No bar on opening bank branches in Iran: SBP governo

KARACHI: The State Bank of Pakistan (SBP) has not barred any bank from opening its branches in Iran for carrying out normal operations including trade finance, SBP Governor Salim Raza said on Saturday.

“Banks have to follow international guidelines, which do not allow undertaking business transactions with Iranian institutions,” he said here in a meeting with the Rice Exporters Association of Pakistan (REAP).

“There are international sanctions (on Iran) and banks have to work under those guidelines,” he said, adding “but certainly we have not stopped any bank from opening its office in the neighbouring country.”

Banks around the world including those operating here are affected by the US government’s Office of Foreign Assets Control (OFAC) which bans every commercial activity with the Iranians.

The SBP governor’s response followed appeals by REAP members to encourage banks to open their branches in Iran, which imports large quantities of Pakistani rice. They also highlighted the indifference of commercial banks to enhancing finance to the trade lobby.

Admitting that he was unaware of the reasons hampering financing to a trade which fetched $2.2 billion in exports last year, Salim Raza said he would sit down with the exporters and personally review the matter.

“There is a lot of room for corporatisation and brand building when it comes to rice export,” he said, adding “logistics and warehousing also need to be strengthened.”

He also acknowledged that the government should play its role in removing supply-side bottlenecks rather than interfering in the market.

Earlier, members of the Rice Exporters Association of Pakistan pointed out that banks had not endeavoured to develop new financing products for rice export as still loans were extended on the basis of collateral and equity.

They said there was a need to understand the whole value-added chain involved in the trade as its improvement could bring dividends by increasing exports. Out of over one thousand exporters 20 per cent contributed 80pc of exports, indicating the need to increase the share of small traders, they said.

Between July and January 2008-09, export of rice has been to the tune of $1.39bn against a full-year target of $2.4bn.