State Bank of Pakistan (SBP) decided to provide flexibility to banks allowing them to outsource the function of the currency process of banknotes.
The banks may outsource their cash processing functions (sorting, authentication, and packing) for all denominations of banknotes to such cash processing companies having the capacity to process the cash in full conformity with the CMS instruction.
The Currency Management System (CMS) has given the flexibility to banks to either have their own cash processing facilities or make arrangements with other banks having the required capacity to get their cash processed, the circular issued by SBP said.
The outsourcing of processing of higher denominated banknotes (1,000 and 5,000) was, however, kept restricted to other banks only having the requisite capacity as CMS did not allow outsourcing of this function to commercial cash processing companies.
The flexibility for banks will get their cash processed speedily and encourage greater innovation and development of cost-effective models for cash processing. Banks shall ensure that the cash processing company (service provider), if any engaged, operates in full conformity with the CMS instructions.
It is reiterated that compliance with the CMS instructions is the responsibility of banks outsourcing cash processing and any non-compliance of instruction by the service provider shall, for all intents and purposes be treated as non-compliance by the concerned bank, making the bank liable to penal action under the CMS.
Banks shall contractually bind the service provider that SBP may conduct surprise visits of its CPCs, to assess the control environment and regulatory compliance regarding CMS. The banks while engaging the service provider shall ensure compliance with SBP instructions on outsourcing arrangements with third parties.
Banks shall report all such arrangements to Finance Department SBP along with details of branches and ATMs to be fed through the outsourced service providers within seven (7) days of the signing of a contract with the service provider.
The banks shall also share the address(es) of the cash processing centers of the service provider and contact details of the CEOs and other senior management for SBP’s information and record.