In the wake of a coronavirus outbreak in the country, State Bank of Pakistan (SBP) has shared precautionary tips for the public, advising minimum or no use of currency notes in their routine transactions.
The central bank has urged commercial banks to encourage the public to use ATMs, online and mobile banking and phone banking on a daily basis.
The circular states:
Take precautionary measures such as enhanced usage of cash counting machines, encouraging customers to use Alternate Delivery Channels (ADCs), etc. to reduce contact with currency notes and other financial instruments. Further, make elaborative arrangements to provide uninterrupted financial services through ADCs (e.g. ATMs, online banking, transactions through call centers, etc.).
SBP has directed banks to reassess Business Continuity Plans (BCPs) in the existing situation and develop suitable remedial plans, including allocation of human and other resources, for their effective implementation.
The banks are directed to carry out an impact analysis to assess the consequences on business and operations and enhance the monitoring frequency of key risk areas like credit, capital market, and foreign exchange exposures.
Banks are further advised to reach out to key payment and settlement system partners such as NIFT, 1Link, NCCPL, and CDC to ensure continued availability of their services.
Banks Asked To Setup a Committee to Address Compliances
In order to implement the above instructions and take other necessary measures, a senior committee should be established to ensure that the banks’/DFIs’/MFBs’ responses towards risks arising out of COVID-19 are robust and adequate.
SBP advised the banks to adopt effective measures to help fight the spread of coronavirus (COVID-19) and to ensure the availability of uninterrupted financial services to the customers.
They are directed to implement the guidelines issued by the World Health Organization, the Government of Pakistan and the provincial governments, in letter and spirit, to ensure the safety and health of employees and cleanliness at the workplace.
Limited Alternative Banking System
As the cases of coronavirus being reported are increasing, fear and panic is widespread among the banks’ customers and bankers. Bankers are of the view that branches are still overcrowded in many areas with no precautionary measures adopted by banks.
Pakistan’s economy is largely cash-based with an alternate banking system or e-banking channels including plastic money, ATMs, online banking and etc.
As per the latest SBP’s figure, there are 15,575 branches by various banks operating in the country. The number of ATMs and POS stands at 14,957 and 56,824 respectively.
The number of mobile phone and internet users stands at 6.3 million and 3.3 million. The facility of call center/IVR is being used by over 30 million registered users with their respective banks but the utility of banking services is limited.
The use of digital channels is on the rise but the volume of currency notes used in their daily lives is prominent, which can be extremely hazardous in a situation where the pandemic could spread through the currency notes.
In Q1 2020, transactions through e-banking channels such as ATMs, POS and etc stand at Rs. 15.6 trillion whereas the transactions through paper-based tools including cheque, pay order, demand drafts stands at Rs. 33.6 trillion.
The overall currency in circulation stands at Rs. 5.5 trillion in the country as per the latest data of SBP.
SBP claims that it is continuously engaged with the industry to understand issues and challenges and formulate a policy response accordingly.
In this vein, the bank has conducted a flash survey covering all banks, Development Financial Institutions (DFIs) and Micro Finance Banks (MFBs). The survey results show that the industry has started to take preventive measures to limit adverse repercussions. However, the results also indicate diversity among the industry participants in terms of their readiness to handle worst-case scenarios.