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  • Overview of banking payment system in Pakistan

    Overview of banking payment system in Pakistan

    KARACHI: The State Bank of Pakistan (SBP) recently issued key information about payment system of banking system in the country.

    Following is the snapshot of payment system in Pakistan:

    Snapshot details as on December 31, 2020

    Total Population in Pakistan: 208.31 million

    Currency in Circulation (in million PKR) 6,543,806

    Number of Banks’ Accounts: 5 59,910,511

    Payment Systems Infrastructure as on December 31, 2020

    Number of Banks 44 and (Branches) (16,304)

    Commercial/ Specialized Banks Branches15,096

    Microfinance (Branches) 1,208

    Number of Real Time Online Branches (RTOBs): 16,165

    Number of banks having ATM machines: 35

    Number of banks having open-looped POS machines: 5

    Number of banks having closed-looped POS machines: 4

    Number of banks providing Internet Banking services: 27

    Number of Banks providing Mobile Phone Banking services: 27

    Number of Banks providing Call Center Banking services: 23

    Total Number of PRISM System Participants: 50

    Total number of ATMs Interoperable Switches: 1

    Total number of Cash & Cheque Deposits Machines (CDMs): 225

    Total number of Cash Deposits Machines with Cash Withdrawal facility: 20

    Multipurpose ATMs (With Cash & Cheque Deposit & Cash Withdrawal):  15

  • SBP issues instructions to banks for wheat procurement by private sector

    SBP issues instructions to banks for wheat procurement by private sector

    KARACHI: The State Bank of Pakistan (SBP) on Friday issued instructions to banks for procurement of wheat by private sector for the season 2021.

    The SBP said that for private sector participation in the wheat procurement season 2021, banks are required to strictly fulfill the following minimum conditions for extending financing to eligible borrowers (licensed and functional flour mills duly evidenced by some documentation or licensed wheat traders registered with concerned authority/department).

    Banks will provide financing to eligible borrowers only for the procurement of indigenous wheat for the harvest season of 2021.

    Banks will ensure that the subject financing will be used only for intended purposes. Special efforts shall be made to ensure that the facilities availed for purposes other than wheat procurement are not utilized for financing of wheat stocks.

    Fresh financing for procurement of wheat shall start from commencement of wheat procurement season 2021 in respective provinces. Financing against wheat and by-products of wheat viz. flour, meada, sujee etc. will be subject to minimum cash margin requirement of 10% of the value of the wheat stock & by -products. Banks shall not provide any financing facilities (funded or non- funded) to enable borrowers to meet the margin requirements.

    Financing to private sector for procurement of wheat shall be provided against pledge of fresh wheat stock only and hypothecation / charge of moveable or immovable property would not be acceptable as collateral for such financing. Moreover, banks will ensure that no revaluation of the pledged stock is considered for release of any differential financing amount to the borrowers against stock of wheat already pledged with the banks.

    Banks will not entertain any application for grant of fresh loans after 30th June, 2021 for procurement of wheat. However, banks may provide financing facility to functional flour mills for purchase of indigenous wheat from their authorized representative and respective Food Department against supply of wheat by them. Quantum of such loan shall not be more than the value of wheat to be supplied by the respective Food Department or actual purchase from wheat traders, commensurate to the milling capacity of each mill. Banks will also monitor that existing stock of wheat purchased by the concerned functional flour mill, has been grinded and that the by-products of wheat (financed against bank loan) have also been released to the market gradually to repay the loans so obtained.

    Banks are also allowed to provide financing facilities for wheat procurement by the seed processing plants duly evidenced by the testing certificates issued by the Federal Seed Certification and Registration Department, in line with their lending policies and the capacity/production plans of the seed processing plants ensuring that such stock of wheat will be used for processing purposes

    These loans will be fully settled on or before 31st January 2022, positively.

    In order to curb the possibility of hoarding, banks shall:

    — require client(s) to disclose their storage location and verify the same.

    — strictly monitor the wheat stock held by the client vide periodical and random inspections of wheat pledged with the bank as well as the gradual release of wheat stock to generate cash for the purpose of repayment of bank loan. SBP may acquire stock reports from banks to verify their authenticity/genuineness as and when desired.

    — be under obligation to immediately recall the advances allowed to the private sector in case of hoarding of wheat.

    — ensure that no financing is allowed to client for retirement of loans availed from other banks.

