The State Bank of Pakistan granted in-principle approval for the establishment of five digital retail banks, the State Bank governor Jameel Ahmad said on September 20.
These pioneering institutions, namely HugoBank Limited, KT Bank Pakistan Limited, Mashreq Bank Pakistan Limited, Raqami Islamic Digital Bank Limited, and Telenor Microfinance Bank Limited, are set to revolutionize the country’s banking landscape.
In a prestigious ceremony held at the SBP Museum Building in Karachi, SBP Governor Jameel Ahmad personally awarded the in-principle approvals to these promising digital banks. Key stakeholders, including sponsors of the proposed Digital Retail Banks, CEOs of existing banks, Payment System Operators/ Payment System Providers, Electronic Money Institutions, Fintechs, and SBP’s top management attended the event.
“These entities are now ready to move on to the next phase, which involves getting them prepared for the launch of the pilot project,” SBP Governor said during his keynote address. “In order to support each of them in launching successfully and ultimately achieving full operations, the SBP will work closely with each of them.”
The State Bank Governor emphasized the potential of the DRBs to enhance the financial system while acknowledging the challenges such entities may face. He also highlighted various regulatory initiatives aimed at nurturing a vibrant digital financial ecosystem.
The governor assured the financial community of SBP’s dedication to fostering inclusivity, innovation, and responsiveness within the financial system. He expressed optimism that digital banks, once operational, would cultivate a thriving digital ecosystem, deliver new and enhanced customer experiences, and provide affordable digital financial services, including credit access to previously underserved segments of society.
Deputy Governor Dr. Inayat Hussain, in his welcome address, emphasized that the IPAs granted to the proposed DRBs mark a significant milestone in their journey toward achieving operational readiness. He highlighted the areas these institutions must address, including governance, risk management, capital requirements, compliance, consumer protection, cybersecurity, and more.
Sponsors of the proposed DRBs expressed their appreciation for SBP’s forward-thinking framework for digital banks, which guided them throughout the setup process. They recognized Pakistan’s vast investment potential and believed that digital banks would offer faster, more cost-effective solutions to meet the financial needs of underserved populations. These sponsors expressed confidence that digital banks would play a vital role in enhancing market efficiency and expanding access to a wider range of financial services, ultimately advancing the cause of financial inclusion.
Earlier this year, SBP issued a “No Objection Certificate” to the aforementioned proposed DRBs, allowing them to incorporate as Public Limited Companies with the Securities and Exchange Commission of Pakistan.
The selection process for these institutions involved a rigorous evaluation based on various parameters, ensuring their fitness and propriety, experience, financial strength, business and implementation plans, funding strategies, IT and cybersecurity approaches, and outsourcing arrangements met SBP’s high standards.
Upon achieving operational readiness, these institutions will seek SBP’s approval to commence their banking operations, ushering in a new era of digital banking in Pakistan.