The State Bank of Pakistan (SBP) has introduced a framework to grant licences for setting up complete digital banking facilities that will provide all the banking services, from account opening to deposit and lending, via digital means and the customers will not need to visit any branch physically. A statement from SBP reads; “The SBP has set the stage for the dawn of a new era for banking in Pakistan with the introduction of a Licensing and Regulatory Framework for digital banks in line with international best practices.”
Types of digital banking licenses
SBP would grant two types of digital bank licences; Digital Retail Bank (DRB), and Digital Full Bank (DFB). DRBs will focus on retail customers, while DFBs can deal with retail customers along with business and corporate entities. Meanwhile, for DRBs, the minimum capital requirement has been set at Rs1.5 billion during the pilot phase that would gradually increase to Rs 4 billion over a transition period of three years.
The SBP stated; “The framework mainly aims to enhance financial inclusion through affordable/cost-effective digital financial services and is part of SBP’s comprehensive efforts to promote digital financial services in Pakistan.” It also added that the digital banking framework will provide details for setting up digital banks as a separate and distinct category in Pakistan.
The bank will issue five licenses
Initially, the SBP has planned to issue only five digital banks’ licences, which essentially means that the SBP is expected from applicants to have a sound digital banking/governance knowledge, robust, secure, and resilient technology infrastructure, sufficient financial strength, effective data management strategy and practices.
According to SBP, setting up digital banks will also require less capital when compared to the brick-and-mortar banks currently in existence, encouraging new technology-oriented entrepreneurs to enter this new realm of business. It also added that the digital banks are required to maintain a principal place of business in Pakistan to house the offices of its management, staff, other support operations and serve as the main hub/ point of contact for various stakeholders including SBP and other regulators.
Source: The NEWS