SBP Launches Licensing and Regulatory Framework for Digital Banks

 
 
 
Posted by: IIPS Category: Daily Insights Tags: Comments: 0

The State Bank of Pakistan (SBP) has introduced a framework to grant licenses for digital banks to provide bank services, from account opening to deposit and lending through digital processes to the customers. This initiative aims to improve financial inclusion by affordable and cost-effective digital financial services and is part of the government’s efforts to promote digital banking services in Pakistan.

The framework requires digital governance, robust, secure and resilient technology infrastructure, effective data management strategy and practices, potential sponsors, and permissible use-cases during different phases. The new regulatory framework will provide a complete method for setting up digital banks as a separate and distinct category in the country that offers all kinds of financial products and services through electronic channels instead of physical branches.

The Central Bank has initially issued licences to five digital banks to attract players with a strong value proposition, sufficient financial strength, and technical expertise due to Pakistan’s international practices and overall banking situation. These digital bank licenses are of two types, Digital Retail Bank (DRB) or Digital Full Bank (DFB). DRB will deal with retail customers, and DFB will focus on business and corporate entities.

However, the present government is focusing on digitalising banking and payment solutions in the country. Recently the government has introduced a series of initiatives to promote digitalisation of the banking system that has opened new opportunities for innovative solutions, including Roshan Digital Account, Raast — instant payment system, customers’ digital on-boarding, electronic money institutions licences, and Asaan Mobile Accounts.

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IMARAT Institute of Policy Studies

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