KARACHI, Sept 28: Bankers and currency dealers firmly believe that the latest attempt by the State Bank to support the local currency is not sustainable. They suggested measures on the pattern of Reserves Bank of India to boost the local currency.

The Indian currency had lost about 20 per cent against the dollar in this calendar year mainly because of widening current account deficit which was $82 billion in the last fiscal year, and this year the expected deficit is $70bn.

Pakistani rupee had also lost 13.36pc since Jan 1 last, but recovered by 5pc on Thursday last when the State Bank injected up to $50-$60 million in the inter-bank market.

A senior banker said that the State Bank must understand regional developments for protection of local currencies against the dollar while a detailed study on RBI strategy is required.

In a bid to attract non-resident Indians deposits, the RBI liberalised bank deposit schemes and some banks raised interest rates for overseas Indians this month.

To spur banks to attract more dollar deposits from non-resident Indians, the RBI exempted these deposits from cash reserve ratio and statutory liquidity ratio requirements.

Like RBI’s above steps, the State Bank can take decisions to improve deposits as well as remittances being sent by overseas Pakistanis, said a banker.

The Indian government increased import duty on gold and silver to 10pc to rein in imports. The RBI tightened norms for gold imports by linking them to exports.

In Pakistan, the finance ministry suspended import of gold for one month in August, but resumed imports without imposing any duty. Currency dealers are complaining that gold smugglers have once again became active.

Recently currency dealers asked for 15pc import duty on gold.

India tightened credit availability for gold imports. The RBI reduced amount of dollar resident Indians can take out of the country from $0.2m to $75000 in a financial year.

“Pakistanis are allowed to take out unlimited amount from the country which must be reviewed, particularly when reserves fell to below $5bn,” said Malik Bostan, Chairman, Exchange Association of Pakistan.

The Indian government has banned duty-free import of flat-screen televisions. It is estimated that more than 1m TV sets were brought into the country last year.

“There is a need in Pakistan to review the import list which includes hundreds of luxury items worth several billion dollars,” said Amir Aziz, an exporter of textile-based products who fears that devaluation of rupee would increase cost of production.

The Indian government would soon issue quasi-sovereign bonds to help bring more dollars into the country. Under the scheme, state finance companies would sell these bonds to fund infrastructure development.

Pakistan may see this as an option as a few companies, particularly in oil and gas sector, are able to sell their bonds, said S S Iqbal, a banker and expert on currency and bonds market.

In another step, the RBI tightened liquidity to reduce availability of rupee in the banking system to reduce rupee volatility.

The State Bank has increased the interest rate to reduce availability of local currency in the banking system, but bankers said more tightening with higher interest rate can produce the desired results.