State Bank of Pakistan issues licensing, regulatory framework for digital banks

The State Bank of Pakistan is now allowing digital lenders to obtain separate licenses as digital retail banks and digital full banks under its newly issued licensing and regulatory framework.

The move came as the central bank seeks to promote digital financial services in the country, enhancing financial inclusion through cost-effective digital services.

Under the guidelines, digital retail lenders will mainly focus on retail customers, while digital full banks deal with them as business and corporate entities. Digital banks are also required to maintain a principal place of business in Pakistan for operations and to serve as the main point of contact for stakeholders including the central bank and other regulators.

The minimum capital requirement for digital retail banks is 1.5 billion rupees during the pilot phase and will gradually increase to 4 billion rupees over a transition period of three years.

Licenses for both digital retail and digital full banks may also be obtained for both conventional and Islamic variants.

The State Bank of Pakistan will initially issue up to five digital bank licenses and will be accepting applications until March 31. The central bank expects a few digital lenders to be operational in 2022.

As of Jan. 3, US$1 was equivalent to 176.43 Pakistani rupees.