SBP revises branch licensing policy

The State Bank of Pakistan (SBP) amending the Branch Licensing Policy has announced that any district having less than 10 Islamic Banking Branches (IBBs) will be termed as underserved with respect to Islamic banking facilities. In order to provide incentive to commercial banks for enhancing outreach of Islamic banking services, it has been decided to enhance the scope of "Rural/Underserved Areas (RUAs)" definition, said SBP circular issued on Monday.
SBP has referred banks'' attention toward BPRD Circular No 15 dated October 12, 2007 whereby revised Branch Licensing Policy (BLP) was announced. "Henceforth, any district having less than 10 Islamic Banking Branches (IBBs) will be termed as underserved with respect to Islamic banking facilities," the SBP circular said adding that first 10 IBBs in such districts of the country will fall under the BLP''s definition of RUAs.
SBP has further clarified that in each calendar year, only one IBB of a particular bank will be eligible to be treated as RUA in any particular district. This means, if a bank desires to open more than one IBBs in any particular district, then its first IBB will be treated as RUA branch and any subsequent number of branch or branches would be considered as normal branch(es).
The State Bank has also allowed all banks to revise their Annual Branch Expansion Programme (ABEP) for the current calendar year. These instructions will be effective immediately; therefore, banks which have already identified RUA locations in ABEP-2011 are allowed to approach SBP within one month of the issuance of this circular for change/replacement of RUA locations (if desires so) with respect to new criteria. All other instructions on the subject shall remain unchanged, the SBP circular said.
Sources said that for the current calendar year, banks have planned to open 570 new branches under the expansion plan. The State Bank under its Branch Licensing Policy (BLP) has issued 570 licenses to banks, DFIs and Microfinance Banks to open new branches, sub-branches and booths in calendar year 2011.
Although, this year, banks have planed to open 37 percent or 153 more branches as compared to last calendar year 2009, however it is still lower than 2008, when highest ever some 730 branch or sub-branch licenses were issued by the State Bank in any year. In 2010, the State Bank had issued a total of 417 branch licenses.
As of February 28, 2011, the total number of bank branches operating in the country was 10,270, which were 9,853 in calendar year 2010. While with the addition of new branches and sub-branches by the end of this calendar year, total branches will be 10,840 across the country.
While, some 759 branches and sub-branches of Islamic Banks are operational across the country. These include 706 branches and 49 sub-branches. Meezan Bank is the leading Islamic Bank and has a branch network of 226 branches, Bank Islami 100 branches, Al-Baraka Islamic Bank 89, Dubai Islamic Bank 57 and Dawood Islamic Bank has 50 branches.
Under the BLP, commercial banks, which want to open new places of business during a calendar year, are required to submit their Annual Branch Expansion Plan (ABEP) to the State Bank for consideration and approval. Accordingly, various banks submitted their ABEP-2011 and were granted approval for opening of branches. As required under the BLP, banks are required to open at least 20 percent of their branches in rural/under-served areas (RUAs). RUAs mean villages, small towns and also include those Tehsil Headquarters where there is no branch of any bank.