 purpose definitions. Code List 8 (department codes on E-2/E-3/E-4) was revised; code 501 is the department stub for private-party cash-resource payments. Code List 1 is document codes — a wrong document code mismatches the summary. Code List 2 is currency; Code List 3 is country. Amounts equivalent to Rs 100,000 and above must have codes checked by supervisory staff. Coding should be done by experienced staff and independently checked. Description on the form must conform to the Code Guide nomenclature.

ADs provide monthly FE data through ITRS/DAP to the Statistics and Data Warehouse Department (now also referred to in later circulars as Core Statistics Department for the Code Guide) by the due date. The Code Guide and reporting software come from that department; the FE returns index historically lived at sbp.org.pk/fe_returns. FE Circular No. 08 of 15 August 2017 still requires hard copies of specified returns to SBP-BSC area offices: manual E Forms, export advance-payment vouchers, and Appendix-V statements/returns other than Summary Statements, Schedules, EIF, EFE, M Forms, R Forms, and IRVs, plus quarterly, half-yearly, and annual FE returns.

Further published overlays a candidate must not skip:

• FE Circular No. 16 of 31 October 2006 — extra fields on export and import schedules: quantity, unit, mode of trade (Incoterm such as fob, c&f), and price per unit, through DAP from November 2006, still due by the 5th.
• FE Circular No. 02 of 2 June 2007 — NTN of the business entity on basic documents (E / I / R) and on the schedule line.
• FE Circular No. 01 of 12 January 2018 — Form-E related data electronically through DAP monthly, latest by the 4th of the following month, before ITRS. The file must include all Forms-E issued in the previous month for which shipments have been made, irrespective of realisation status.
• Foreign private loans: obtain a Statistics & DWH reference ID before the 5th of the following month, with EPD registration documents if any, lender detail, and borrower NTN/amount/currency/dates/rate/maturity (DS.DWCD.3(6)/2012-1213 dated 4 December 2012).
• FE-25 and related financial-account purpose codes sit on J/O-3 and E-3/P-3, E-4/P-4 as listed in Chapter 22 (including call-centre codes 9102 / 1102 from FE Circular No. 11 of 1 August 2006).
• PSW Chapters 12/13: report on ITRS on the basis of the FI number on the respective schedules, by the AD who settled the BDA/BCA.
• Form ‘I’ originals not yet sent: monthly statement to SBP by the 5th, with running serial numbers and reasons (paragraph 3(iii)(c)). Quadruplicate Form ‘I’ may travel with the schedule until the importer signs the original at retirement.

On-site, off-site, post-facto

Chapter 22 paragraph 5 is the inspection sentence. ADs shall maintain complete record/documents of monthly foreign exchange returns as per existing procedure and shall present the same to SBP / SBP-Banking Services Corporation for onsite inspection and offsite monitoring, as and when required. ITRS/DAP data must be accurate, complete, and in the prescribed format. Misreporting, non-reporting, or non-compliance shall attract regulatory action under the related provisions of FERA 1947. The Code Guide’s coding chapter adds that strict punitive action will be taken for incorrect or incomplete information, and that a wrong document code mismatches the summary.

Appendix V working papers still print the old SBP-BSC countersignature language: “Countersigned subject to detailed postfacto check on receipt of the relevant schedule/Statement from the Authorized Dealer concerned.” Teach that phrase as the Manual’s own model of post-facto verification: the area office may accept a summary subject to a later line-by-line check of A/J/E schedules, Forms E/I/R, and ITRS. Off-site monitoring is the DAP/ITRS file. On-site inspection is the branch file: FI numbers versus GDs versus BDA/BCA versus ITRS lines versus NTN versus purpose codes.

EPD Circular Letter No. 18 of 24 October 2003 allows all outward remittances to be effected from a treasury or any centralised branch, but the designated branch — the branch that received SBP / SBP-BSC approval for the remittance — must still report to the concerned FEOD area office.

Picture a Peshawar AD whose ITRS file lands on time with a tidy S-1 total, while three PSW import FIs have BDAs that never hit Schedule E-2, and two export GDs have no BCA and no A-1 line. Off-site, Statistics & DWH sees a balanced summary. On-site, FEOD matches PSW GD dumps to ITRS. That is the inspection the paragraph 5 duty exists to support.

Apply the Chapter 2 FERA tracks to PSW and returns defects

Chapter 2 already taught three tracks. Use them; do not invent a fourth “PSW court.”

