SBP assigns PRISM membership to NCCPL

KARACHI: The central bank on Monday allowed the National Clearing Company of Pakistan Limited (NCCPL) to directly settle shares trade as it made the clearing company a member of its interbank settlement system.

“In order to enhance the existing clearing process of National Clearing Company of Pakistan Limited (NCCPL) and to reduce the settlement risk associated with it, SBP has assigned NCCPL as a special participant of PRISM (Pakistan real time interbank settlement Mechanism) system to settle net position of capital market transactions in PRISM,” the State Bank of Pakistan (SBP) said in a statement. “The settlement of clearing through NCCPL shall be made operational from January 22, 2018.”

PRISM system offers the mechanism to settle transactions in real time throughout the day, therefore significantly reducing the time lag unlike the settlement system where transactions are settled at the end of the day.

Currently, the NCCPL has to instruct PRISM-member banks to settle buying and selling positions. As NCCPL becomes the system’s member it could directly settle trade transactions.

Muhammad Lukman, chief executive officer at NCCPL said the permission would improve efficiency and speed up settlements. “The special participation in PRISM is limited to clearing and settlement alone,” he added.

A senior banker agreed that the move could increase the efficiency as well as reduce the operational cost of the NCCPL. In January last year, the central bank had also assigned the PRISM membership to the Central Directorate of National Savings.

The SBP advised all the member banks to maintain adequate funds in their current accounts with SBP Banking Services Corporation (BSC) based on their existing and future clearing requirements to mitigate the settlement risk.

SBP also issued a new mechanism for the settlement of NCCPL through PRISM system. “In terms of the payment and collection, NCCPL would prepare a net position to debit or credit current account of PRISM participants through PRISM system,” it said.

Under the new mechanism, the PRISM participant’s current account at Karachi-based SBP BSC office will be debited or credited through PRISM system as per the figures sent by NCCPL in the batch each working day.

“In case of any shortfall, the PRISM participants are required to arrange funds within stipulated time,” the central bank added. “The PRISM participants who are eligible for SBP’s reverse repo facility can avail intraday liquidity facility as per PRISM rules.”

SBP said it could take action including levying of penalties under applicable laws, if a participant is unable to settle clearing obligations within 15 minutes. “NCCPL shall inform all settling banks and their treasury departments about the multilateral net settlement batches on daily basis,” it added.

PRISM processed 0.4 million transactions amounting to Rs88.1 trillion during the quarter ended September 30, 2017, according to the SBP’s latest payment system review. While the value of transactions rose 3.2 percent during the quarter over the previous three months, the volume fell 2.9 percent.