SBP Awards In-Principle Approval to 5 Digital Retail Banks

In a bid to foster innovation, financial inclusion, and availability of affordable digital financial services, the State Bank of Pakistan (SBP) has granted In-Principle Approval (IPA) for establishing five digital retail banks, namely HugoBank Limited, KT Bank Pakistan Limited, Mashreq Bank Pakistan Limited, Raqami Islamic Digital Bank Limited and Telenor Microfinance Bank Limited.

In a ceremony at the SBP Museum Building in Karachi today, SBP Governor Jameel Ahmad awarded IPAs to the five proposed digital banks. This event was attended by sponsors of proposed DRBs, CEOs of incumbent banks, Payment System Operators (PSOs)/ Payment System Providers (PSPs), Electronic Money Institutions (EMIs), Fintechs and SBP’s top management.

During his keynote address, the SBP Governor highlighted the significance of the initiative of introducing DRBs in the country, its profound benefits to the financial system, and some of the key challenges faced by such genre of financial players. Ahmad also mentioned a few other important regulatory initiatives in support of building a digital financial ecosystem and assured that SBP is fully committed to supporting various stakeholders for a bright, innovative, and digitally empowered future of banking in Pakistan.

The governor assured the financial fraternity of SBP’s commitment to making the financial system more inclusive, more innovative, and more responsive to the needs of the citizens of Pakistan. He also shared his expectations that post operational commencement, digital banks will help develop a digital eco-system, foster a new set of customer experiences, and provide affordable digital financial services including credit access to unserved and underserved segments of society.

Earlier, while welcoming the participants, Deputy Governor Dr. Inayat Hussain highlighted that these IPAs shall enable the proposed DRBs to proceed further with respect to achieving operational readiness in all their functions, including governance, risk management, capital requirements, compliance, and audit, consumer protection, business continuity, cyber security, product development, deployment of technological infrastructure, formulation of relevant policies, processes & procedures.

The sponsors of proposed DRBs also shared their thoughts during the program. While welcoming SBP’s landmark initiative, proposed DRBs’ sponsors highlighted that SBP’s framework for digital banks served as a comprehensive guidepost throughout the required journey of setting up digital banks in Pakistan. They were of the view that besides having its own challenges, Pakistan is full of investment opportunities wherein digital banks would offer a faster, cheaper, and an efficient solution for meeting the financial needs of the unserved and underserved segments.

They were confident that digital banks would become an essential part of the financial ecosystem, enhancing market efficiencies, providing access to a wider range of financial services, and thereby, advancing the broader agenda of financial inclusion.

Earlier this year, SBP issued a “No Objection Certificate (NOC)” to the proposed DRBs mentioned above allowing them to incorporate as a Public Limited Company with the Securities and Exchange Commission of Pakistan (SECP). These institutions were selected after a thorough and rigorous evaluation process based on a comprehensive set of parameters including fitness and propriety, experience and financial strength; business plan; implementation plan; funding and capital plan; IT and cybersecurity strategy, and outsourcing arrangements.

Upon attaining operational readiness, these institutions will be required to seek approval from SBP for the commencement of their operations.

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