SBP launches licensing and regulatory framework for digital banks

Noor Haider
SBP launches licensing and regulatory framework for digital banks
SBP launches licensing and regulatory framework for digital banks

The State Bank of Pakistan has announced a license and regulatory framework for digital banks.

Tell me more: The licensing and regulatory framework has details for setting up digital banks as a separate category in the country. The digital bank will let you do everything like open an account, deposit money, and borrow money without going to a physical branch.

The SBP will be granting two types of digital bank licenses under this framework:

  • Digital Retail Bank (DRB)
  • Digital Full Bank (DFB)

DRBs will primarily focus on retail customers, while DFBs can deal with retail customers and business and corporate entities.

During the pilot phase, the minimum capital requirement for DRBs is Rs. 1.5 billion will gradually increase to Rs. 4 billion over a transition period of three years.

What it says: The framework also includes guidance regarding:

  • licensing requirements
  • potential sponsors
  • permissible use-cases during different phases

The applicants should have sound digital governance, secure technology infrastructure, and effective data management strategy and practices.

Digital banks will also have to maintain a principal place of business in the country to house the offices of its management, staff, and other support operations and serve as the main point of contact for various stakeholders, including the State Bank and other regulators.

You should know: Setting up digital banks requires less capital than traditional physical banks. SBP expects the low cost to encourage tech-entrepreneurs to enter this new business realm.

Applications for setting up a digital bank are being accepted till March. A few digital banks are expected to be operational within this calendar year.

Zoom Out: The framework is another initiative by the State Bank towards digitalization, and it aims to enhance financial inclusion in the country.

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