    — ensure that their clients are in strict compliance with the guidelines of respective government (Federal/Provincial) for release of wheat stock and are not involved in any other activity which may cause speculation of wheat/flour price in market.

    The lending shall be in compliance with applicable laws, Prudential Regulations and other instructions of SBP issued from time to time.

    Banks will submit a monthly statement in respect of financing to private sector for wheat procurement to this department within ten working days from the close of the relevant month.

    Any violation of the above instructions will attract administrative and/or penal action under the provisions of BCO, 1962 and other relevant laws.

  • State Bank decides to maintain policy rate at 7pc

    State Bank decides to maintain policy rate at 7pc

    KARACHI: The State Bank of Pakistan (SBP) in a meeting held on Friday decided to maintain the policy rate at 7 percent for next two months.

    The meeting of the Monetary Policy Committee (MPC) noted that since the last meeting in January, growth and employment have continued to recover and business sentiment has further improved. While still modest, at around 3 percent, growth in FY21 is now projected to be higher than previously anticipated due to improved prospects for manufacturing and reflecting in part the monetary and fiscal stimulus provided during Covid.

    Recent inflation out-turns have been volatile, with the lowest reading on headline inflation in more than two years in January 2021 followed by a sharp rise in February.

    According to SBP estimates, the recent increase in electricity tariffs and sugar and wheat prices accounts for about 1½ percentage points of the 3 percentage point increase in inflation between the January and February out-turns.

    The recent increase in electricity prices will continue to manifest in headline numbers in coming months, keeping average inflation in FY21 close to the upper end of the previously announced range of 7-9 percent.

    In a statement the SBP said that while noting that the recent increase in inflation is primarily due to supply-side factors, the MPC also highlighted that the output gap is still estimated to be negative, core inflation continues to be relatively subdued, and inflation expectations—while drifting up somewhat due to the recent increase in headline inflation numbers—are still well-anchored.

    Looking ahead, as the temporary increase in inflation from administered prices wanes, inflation should fall to the 5-7 percent target range over the medium-term.

    Given this underlying inflation trajectory, the MPC felt that the existing accommodative stance of monetary policy remained appropriate to support the recovery while keeping inflation expectations well-anchored and maintaining financial stability.

    “From a policy mix perspective as well, given that fiscal policy is expected to remain contractionary to reduce public debt, the MPC noted that it was important for monetary policy to be supportive as long as second-round effects of recent increases in administered prices and other one-off supply shocks do not materialize and inflation expectations remain well anchored,” the SBP said.

    In reaching its decision on the policy rate, the MPC also took note of the uncertainty around the inflation and growth outlook. On the growth front, the MPC noted that despite recent momentum, risks remain due to the emergence of a third, more virulent wave of Covid in Pakistan just as the vaccine roll-out is beginning. In terms of the inflation outlook, this summer’s wage negotiations and any new tax measures in the next year’s budget could add further supply-side shocks.

    In addition, optimism about a stronger US-led world recovery this year is translating into higher international commodity prices, including both food and oil, which could continue to feed into domestic inflation. These trends in the outlook for inflation and growth will need to be carefully monitored. In the absence of unforeseen developments, the MPC expects monetary policy settings to remain broadly unchanged in the near term. As the recovery becomes more durable and the economy returns to full capacity, the MPC expects any adjustments in the policy rate to be measured and gradual to achieve mildly positive real interest rates.

  • Foreign exchange reserves remain flat at $20.159 billion

    Foreign exchange reserves remain flat at $20.159 billion

    KARACHI: The liquid foreign exchange reserves of the country are remained flat at $20.159 billion by week ended March 12, 2021, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $20.158 billion by week ended March 05, 2021,

    The official foreign exchange reserves of the central bank were at $13.02 billion by week ended March 12, 2021 as compared with $13.016 billion a week ago.

    The foreign exchange reserves held by commercial banks were at $7.139 billion by week ended March 12, 2021 as compared with $7.142 billion a week ago.

  • Mobile banking transactions registers massive growth of 192 percent

    Mobile banking transactions registers massive growth of 192 percent

    KARACHI: The value of mobile banking transactions have registered an unprecedented growth of 192 percent to Rs1.12 trillion during quarter October – December 2020, State Bank of Pakistan (SBP) said on Thursday.

