The State Bank of Pakistan (SBP) has accelerated its drive to set up digital banks in Pakistan — both Islamic and conventional — with its recently released Licensing and Regulatory Framework for Digital Banks.
The central bank can, under the framework, grant two types of digital bank licenses: one for digital retail banks and another for digital full banks (which serve corporate entities in addition to retail customers).
Applications for the licenses will be open until the 31st March 2022, after which the SBP will initially grant only up to five licenses.
“That SBP is looking to attract players with a strong value proposition, a robust technological infrastructure, sufficient financial strength, technical expertise and an effective risk management culture,” the apex bank noted.
One of the objectives of the framework is to enhance financial inclusion through cost-effective digital financial services.
“The demand for banking services is also faith-sensitive and there is a large market for Shariah compliant services,” the SBP said. “Therefore, licenses for digital retail banks and digital full banks may be obtained for both conventional and Islamic variants. Further, conventional variants may also offer Islamic banking services through Islamic windows as per existing practice.”
The minimum capital requirement for digital retail banks is set at PKR1.5 billion (US$8.48 million) during the pilot phase, which would gradually increase to PKR4 billion (US$22.61 million) over a transition period of three years.
The framework is primarily designed for the setting-up of new digital banks, but traditional banks and microfinance banks may also request to convert into a digital bank.