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June 21, 2011

SBP amends regulations to expand outreach of branchless banking

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June 21, 2011

KARACHI: The State Bank of Pakistan (SBP) has amended the regulations for financial institutions to expand the outreach of branchless banking operation in the country, a statement said on Monday.
“The SBP amended the existing branchless banking regulations for financial institutions, which include commercial, Islamic and microfinance banks for expanding the outreach of the branchless banking operations in the country,” it said.
These amendments in the regulations would be immediately applicable to all potential financial institutions.
The financial institutions, which had already been allowed to offer branchless banking services, have been directed to streamline their existing operations/processes as per the amended regulations within six months and report compliance to the SBP, the statement said.
According to these amendments, the central bank has introduced Level ‘0’ Branchless Banking (BB) Accounts to bring the low-income earning segment of the society into the financial services loop.
“With the introduction of Level ‘0’ BB Accounts, now, instead of sending the physical account opening form and copy of customer’s CNIC to the financial institution for further processing, the branchless banking agents have been allowed to send the digital account opening form, customer’s digital photo and an image of customer’s CNIC to the financial institution electronically,” the statement said. The new category of Level ‘0’ BB Account will provide flexibility to the agent and the financial institution for opening of basic BB accounts, while rationalising the Know Your Customer (KYC) requirements in line with the transaction limits, it added.
The following transaction and maximum balance limits on Level ‘0’ Accounts would be applicable: daily limit Rs15,000, monthly limit Rs25,000, annual limit Rs120,000 and maximum balance limit Rs100,000.
Similarly, the transaction limits of Level 1 Branchless Banking Accounts have been

reasonably increased to cater to the needs of the customers by rationalising the KYC requirements.
“Now, all services permissible under the existing branchless banking regulations shall be available to level ‘1’ accountholders,” the statement said.
The transaction and maximum balance limits applicable to level ‘1’ accounts will be: daily limit Rs25,000 (previous limit was Rs10,000), monthly limit Rs60,000 (previous limit was Rs20,000) and the annual limit Rs500,000 (previous limit was Rs120,000). There will be no maximum balance limit, according to the amendments.
The salient features of the amendments include All BB accountholders would be allowed to transfer up to Rs25,000 per month to non-accountholders.
The financial institutions are allowed to provide Person-to-Person Funds transfer service to customers (senders and receivers) up to the transaction limit of Rs15,000 for one customer in a month.
Persons availing this service would be registered by the financial institution 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 financial institutions would take appropriate penal action, including blacklisting of agent or termination of agency agreement. The financial institutions would device mechanism for ongoing agent supervision and monitoring, it said.
The financial institutions would formulate standardised guidelines to capture customers’ photograph and 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 would not be applicable on the newly-introduced Level ‘0’ Accounts, as well.
The branchless banking accountholders would 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 financial institutions 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)”. The financial institutions would enter into an arrangement with the TPSP after obtaining prior regulatory approvals, it said.
The financial institutions 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, the statement said.
The financial institutions are allowed to maintain branchless banking customer accounts as remunerative accounts in order to encourage opening of more accounts, it said, adding that the financial institutions would develop a remuneration mechanism for all Levels of BB Accounts.
The financial institutions entering into the branchless banking would be required to submit quarterly reports on financial data of BB initiatives to the State Bank of Pakistan on a prescribed format and would also provide on a monthly basis, the customers complaints of fraud and forgery incidents and the action taken by the financial institutions, it said.
To ensure the success of the BB initiative, the financial institutions should have a policy of zero tolerance for fraudulent activities.
The financial institutions 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, the statement added.

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