Day: January 4, 2022

Habib Bank Limited (HBL), Pakistan’s largest and most profitable bank, has once again left its customers in a lurch with either interrupted or no service at branches, ATMs, online, and related mobile banking channels.

The system of HBL has yet again collapsed after hundreds of thousands of customers attempted to make transactions on the very first working day in the banking sector of the calendar year.

Customers were not able to withdraw cash at branches using checks while companies were not able to transfer funds into HBL accounts. Some companies and customers who don’t check transactions may not be aware of the problem.

After receiving a plethora of complaints and a lot of heat on social media, HBL finally built up the courage to respond via its Twitter account: “We are aware of the issue and have notified our teams to look into this at the earliest. We understand the hassle you must have gone through and sincerely apologize for the inconvenience.”

The services of the bank were consistently poor in the closing months of 2021, and the same has continued in 2022.

In October 2021, HBL’s internet services fell down twice, causing major disruption to its customers in the first week of the month, which persisted in the second week despite urgent measures taken by the bank. In the subsequent month of November 2021, customers of the bank witnessed a surprise deduction of money from their deposits without any announcement from the bank.

Later, HBL explained the real reason behind the deductions of funds from the accounts, saying that it was a reversal of payments, which the bank mistakenly made as a result of a software malfunction that doubled the debit of funds.

Regardless, with its profitability last year, HBL surpassed all other competitive banks in the banking market. It also took first place in terms of consumer complaints received by the Pakistan Banking Ombudsman and the PM Portal. The total number of complaints received was 5,317, significantly above the number received by any other bank in the country.

To increase the standard of banking services in the country, the State Bank of Pakistan should examine the performance of banks’ services and develop a quality of service index. It should also penalize banks for offering bad customer service, just as it does for ensuring that regulations are followed in operations.

Source: Pro Pakistani

The IT, technological, and financial service providers will now be allowed to set up or sponsor a digital bank, as the State Bank of Pakistan (SBP) has launched its new licensing and regulatory framework. SBP will accept applications till March 31 and will initially issue five licenses.

Various companies operating e-wallet and eCommerce firms could avail this opportunity to set up a digital bank separately or through collaboration as they maintain a family of high customers base.

SBP, the banking regulator, has made it mandatory for the new players planning to enter into the banking sector through a digital bank to have an experienced staff who are capable of leading the bank as per defined rules and regulations.

According to the SBP framework, any other person having a minimum of three years of experience in the financial services, financial technology, telecommunication, merchant aggregation technology platforms, Information Communication Technology (ICT), or other pertinent digital or innovative financial and non-financial domains should — when applying to form a digital bank — be a minimum five percent equity participant in the proposed digital bank.

In line with international best practices and assessment of the overall banking situation in Pakistan, SBP has decided to initially issue up to five digital bank licenses, which essentially means that SBP is looking to attract players with a strong value proposition, a robust technological infrastructure, sufficient financial strength, technical expertise, and effective risk management culture.

Who Can Set up Digital Banks?

The banking regulator listed down the eligibility criteria for entities seeking to set up a digital bank or avail its license. A traditional bank that has a minimum of one year of experience in delivering Digital Financial Services (DFS) in the retail customer segments may apply either individually or with other equity participants.

However, SBP may advise an extended period of experience if the traditional bank’s performance is not considered satisfactory. An international bank or international DFS entity having a successful track record of a minimum of three years of delivering DFS in the retail customer segments may apply either individually or with other equity participants.

An Electronic Money Institution (EMI) seeking conversion into a digital bank that has a minimum of one year of experience of delivering DFS in the retail customer segments may also apply. However, SBP may advise an extended period of experience if the EMI’s performance is not considered satisfactory by SBP. Furthermore, the pilot phase operation period of an EMI may be counted towards one-year operations required for an EMI seeking to transform into a digital bank.

Those holding a majority stake in or exercising control over an MFB [Micro Finance Bank], EMI, international bank, or international DFS entity having a successful track record of a minimum of three years of delivering DFS in the retail customer segments, may apply either individually or with other equity participants.

Traditional banks or those with a majority stake in or exercising control over MFBs and EMIs are encouraged to collaborate with an established entity(ies) or investor(s) who can effectively contribute as sponsor(s) in collectively delivering innovative, robust, and sustainable digital bank value proposition, when applying for a digital bank license.

