State Bank of Pakistan Approves 5 New Players in Pakistan’s Digital Retail Banking

The State Bank of Pakistan (SBP) has granted in-principle approval (IPA) to five digital retail banks. This move aims to promote financial inclusion and enhance the accessibility of banking services across the country. The five institutions that have received the IPA are HugoBank Limited, KT Bank Pakistan Limited, Mashreq Bank Pakistan Limited, Raqami Islamic Digital Bank Limited, and Telenor Microfinance Bank Limited. Governor SBP Jameel Ahmed excitedly declared the event a milestone in a ceremony on Wednesday.

These entities have demonstrated their commitment to revolutionizing the banking landscape through innovative digital solutions. By granting IPA, the SBP has acknowledged the potential of these digital retail banks to contribute to the growth and development of the banking industry. This approval helps these institutions to apply for a full banking license in the future.

The introduction of digital retail banks is expected to bring a host of benefits to the Pakistani population. These banks will use technology to make banking easy for urban and rural customers. These digital-first institutions strive to target the unbanked and underbanked to make financial services accessible to everybody. The SBP’s decision to grant IPA to these five digital retail banks aligns with the government’s vision of promoting financial inclusion and digitization.

“This is a momentous occasion. These entities are now ready to enter the next phase, which is preparing themselves for the launch of the pilot project. The SBP will work closely with each one of them to support their successful launch and ultimately towards full operations”, said SBP Governor Jameel Ahmed while addressing a ceremony on Wednesday.

According to a statement released by the SBP, this event was attended by top management from the central bank as well as sponsors of prospective DRBs, CEOs of incumbent banks, Payment System Operators (PSOs)/ Payment System Providers (PSPs), Electronic Money Institutions (EMIs), and Fintechs.

According to Ahmed, digital banking will completely transform how consumers obtain financial services. The governor disclosed that a framework for licensing and regulating digital banks was introduced by the central bank in 2022.

The Governor of the State Bank of Pakistan (SBP) said digital banks must prioritize cyber security and client data protection. He said digital banks must invest more in security to prevent cyber attacks, cyber breaches, and fraud.
In this regard, the SBP is currently revisiting its guidelines on information security and cyber security.

Deputy Governor Dr. Inayat Hussain said the SBP had tough criteria in choosing five organizations from a big list of retail banks. Additionally, SBP established a comprehensive and stringent evaluation procedure in order to analyze these applications. According to him, the evaluation criteria comprised the caliber of the value proposition, the strength of the technology infrastructure these applicants intended to implement, the sponsors’ relevant experience in the field of digital banking, and the caliber of the risk management framework the companies were putting forth.