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January 4, 2022

State Bank of Pakistan launches new framework for digital banks

Pakistan’s central bank has launched a new licensing and regulatory framework for digital banks.

The State Bank of Pakistan (SBP) said that this is the first step towards setting up a completely digital bank that will offer all banking services.

The new framework is part of SBP’s efforts to digitise the banking and payments services in the country and increase financial inclusion via cost-effective digital financial services.

SBP’s other initiatives in this direction include customers’ digital on-boarding, Roshan Digital Account, Raast – Instant Payment System, Electronic Money Institutions licenses and Asaan Mobile Accounts.

SBP’s framework provides details for setting up digital banks such as licensing requirements, potential sponsors, and permissible use-cases during different phases.

Under the new framework, SBP plans to offer two types of digital banking licenses – Digital Retail Bank (DRB) and Digital Full Bank (DFB).

DRBs will be focused on retail customers, while DFBs can cater to retail customers as well as business and corporate clients.

SBP noted that the “demand for banking services is also faith sensitive”. Therefore, it will license DRBs and DFBs to offer both conventional and Islamic banking services.

During the pilot phase, the minimum requirement of capital for digital retail banks is $8.5m. This capital will increase to $22.6m over three years.

The central bank said it will issue up to five digital bank licenses and the application window is open until 31 March 2022.

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