Five defects FEOD actually sees on PSW files

1. Mismatched GDs. Chapter 13 para 6B(xii) is the test: open-account payment must not exceed PSW-declared value; LC/contract/collection value must commensurate with payment, verified from GD data PSW sends the AD. Unsatisfactory importer explanations go to FEOD Head Office. That is an operational complaint that can become a 23B file against the importer (declaration / purpose-use) and a 23K file against an AD that kept booking BDAs it never reconciled.

2. Missing e-PRCs. Chapter 12 paragraph 31 allows ADs to issue a Proceeds Realization Certificate on realisation. After electronic PRC (e-PRC) in the prescribed format, duplicate paper PRC is not required. If funds arrive at an intermediary bank, that bank reports the inward remittance in ITRS; the beneficiary bank issues e-PRC and S-PRC from complete MT-102/MT-103 information. A missing e-PRC when proceeds were never received is an overdue / s.12 problem, not a stationery problem. A missing e-PRC when proceeds were received is an AD documentation failure sitting on Chapter 22 completeness and, for the bank, 23K territory if instructions to issue e-PRC were ignored. Government departments may still ask the AD to verify realisation on Appendix V-17.

3. Unadjusted advances. Export advances need an Advance Payment Voucher with UIN, ITRS reporting of the voucher and its utilisation, shipment within one year unless FEOD extends (Chapter 12 para 27). On PSW, the AD shares the FI through EDI when the advance arrives. Import advances still run the 120 / 730-day clocks and 0.1 percent interim penalty until GD or repatriation. An FI left “open” after the mill spent the dollars on a different purpose is s.4(3) as well as a Chapter 22 A-2 / E-2 mismatch.

4. Undocumented remittances. Every S-1 sale to the public needs the matching I, T-1, or M form on E-2/E-3/E-4. Every non-export inward needs R or IRV on J. Currency-account posting without a form is exactly the suspense the paragraph 3 system forbids. “Paid from nostro, paperwork later” is undocumented for Chapter 22 purposes even if PSW shows a GD.

5. Late ITRS. Summaries: branches 3rd, Head Offices 5th; ITRS/DAP 5th; Form-E data 4th, before ITRS; O/P 17th; Schedule K 12th of the quarter-start months; blocked-account yearly 7 January; outstanding commitments 7th and 22nd. A Head Office that files ITRS on the 12th “because PSW settlement messages were late” has still missed paragraph 5. Chapter 22 says that lateness attracts FERA regulatory action; for the AD, map that to s.23K, not to a Tribunal five-year story unless the facts also support a s.23 complaint.

Rectification pathways that are actually published

• FI amendment with documentary evidence, or cancellation before BDA/BCA or GD attachment (Chapters 12/13).
• AC/DC MIS replacement of a wrongly associated FI (PSW FAQ).
• Bank-to-bank transfer after at least one GD, with the transferee owning later reporting.
• FEOD Head Office settlement when the AD cannot settle the FI; WeBOC EIF cancel/settle/transfer by Director FEOD in the residual channel.
• FEOD extension of open-account import payment beyond one year, and of export-advance shipment beyond one year, on justified request through the AD.
• Repatriation then settlement with remarks when advance goods fall short.
• Form ‘I’ original submitted after importer signature, with the monthly missing-originals statement by the 5th.
• Head Office O/P schedules by the 17th without moving the 5th summary deadline.
• Show-cause and hearing before a 23K penalty (officer not below Assistant Director to issue notice; not below Senior Joint Director to impose); appeal to a designated Deputy Governor within 30 days, decision within 90 days.
• FERAB within 30 days (board may entertain up to 60 days) from a 23B order, penalty deposited or secured; High Court in three months from a Tribunal judgement, not as a shortcut around FERAB.

A Multan AD that finds, on the 2nd of the month, that three PSW BDAs were omitted from E-2 still has a branch-level window before the 3rd despatch and a Head Office window before the 5th ITRS cut-off. After those dates, the published path is complete-and-correct reporting plus whatever FEOD / 23K process the breach has already triggered — not a silent replacement file that pretends the 5th never existed.

Independent OpenExamPrep takeaway: PSW moved the form, Chapter 22 still owns the ledger, and FERA still owns the forum. Name the schedule letter you saw in Chapter 22, the FEOD inbox in Karachi or the area office, and the section 23 / 23B / 23K track that fits the person who defaulted.