A group, as defined under the Prudential Regulations for Corporate/Commercial Banking, already owning one traditional bank shall not be eligible to apply for a digital bank license, except where the digital bank is proposed as a subsidiary of the traditional bank.

The applicant shall deposit a sum of Rs. 1,000,000 (One Million Rupees) as a processing fee along with the application.

According to the SBP framework, there will be two types of digital banks:

a. Digital Retail Bank (DRB), which may deal with retail customer segments.

b. Digital Full Bank (DFB), which may deal with corporate, commercial, and retail customer segments.

DRB and DFB licenses may have conventional and Islamic variants. Further, a conventional variant of DRB and DFB may also offer Islamic window operations as per existing practice after obtaining the specific approval of SBP.

This framework is primarily designed for the setting up of a new digital bank. However, based on a viable business case and satisfactory Digital Financial Services (DFS) experience, traditional banks/Micro Finance Banks (MFBs) may request SBP for conversion of their institution into a digital bank.

In this regard, the applicant bank/MFB shall submit a tenable and comprehensive policy/ transformation plan for its conversion into DRB/DFB. Nevertheless, the applicant bank/MFBs shall be required to fulfill the prescribed capital requirements during the transition or progression phases.

The paid-up capital for the Digital Retail Bank has been set from Rs. 1.5 billion for the first year to Rs. 4 billion for the fourth year. The requirement of Digital Full Bank stands at Rs. 6.5 billion from the beginning which will be revised up to Rs. 8 billion in the third year of the operations.

Infrastructure of Digital Banks

Digital banks are not required to establish any branch. Moreover, digital and electronic means (e.g. mobile phones, internet, own and other banks’ ATMs, CDMs, digital kiosks/pods) and contact/call centers shall be the primary channels/ access points.

Digital banks may leverage the following physical channels/ access points after seeking prior approval of SBP where applicable:

a. Sales and service centers owned by the digital bank

b. Agents of the digital bank or other banks

c. Other banks’ branches (including of parent bank)

d. Any other channel as permissible under the applicable laws, rules, and regulations

With respect to own smart branches, sales & service centers, ATMs, CDMs, and digital kiosks/pods, digital banks shall follow relevant and applicable requirements of the Branch Licensing Policy in relation to the process for application and approval, along with general instructions on operations at these places. However, provisions not relevant in the context of digital banks such as geographical distribution shall not apply.

Business Plan and Exit Strategy

The applicant shall submit a comprehensive feasibility study, business, and enablement plan that shall include detailed financial projections and underlying assumptions, covering a period of at least five years from the commencement of commercial operations.

In case the break-even period exceeds five years, the projections shall cover the extended period. The business plan shall include justifications if the financial projections signify a consistent or rising loss trend without a clear and tenable path to profitability, or indicate a breakeven period exceeding five years from the commencement of commercial operations.

Every digital bank shall have an exit plan covering a minimum time horizon of the business plan addressing different stress scenarios as well as the digital bank’s likely responses. The exit plan shall also provide for adequate protection of customer/ depositor interests as well as responsible and effective communications with the concerned stakeholders.

Source: Pro Pakistani

The Ministry of Information Technology and Telecommunications has devised strategic plans and guidelines for the launch of 5G in the country, proposing that various institutions should start working in this direction in their respective areas.

The Ministry’s Policy Guidelines suggest that the Ministry of IT, Pakistan Telecommunication Authority (PTA), Pakistan Electronic Media Regulatory Authority (PEMRA), Frequency Allocation Board (FAB), Ministry of Finance, and Ministry of Health should work on the launch of 5G.

Guidelines propose that for the launch of 5G, phase-wise availability of at least 840 MHz for international mobile telecommunication in low and mid-bands should be made by the end of 2024 or the first half of 2025.

PTA, as proposed in the Guidelines, will appoint a reputed consultant to make recommendations to the Government of Pakistan on issues like investment-friendly spectrum auction design, per MHz spectrum price determination in US dollars or Pakistan rupees, payment terms, installment plan, IMT/5G Spectrum Block sizes, and minimum bandwidth per operator in line with international best practices. A consultant will also finalize recommendations on the number of operators, tenure of licenses, and incentives for auction winners.

After recommendations from PTA, PEMRA, FAB, and other stakeholders, the Ministry of IT will finalize the spectrum reframing framework for IMT bands. A Spectrum Reframing Committee composed of stakeholders should be formed in line with telecom policy 2015.

