SBP revises branch licensing policy

The State Bank of Pakistan (SBP) Tuesday announced revision in the Branch Licensing Policy (BLP) aimed at enhancing the outreach of banking facilities to the population with specific focus on rural and underserved areas. According to a circular issued to banks, the provision of financial services in rural and underserved areas is the key priority of the State Bank to balance the distribution of branch network amongst different segments of the country.
The BLP is one of the important tools available to SBP for allowing guided expansion of the banking system keeping in view requirements of the system and provides an insight into rationalisation of the branch network. The SBP since 2007 has liberalised the BLP with a view to allowing the banks to make their branch networking within the broad policy parameters. Continuing with the same stance and to align policy with National Financial Inclusion Strategy, the SBP has revised the existing BLP to enhance the outreach of banking facilities.
In the revised policy, the SBP has introduced tier-wise geographical distribution of new branches proposed by the banks under Annual Branch Expansion Plan (ABEP) in different segments such as big cities, other cities, Rural and Underserved Areas (RUAs) and unbanked areas. The new policy will guide roadmap for commercial banks to open their new branches during next 5 years according to these tiers. As a result, the RUA requirement (including unbanked areas) will be enhanced year-wise from existing 20 percent in 2016 to 25 percent by the end of FY 2021.
Introduction of criteria for upgradation of sub-branches into full-fledged branches is also a part of policy, besides enhancement of scope of big cities from 13 to 18 big cities for the purpose of BLP. The SBP also gave special instructions to banks regarding accessible banking infrastructure for persons with disabilities/senior citizens/women as a part of banks corporate social responsibility and moral obligations.
The new BLP is consolidation of existing policies/instructions issued on branch licensing from time to time and rationalisation of some of the existing instructions for ensuring statutory/regulatory compliance. The SBP said that the new policy will become effective immediately and will supersede the existing instructions on the BLP.
Similarly, a license issued under a given ABEP will be expired where a licensed place is not opened within three months of issuance of a license or by 31st December of the respective year, whichever comes earlier. All licensed institutions as a part of their corporate social responsibility will make arrangements at designated branches for special persons suffering from any disability. Commercial banks can open sub-branches, which will allow them another option for enhancing their outreach to underserved areas and population. However, they will not be allowed to downgrade any of their existing branches into sub-branches.
The commercial banks are allowed to offer banking services through bank vans with prior written approval of SBP with a main purpose of retail delivery of financial services at the doorsteps. It shall be occasional and covering areas within 50 kilometres radius of the licensed branch preferably for agricultural; calamity-hit areas and for other pressing situations.