    The volume of mobile banking transactions reached 44 million, (up 147 percent) valuing Rs.1.12 trillion (up 192 percent) compared to 17.8 million transactions valuing 382.5 billion in the same quarter, last year.

    The number of registered mobile phone banking users reached 9.4 million accounting an increase of 5 percent. Similarly, 22 million internet banking transactions valuing Rs1.3 trillion were recorded during this period compared to Rs. 1.1 trillion in the previous quarter.

    The SBP released its Quarterly Payment System Review (QPSR) for the second quarter, October – December 2020, of the fiscal year 2020-21, which shows strong growth in digital financial transactions in the country.

    During Q2FY21, 296.7 million e-Banking transactions valuing Rs21.4 trillion were carried out, registering a growth of 24 percent by volume and 22 percent by value, over the same quarter last year. Most of the uptake in e-banking transactions were seen in internet and mobile banking.

    In response to SBP’s measures to incentivize the installation of Point of Sale machines to facilitate digital payments through debit or credit cards, the number of POS machines have shown a notable growth of 18 percent during Q2FY21, reaching 62,480 installations throughout the country.

    On these POS machines, 23 million transactions amounting to Rs115 billion were processed during Q2FY21, which shows the positive impact of the market conducive policies adopted by SBP, particularly targeted towards increasing the payment acceptance infrastructure in Pakistan.

    Card based transactions on e-commerce portals also increased substantially, with e-commerce merchants processing 5.6 million transactions through payment cards amounting to Rs15 billion compared to 3.9 million valuing 11.9 billion in the first quarter of the current fiscal year, which marks a shift in the behavior of the Pakistani population and also complements Government of Pakistan’s efforts to develop a more market friendly landscape toward acceptance of payments by e-commerce merchants.

    Total number of payment cards issued in the country stood at 44 million out of which 27.6 million are debit cards and 1.7 million are credit cards. Further, 7.6 million social welfare cards have been issued by banks on behalf of BISP, EOBI and other government organizations.

    In the last few years, Digital payment transactions in Pakistan have shown significant growth, reflecting the favourable impact of the SBP’s policies in shifting customer preferences. Expansion in digital payment infrastructure as well as the emergence of new payment aggregators have played a role in this growth.

    In line with its declared objectives to digitize payment and financial services, SBP will continue promoting digitization in the country and expects the industry to support these efforts, which will increase convenience and financial inclusion for all Pakistanis.

  • Foreign direct investment falls by 30pc during July-Feb

    Foreign direct investment falls by 30pc during July-Feb

    KARACHI: The net inflow of foreign direct investment (FDI) has declined by 30 percent during first eight months (July – February) 2020/2021 owing to significant increase in outflow of the investment during the period under review.

    According to data released by State Bank of Pakistan (SBP) on Wednesday, the FDI fell to $1.3 billion during first eight months of the current fiscal year as compared with $1.85 billion in the corresponding months of the last fiscal year.

    The inflows under this head witnessed a decline of 16 percent to $1.98 billion during July – February 2020/2021 as compared with $2.36 billion in the corresponding period of the last fiscal year.

    However, outflow under this head increased by 35 percent to $683 million during the period under review as compared with $507 million in the corresponding period of the last fiscal year.

    The overall inflow of private foreign investment fell by 43 percent to $1.04 billion during the first eight months of the current fiscal year as compared with $1.83 billion in the corresponding period of the last fiscal year.

    The portfolio investment from the equity market witnessed massive outflows during the period. The portfolio investment saw an outflow of $256 million during the first eight months of the current fiscal year as compared with outflow of $26.3 million in the same period of the last fiscal year.

    The foreign public investment recorded outflow of $132 million during first eight months of the current fiscal year as compared with inflows of $2.16 billion in the corresponding period of the last fiscal year.

  • Bank holiday announced

    Bank holiday announced

    KARACHI: The banks will remained closed on March 23, 2021 on the occasion of Pakistan Day, State Bank of Pakistan (SBP) said on Wednesday.

    In a circular, the SBP informed the presidents and chief executives of all banks, development finance institutions and microfinance banks that the central bank would remain closed on March 23, 2021 (Tuesday) being public holiday on the occasion of “Pakistan Day” as declared by the government.

  • Poll suggests no change in key policy rate

    Poll suggests no change in key policy rate

    KARACHI: The State Bank of Pakistan (SBP) on Tuesday said it will issue monetary policy statement on Friday March 19, 2021. A poll suggested that the central bank likely to keep policy rate unchanged at 7 percent.