According to the plan, the Ministry of Finance in consultation with all stakeholders should finalize incentives, which could in fact be reflected in the finance bill 2022.

All relevant stakeholders including the Ministry of IT, Ministry of Finance, PTA, and FAB are expected to work in parallel for the conduct of spectrum auction in 2023. The hiring of the consultant firm and recommendations by it should be finalized by December 2022. All stakeholders and the government should lock the commercial launch target by the 1st quarter of 2023.

Source: Pro Pakistani

The Federal Board of Revenue (FBR) on Tuesday revised and increased the rates of sales tax on petroleum products.

According to the FBR SRO 1(I)/2022, THE sales tax on petrol has been increased from 1.63 percent to 4.77 percent from January 1, 2022. And, the sales tax on high-speed diesel oil has been raised to 9.08 percent from 7.37 percent.

Moreover, the sales tax on kerosene has been raised from 8.19 percent to 8.30 percent and on light diesel oil from 0.46 percent to 2.70 percent.

The PL (petroleum levy) rate on petrol has been raised from Rs. 13.62 to Rs. 17.62 per liter. The PL rate on High Speed Diesel has also been revised and increased from Rs. 13.14 to Rs. 17.14 per liter. The PL rate on SKO has been hiked to Rs. 9.86 per liter and Light Diesel Oil rate to Rs. 7.66 per liter.

The sales tax hike on petroleum products comes four days after the federal government’s announcement of another increase in retail prices of petroleum products.

According to a notification issued by the Finance Division late on Friday, the prices of petrol and high-speed diesel (HSD) have gone up by Rs. 4 per liter for the first 15 days of January.

The increase means the price of petrol has gone up from Rs. 140.82 per liter to Rs. 144.82 per liter. Similarly, the price of high-speed diesel is now Rs. 141.62 per liter, from the previous price of Rs. 137.62 per liter.

Source: Pro Pakistani

The Ministry of Information Technology and Telecommunication has drafted the “National Broadband Policy-2021”, targeting the contribution of digital/broadband development to the economy to the tune of $5 billion investment and $20 billion revenue by 2025.

The draft policy also envisages up to eight percent contribution toward the Gross Domestic Product (GDP) from digital/broadband development in the next four years.

One of the objectives of the draft policy is to ensure that 100 percent population living in tier-2/3 cities should have access to high-speed internet, an average per user internet speed of 50Mbps in major cities, and facilitate 75 percent of the internet users with digital bank accounts by 2025.

The draft policy aims at addressing some of the specific challenges;

i. The need for affordable access to broadband for all;

ii. To address the challenges concerning the digital divide especially in unserved and underserved areas nationwide;

iii. Overcoming the challenges in rolling out the required digital infrastructure and related financing models including extensive fiberization and efficient spectrum management;

iv. Harmonization of existing tax regime on telecommunication services;

v. Stimulating the development of local and relevant content and services;

vi. The need for improved and consistent broadband quality of service;

vii. Urging the importance of digital trust over telecommunication networks to promote wider use of digital technologies in all spheres of life; Understanding the impact of the internet in terms of socio-cultural developments, economic growth, and environmental sustainability;

viii. Lowering barriers for investments applied on existing licensees and for new investors in telecommunication sector and promoting public-private partnerships; and

ix. Challenges vis-à-vis accelerated evolution towards adoption of Xth Generation technologies and fiberization, necessary for improving the state of broadband infrastructure.

The policy envisaged to further the initiative of “Digital Pakistan” is pivotal to craft a policy vision that is user-centric, market-oriented, simple to govern, and all-inclusive in nature, laying a strong foundation to address outstanding issues expediently and explore new opportunities in the most agile manner.

The National Broadband Policy-2021 aims to; “revitalize the state of telecommunication by accelerating the efforts for digital inclusion of every citizen in any corner of the country to gain universal access to high-speed affordable internet, enhance the use of digital space by providing equal opportunity for socio-economic wellbeing in a safe, responsible and healthy environment through evolving policy and regulatory measures required for timely and sustainable adoption of cutting edge technologies and digital infrastructure”.

