Pakistan Remittance Charges UAE: SBP Ends Incentive Schemes, But Transfers Remain Free for Senders and Recipients

The State Bank of Pakistan (SBP) has recently announced the termination of two long-standing incentive programs for banks and remittance providers, raising concerns among overseas Pakistanis regarding the costs associated with sending money back home. Effective July 1, 2026, this policy change eliminates government-funded reimbursements previously provided to financial institutions for facilitating overseas remittance transactions. However, the SBP assures that eligible remittance transfers will continue to be free for both senders and recipients.

Changes Implemented by the State Bank of Pakistan

On July 2, the SBP issued separate circulars announcing the discontinuation of two key programs:

• Telegraphic Transfer Charges Incentive Scheme (TTCIS)
• Sohni Dharti Remittance Programme (SDRP)

The TTCIS allowed banks, exchange companies, and authorized dealers to receive reimbursements from the central bank for processing eligible remittance transfers. This arrangement enabled overseas Pakistanis to send money home without incurring transfer fees, while recipients received the full amount without deductions. With the cessation of this scheme, those reimbursements will no longer be available.

Despite the discontinuation, the SBP has mandated that participating institutions continue to implement the core features of the program, ensuring that eligible home remittance transactions remain free for both senders and beneficiaries. Additionally, the SDRP, which rewarded overseas Pakistanis with loyalty points for using formal remittance channels, has also been terminated.

Impact on Customers

For the majority of overseas Pakistanis, the recent changes are not expected to result in increased costs. The SBP has explicitly instructed banks and exchange companies to maintain the provision of eligible remittance services without charging customers.

Ali Al Najjar, Chief Executive Officer of Al Ansari Exchange, indicated that the company does not foresee any impact on remittance costs or customer experience due to the policy change. He stated, “We do not currently anticipate any impact on customers’ remittance costs.” Reports suggest that eligible home remittance transactions will continue to be free for both senders and beneficiaries. Al Ansari Exchange noted that Pakistan remains one of its largest remittance corridors, and the recent policy primarily affects incentive arrangements within Pakistan’s banking sector rather than cross-border money transfers.

Reasons Behind the SBP’s Decision

While the SBP did not provide a detailed rationale for the discontinuation of these programs, sources within the banking industry indicated that the cost of maintaining the incentive schemes had escalated significantly as remittance inflows reached record highs in recent years. Discussions with the International Monetary Fund (IMF) also scrutinized the sustainability of government incentive payments amidst rising remittance volumes.

Rather than eliminating free remittance services, the SBP has opted to remove the reimbursement mechanism that compensated banks and exchange companies for processing eligible transfers.

Concerns Among Banks

Although customers are unlikely to experience immediate changes, banks have expressed concerns about absorbing costs that were previously reimbursed by the central bank. Zafar Masud, Chairman of the Pakistan Banks Association and CEO of Bank of Punjab, stated that banks are currently consulting on how to manage future remittance costs. Similarly, Atif Bajwa, CEO of Bank Alfalah, warned that the decision could reduce banks’ profitability, as participating institutions will now bear expenses that were previously covered under the incentive scheme. Despite these concerns, the Pakistan Banks Association has reaffirmed its commitment to supporting overseas remittance flows.

Limited Impact on Remittance Inflows

Banking experts generally believe that the policy change is unlikely to significantly diminish remittance inflows. Analysts have noted that the TTCIS had become less relevant due to advancements in digital banking, which have substantially lowered the costs associated with processing international money transfers. Furthermore, Pakistan’s banking sector remains one of the country’s most profitable industries, with banks reportedly earning around Rs640 billion during the calendar year 2025. Profits continued to grow during the first quarter of 2026.

Incentives available under the Pakistan Remittance Initiative (PRI) will remain unchanged, allowing banks to continue receiving incentives linked to the volume of remittances processed through formal channels.

Transition Period for Sohni Dharti Reward Points

The SBP has introduced a one-year transition period for overseas Pakistanis who earned reward points under the Sohni Dharti Remittance Programme. Points accumulated on eligible remittances processed up to June 30, 2026, can be redeemed until June 30, 2027. After this date, the program will officially close.

Future Outlook for Remittances

Despite the termination of the two incentive schemes, the SBP remains optimistic about the future of workers’ remittances. SBP Governor Jameel Ahmad stated that remittances are expected to continue growing during FY2027, driven by overseas Pakistanis and sustained labor migration, particularly to Gulf countries. Al Ansari Exchange also anticipates that customers will continue to utilize trusted remittance channels. Al Najjar remarked, “We anticipate overseas Pakistanis will continue sending money home to support their families and meet regular financial commitments, with established channels, including our digital platforms, remaining available.”

Pakistan received nearly $40 billion in workers’ remittances during FY2025, making overseas transfers one of the country’s most vital sources of foreign exchange. Experts project that remittance inflows may rise further to between $41 billion and $42 billion during FY2026, bolstered by ongoing overseas employment and increasing use of formal banking and exchange company channels.

For Pakistanis living in the UAE, the latest policy primarily alters how banks are compensated rather than how customers send money home. As it stands, eligible remittance transfers are expected to remain free, allowing overseas workers to continue supporting their families without incurring additional transfer charges.

Source: timesofdubai.ae

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Published on 2026-07-15 12:42:00 • By the Editorial Desk