    However, some participants polled the policy rate might be increased by 25 basis points to 50 basis points in the upcoming monetary policy meeting.

    The Topline Securities conducted the poll of key financial market participants over their views on the upcoming Monetary Policy Statement (MPS) of Mar 19, 2021.

    A total of 118 participants took part in the latest poll, compared to 94 in Jan-2021 poll which was conducted for Jan-2021 MPS.

    Of the 118 participants, 82 percent expect no change in the Policy Rate in the Mar 19, 2021 MPS. In previous poll, 75 percent of the participants were expecting no change.

    In total, 18 percent of the participants are expecting increase in Policy Rate. Around 11 percent are expecting increase of 25 basis points and 4 percent are expecting hike of 50 basis points.

    In last the poll, 19 percent of the participants were expecting an increase in Policy Rate.

    Regarding cumulative hike in 2021, 65 percent respondents have voted for rate hike between 25-100 basis points. Similarly, 24 percent people expect rate hike in range of 125-200 basis points.

    Surprisingly, 8.5 percent of the participants yet expect no change in policy rate during 2021.

    We are also expecting no change in the Policy Rate in the March 2021 MPS, while we expect increase in Policy Rate by 100 basis points in 2021.

    On inflation front, 70 percent participants believe that during 2021 inflation will average between 8-10 percent, while 16 percent believe inflation will average lower than 8 percent. Rest of the participants believe, inflation will clock in above 10 percent during 2021.

    We believe change in views towards increase in Policy Rate going forward is owing to (1) likely restoration of IMF program over next couple of weeks wherein energy tariffs are likely to be adjusted upwards and (2) rising international oil and commodity prices (sugar, scrap, palm oil etc.)

  • Banks directed to discontinue paper-based submission of foreign exchange cases

    Banks directed to discontinue paper-based submission of foreign exchange cases

    KARACHI: State Bank of Pakistan (SBP) on Tuesday directed banks to discontinue paper-based submission of foreign exchange related cases to them by their clients latest by June 30, 2021.

    The SBP said it had initiated efforts to facilitate business community and promotes ease of doing business through end-to-end digitalization of approval of foreign exchange related cases in the banking system

    In order to further facilitate the business community in Pakistan, promote ease of doing business, enhance operational efficiency and make processing of Foreign Exchange (FX) related cases cost effective and environment friendly, State Bank has advised all banks to implement digital portals for end-to-end digitalization of case submission and processing.

    In the first leg of its end-to-end digitalization drive, SBP launched an online platform – Regulatory Approval System (RAS) to facilitate banks in online submission of foreign exchange related cases to the Exchange Policy Department (EPD) of SBP and the Foreign Exchange Operations Department (FEOD) of the SBP Banking Service Corporation (SBP BSC). The SBP-RAS has been operational since March 24, 2020 whereby banks are submitting their cases online to FEOD and manual case submission has been discontinued. Later on, paper based case submission to EPD by banks was also discontinued with effect from August 28, 2020.

    In the next leg of its digitalization drive, SBP instructed banks to develop portals to facilitate their customers for online submission of cases to banks and abolish paper based case submission. In this background, twenty-one (21) banks have already developed their portals and started onboarding their customers besides receiving cases digitally, while the rest of the banks are in the development phase and customers’ onboarding is underway.

    In view of SBP’s priority for end-to-end digitalization of foreign exchange related case submission, banks have been advised to complete development of portals, onboarding and educating their customers for the same and discontinue paper-based submission of foreign exchange related cases to them by their clients latest by June 30, 2021. It has further been advised that banks must make comprehensive arrangements for any contingency and ensure business continuity in case of disruption in their portals.

  • SBP imposes Rs93.23 million penalty on Meezan Bank

    SBP imposes Rs93.23 million penalty on Meezan Bank

    KARACHI: State Bank of Pakistan (SBP) has imposed an amount of Rs93.23 million as penalty on Meezan Bank Limited during the year 2020, according to annual financial results of the bank.

    The bank in its annual financial results for period ended December 31, 2020 said that it had paid Rs93.23 million to the SBP for violation of various regulatory provisions.

    The total monetary penalty on the bank imposed by the SBP reached to Rs175.5 million in past two financial years.

    The central bank imposed Rs82.27 million as penalty on the bank during the year 2019.