KARACHI - The State Bank of Pakistan (SBP) and Bank Markazi Jomhouri Islami Iran on Friday signed an agreement on Banking and Payment Arrangement (BPA) in Tehran.

SBP Deputy Governor Riaz Riazuddin and BMJII Vice Governor Ghulamali Kamyab have signed the agreement on behalf of their respective central banks, said a press release of the central bank. The objective of this agreement is to provide a trade settlement mechanism to promote trade between Pakistan and Iran. This mechanism will be used for the payment of trade conducted via letter of credit (L/Cs) and in accordance with international laws and regulations.

In the next step, both the central banks will invite banks in their respective jurisdiction to act as authorised banks for undertaking trade transactions under this BPA. Details of the mechanism will be issued by SBP in due course. State Bank of Pakistan expects that this agreement will help in strengthening the trade links between the two countries.