The other policy objectives include:

i. To address the challenges of internet access by fast-tracking the penetration of digital access, optimizing the use of existing infrastructure, and equitable distribution of digital dividends through need-based policy interventions;

ii. For the early inclusion of digitally-divided people, promote service-based and open competition, rationalize taxes, and offer essential incentives for reducing the cost of inclusivity;

iii. For the socio-economic wellbeing, enhance the awareness of using the internet/digital services for learning and earning;

iv. Xth Generation internet service and technology readiness and enablement;

v. To improve the availability of the internet by localizing content and inducing a culture of indigenous research and innovation at the grassroots for addressing societal challenges and exploring opportunities through effective and efficient use of digital/internet space;

vi. To plan and optimize infrastructure/resources available with national and provincial governments/state organizations for improving the delivery of internet/digital services in synergies and partnerships and for a purposeful adoption and humanization of Fourth Industrial Revolution (4IR), develop a roadmap for harnessing evolving communication technologies, and to create an enabling environment through necessary facilitation and appropriate regulation.

The user-centric policy drivers on which the foundation of the National Broadband Policy – 2021 is laid consists of the following four major pillars.

The 1st pillar will focus on the digitally divided people who are yet to be digitally included and will provide guidelines regarding the use of existing fiber resources, facilitating infrastructure sharing, introducing national broadband networks, and its role in the development of sustainable broadband infrastructure in public-private partnerships, reviewing the role of USF for sustainable penetration of broadband services in unserved and underserved areas of the country further enhancing the capability for use of already laid infrastructure, further assessing the rolling spectrum strategy and offering interventions for resource optimization as well as a roadmap for inclusion of new mobile spectrum bands, facilitating the provisioning of rights of ways, plan for commercial use of data satellite and proposal for smartphone adoption and increased local manufacturing of internet devices/terminals in Pakistan.

The 2nd pillar will help in organizing matters related to enhancing the use of the internet and for market enablement such as; a roadmap for service-based competition, review of licensing framework, outlining the future course of OTT platforms and content management, broadening the role of Ignite as research and innovation enabler, facilitating the cloud infrastructure and internet exchange points, reviewing the quality of service rules for improving user experience, developing and implementing new services and technologies in public-private partnerships, supporting with necessary infrastructure and services for enabling social services in the digital space.

The 3rd pillar will emphasize the privacy and protection of users consuming the internet and will help in creating awareness and propose a framework for securing identity and data online, ease of access for reporting criminal activity online, guidelines for constituting CERTs, standardizing and implementing user privacy, propose common operating environment and standards for internet security, environment protection support, a framework for standardizing new technologies and services.

The 4th and final pillar of the policy would help users by providing a transformational roadmap for legacy services and technologies, reviewing the role of different public sector organizations responsible for facilitating different telecommunication services, planning for adopting open source technologies and platforms, broadly identifying future technologies and make provisions for early adoption, propose a broad strategy for the adoption of internet of everything, and last but not the least provide a guideline for international cooperation in ICTs.

For enhancing the implementation capacity of broadband plans and strategies through special funding instruments for aiding the economic structure based on thorough market analysis and benchmarking, the ITU Broadband Commission advocates to align National Broadband Targets with international action plans until 2025.

With a focus on the early digital financial inclusion of the millennial population, it is anticipated that Pakistan can achieve the targets given below well before the time due to propelling digital culture in the country.

These targets are to ensure that 100 percent population living in tier-2/3 cities should have access to high-speed internet by 2025, more than 75 percent of a metropolis, district, town, tehsil, and union council should be connected with optical fiber cable-based fixed/wireless access network with an average per-user internet speed of 50Mbps in major cities of Pakistan by 2025, every social and welfare service facility such as; schools, hospitals, courts, police/fire stations, district/union council offices should have access to broadband internet services with at least 50Mbps connectivity by 2025, more than 75 percent of businesses and commercial facilities should have access to high-speed fixed and mobile broadband internet by 2025, every internet user to have ownership of at least one latest smartphone(s) and/or device(s).

To introduce the next wave of fixed and mobile services and ensure coverage in 25 percent of the cities in Pakistan by 2025 and another 75 percent of cities/towns by 2030 while accommodating technological evolution and resource optimization on the go, to facilitate 75 percent of internet users with digital bank accounts by 2025, develop and operationalize at least five carrier-neutral Internet Exchange Points and cloud data centers in public-private partnerships by 2030.

Source: Pro Pakistani