On June 20, 2011 the State Bank of Pakistan (SBP) introduced a new circular that significantly modifies the regulation for branchless banking in Pakistan. We talked to Mr. Mansoor Hassan Siddiqui, the Director for Banking Policy and Regulations Department at SBP about why they made these changes and the impact that they expect to see as a result.
In March 2008, the State Bank of Pakistan introduced some of the first regulations anywhere in the world designed specifically to encourage branchless banking. The regulations allowed a number of different business models and permitted agents to deliver financial services on behalf of banks. Three years later the State Bank has significantly amended the regulations. Among the changes are:
Rationalization of account opening process and requirements by removing the need to capture biometric fingerprint information at the time of account opening for the lowest value accounts. The requirement to capture a digital image of the account holder (which can be done at far cheaper cost with a low cost camera-phone) remains to ensure the physical presence of the customer at the time of account opening.
Substantial increases in the transaction limits and elimination of the maximum balance, which remedies the situation that previously existed where a customer could perform more transactions “Over-the-Counter” than they could through their own account. Bill payments are no longer included in the transaction limits.
Introduction of a new “Level 0″ account with the lowest transaction limits which can be opened electronically with no physical paperwork required.
The new category of Level ‘0’ BB Account will provide flexibility to the Agent and the
Financial Institution (FI) for opening of basic BB accounts while rationalizing the ‘Know Your
Customer (KYC)’ requirements in line with the transaction limits.
The following transaction and maximum balance limits on Level “0” Accounts shall be
applicable: Daily Limit Rs. 15,000, Monthly Limit Rs. 25,000, Annual Limit Rs. 120,000 and
Maximum Balance Limit Rs. 100,000.
Similarly, the transaction limits of Level 1 Branchless Banking Accounts have been
reasonably increased to cater to the needs of the customers by rationalizing the Know Your
Customer (KYC) requirements. Now, all services permissible under existing Branchless Banking
Regulations shall be available to Level “1” account holders.
The transaction and maximum balance limits applicable to Level “1” Accounts will be:
Daily Limit Rs. 25,000 (previous limit was Rs 10,000), Monthly Limit Rs. 60,000 (previous limit
was Rs 20,000) and Annual Limit Rs.500,000 (previous limit was Rs. 120,000). There will be no
Maximum Balance Limit, according to the amendments.
Other salient features of revised/ amended Branchless Banking Regulations are as
All BB account holders shall be allowed to transfer up to Rs. 25,000 per month to nonaccount
Financial Institutions (FIs) are allowed to provide Person‐to‐Person Funds transfer
service to customers (senders and receivers) up to the transaction limit of Rs. 15,000 for
one customer in a month.
Persons availing this service shall be registered by the FI after due verification process
for subsequent transactions.
During the verification of customer data from NADRA, if it is found that the agent has
opened any customer account or has processed a funds transfer transaction on the basis
of a fake or incorrect information/document, the FIs shall take appropriate penal action
including blacklisting of agent or termination of agency agreement. FIs shall device
mechanism for ongoing agent supervision and monitoring.
The FIs shall formulate standardized guidelines for capturing customers’ photograph &
image of CNIC at agent locations to prevent impersonation of identity.
The requirement of throughput limit has been withdrawn on Level “1” BB Accounts.
However, throughput requirements shall not be applicable on newly introduced Level
“0” Accounts as well.
The Branchless Banking account holders shall be able to pay their utility bills without
exhausting their BB account limits.
Keeping in view the Level of BB Account, the transaction limits allowed and the Risk
Profile of each customer, the FIs’ system should be capable of carrying out effective due
diligence on a continuous basis.
The phrase “Transaction Processing System (TPS)” has been replaced with “Third Party
Service Provider (TPSP)”. FIs shall enter into arrangement with TPSP after obtaining prior
FIs are allowed to open multiple Level 2 and Level 3 Accounts of the branchless banking
customers after due KYC procedure defined for the regular bank account.
FIs are allowed to maintain branchless banking customer accounts as remunerative
accounts in order to encourage opening of more accounts. FIs shall develop a
remuneration mechanism for all Levels of BB accounts.
FIs entering into Branchless Banking shall be required to submit quarterly reports on
financial data of BB initiatives to State Bank of Pakistan on a prescribed format and shall
also provide on monthly basis, the customers complaints of fraud & forgery incidents
and the action taken by FIs.
To ensure the success of the BB initiative, FIs should have a policy of zero tolerance for
FIs should have a proper policy framework in place on taking penal action against the
branchless banking agents in case it is established that the agent is involved in any kind
of fraud, forgery, misinformation and misreporting etc.