SBP Imposes Tougher Rules for Digital Retail Bank License Applicants
The State Bank of Pakistan (SBP) has introduced new requirements for applicants seeking a digital retail bank (DRB) license, aimed at strengthening the financial sector.
Additional Documentation and Information Required
As per the revised guidelines, DRB license applicants will need to provide additional documentation and information to demonstrate their capabilities in areas such as:
- Governance
- Risk management
- Compliance
- IT operations
Some of the key requirements include:
- Submission of audited financial statements of the parent bank for the last three years
- Internal audit findings relating to governance, risk, compliance, and controls
- Details on digital strategy, current stage of digitization, and future plans for implementation
- Information demonstrating human resource capacity and competencies related to implementing digital and IT business strategies
- Most recent customer experience surveys and service quality reports
Stricter Requirements for Sponsors of Microfinance Banks (MFBs) and Electronic Money Institutions (EMIs)
Applicants who are sponsors of MFBs or EMIs will need to provide additional information, including:
- Audited financial statements of the MFB or EMI
- Internal audit findings relating to governance, risk, compliance, and controls
- Business strategies and digital plans
- IT organograms
- Human resource capacity and competencies
Eligibility Criteria for Existing Microfinance Banks (MFBs) and Electronic Money Institutions (EMIs)
Existing MFBs and EMIs that wish to transform into DRBs will need to meet specific eligibility criteria, including:
- A minimum of one year’s experience in providing digital financial services (DFS)
- A feasibility, business, and enablement plan approved by the Board
- Transformation plans covering separate plans for transformation and conversion, including timelines for legal and corporate formalities, business model alignment, channel alignment, organizational governance, portfolio conversion, and compliance with regulatory provisions
Emphasis on Financial Inclusion and Credit Access
The SBP has emphasized the importance of financial inclusion and credit access in these new requirements. DRB license applicants must demonstrate a commitment to these goals.
Industry Analysts’ Views
Industry analysts believe that these revised guidelines will help strengthen the financial sector by promoting better governance, risk management, and compliance practices among DRB license applicants. However, they have also expressed concerns about the potential challenges faced by existing MFBs and EMIs seeking to transform into DRBs.