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Digital Retail Banks Regulatory Framework in Pakistan
The State Bank of Pakistan (SBP) has established a regulatory framework for Digital Retail Banks (DRBs). This framework outlines the requirements and procedures for obtaining a license to operate as a DRB.
Eligibility Criteria
To be eligible for a DRB license, an entity must meet certain criteria, such as:
- Minimum Capital Requirement: The applicant must have a minimum capital requirement.
- Satisfactory Performance in Previous Regulatory Reviews: The applicant must have satisfactory performance in previous regulatory reviews.
- Compliance with Relevant Laws and Regulations: The applicant must comply with relevant laws and regulations.
Application Requirements
Applicants must submit a comprehensive application package, including:
- Business Strategy: Documentation related to the business strategy.
- Digital Transformation Plan: A plan for digital transformation.
- Risk Management Framework: A framework for risk management.
- Governance Structure: Information about the governance structure.
Assessment Process
SBP will assess the applicant’s readiness for commercial operations through:
- On-Site Inspections: On-site inspections of the applicant’s premises.
- Review of Documentation: Review of the applicant’s documentation.
- Evaluation of Performance during Pilot Operations: Evaluation of the applicant’s performance during pilot operations.
Transition Phase
If granted a license, the DRB must initiate commercial operations within specified timelines. At this point, the transition phase commences.
Regulatory Requirements
During the transition phase, the DRB must comply with the conditions provided under Regulation 7 of the Regulatory Framework (Part-B) for Digital Banks.
Additional Requirements
The text also highlights additional requirements for specific types of applicants:
- Digital Bank Subsidiary of a Traditional Bank: The traditional bank must meet capital guidelines and supervisory rating criteria. Additionally, it must provide documentation related to its digital strategy, IT infrastructure, and human resources.
- Sponsors of MFBs and EMIs: Applicants with majority stakes in or control over Microfinance Banks (MFBs) or Electronic Money Institutions (EMIs) must provide:
- Audited financial statements
- Internal audit findings
- Business strategies
- Digital plans
- Transformation of EMI into Digital Retail Bank: An EMI with a minimum one-year experience of providing digital financial services may apply for transformation into a DRB. The application package must include:
- A feasibility plan
- Board resolution
- Documentation related to the EMI’s performance and digital strategy
Overall, the regulatory framework provides a comprehensive set of guidelines for entities seeking to establish themselves as DRBs in Pakistan.