The Pakistan Banks Association (PBA) has issued a detailed response rejecting what it describes as misleading and damaging claims circulating in recent press reports regarding government incentives tied to remittances. These reports suggested that subsidies provided to banks under remittance schemes were economically wasteful, a narrative the PBA warns could harm public confidence at a time when Pakistan’s economic stability is heavily reliant on secure formal remittance flows.
Tracing the roots of this policy, the PBA pointed out that when the Pakistan Remittance Initiative (PRI) was initially crafted in 2008, formal remittances into the country were only about USD 6.5 billion. Meanwhile, an estimated USD 20 billion moved through informal hawala and hundi networks, placing enormous pressure on the country’s balance of payments. In response, the PRI was formally launched in 2009 as a locally driven effort to channel these flows through transparent banking systems.
Under the scheme, the government offered a modest incentive equivalent to SAR 20 per transaction, roughly 2.25% of an average USD 500 remittance. Compared to costly foreign borrowing, often exceeding 3.5% interest with additional long-term repayment and currency risks, the PRI incentives were one-time payments in PKR, free from any repayment obligations. According to the PBA, this structure provided Pakistan with a practical tool to safeguard foreign exchange reserves without loading the country with additional debt.
Dispelling the idea that banks benefit unduly from these incentives, the PBA clarified that the financial sector often bears considerable costs to maintain competitiveness. Banks routinely pay higher rebates and premiums — in some cases PKR 3-5 more per USD over interbank rates — to ensure that remittances flow through official channels rather than reverting to undocumented networks. These costs are only partly compensated by government incentives, with the rest absorbed by banks themselves, often resulting in direct losses incurred for the broader benefit of maintaining liquidity for imports and stabilizing the economy.
The PBA also underlined that almost 90% of rebates before FY25, and more than 100% under the current structure, are passed directly to international money transfer partners, leaving virtually no margin for banks. Meanwhile, banks must pay these partners upfront while awaiting government reimbursements, which are frequently delayed by several months, adding further working capital strain.
In addition, all remittance data under PRI is certified internally by banks and then reviewed by the State Bank of Pakistan (SBP) before any incentive disbursement. This layered oversight, alongside rigorous AML/CFT checks and independent audits, directly counters allegations of data manipulation, laundering, or facilitation of tax evasion. As for questions on categorizing IT and freelance earnings as remittances, the PBA labeled this a regulatory policy matter rather than bank malpractice.
The association cautioned that much of the criticism appears to be fueled by groups with vested interests who prefer informal channels. Weakening public trust in formal banking, it argued, could drive funds back into undocumented flows, threatening Pakistan’s compliance with international financial standards and potentially risking global blacklisting.
In closing, the PBA maintained that while operational aspects of PRI can be refined, the program remains a critical pillar of Pakistan’s financial autonomy. By securing transparent and traceable inflows, banks help reduce reliance on foreign loans and ensure economic resilience. The association reaffirmed its commitment to collaborating with policymakers to strengthen these frameworks, but firmly rejected narratives that undermine the banking sector’s vital role in national economic security.