One of the big steps SBP took lately has been the introduction of Roshan digital account for Non-Resident Pakistanis (NRP). This was long due as other countries (such as India) have been capitalizing on the diaspora investment for some time. In Pakistan, the reliance of expats sending money was primarily on remittances. This is a one-way traffic where money is taken into the country and managed within Pakistan.
However, with Roshan accounts, money can be taken in and out seamlessly – Like SCRA. Moreover, Naya Pakistan Certificates are to be issued to NRP in PKR and USD at lucrative rates. Pakistan Banao Certificate did not succeed due to operational glitches and lack of marketing. That was a half-hearted attempt. Overall the incoming investment was less than $100 million.
Now it seems a full-blown effort is in the making. There are approximately 9 million NRPs and if 1 percent of them open accounts with an average balance of $10,000, the total gets to almost a billion dollar. This is the minimum SBP should be aiming in for the early days; and once it is successful, the sky is the limit.
The SBP made some requisite regulatory changes in FX regulations to allow these accounts to be opened sitting outside Pakistan. These can be invested in real estate, stock market and other avenues. The accounts will be opened digitally in 48 hours; and repatriation can be done as swiftly. The Roshan digital account can be in conventional and Islamic mode; and can be opened in PKR or USD. The banks will issue debit cards and these can operate for commerce transactions.
The other element is to ensure that technologically, the accounts are operable with all banks. The SBP started worked with the banks to make this happen. Every bank has its own platform, and banks have to make changes in-house. The SBP has partnerships with 8 banks based on its assessment.
Roshan digital accounts would be different from expats’ existing accounts. The new accounts will be fed from outside Pakistan, and cannot be linked to existing accounts. If one has to invest in the stock market, a new CDC-sub account will be opened and linked to Roshan Account, and it would remain separate from existing CDC sub account, if any.
The other option would be to buy Naya Pakistan Certificates (to be issued by federal government soon) through the Roshan account. The bonds will be issued for 3M, 6M, 12M, 3Y and 5Y maturity by the government. The rates in USD would be between 5-7 percent – mouthwatering; considering near zero rates in developed economies. The PKR bonds rates would be 9-11 percent, which is better than prevailing T-bills and PIBs yield.
The rates are kept high to attract investment from expats and to pay a vote of thanks for their continuous support on balance of payment. The worker remittances sent by 9 million NRPs is almost equal to country’s goods exports. These expats are critical for managing external financial health of the country. It is good to see that they are getting something in return.
The Roshan digital accounts are at their pilot stage and a few bank accounts are already opened. It will be marketed soon via formal launch by the SBP, federal government and partner banks. At the start, the investment options would be partner bank products, stock market and Naya Pakistan certificates. In the next phase, real estate and mutual funds investment would be available for NRPs.
In real estate, land development agencies like DHA or Naya Pakistan projects would be open for investment on new issuances. This will be primary buying. Going forward, the plans are to open secondary market buying and selling for these accounts.
Roshan accounts will have continued relationship of NRPs with respective bank. They will operate it digitally from anywhere in the world. The Roshan account will essentially travel with the account holder. This is a regime change, not only for the expats; but for SBP as well. The opening up of digital account in domestic market is allowed for small accounts with Rs30,000-40,000 per month limit. This is level zero in branchless banking. In terms of opening a proper bank account, client has to visit bank office and to go through rigorous KYC.
In case of Roshan Account, the expat has to provide limited information for documentary evidence digitally and the account will be open within 48 hours, subject to verification from NADRA and other relevant agencies. The framework for account opening is also changed for this product. The wait here is to see how much attention this would grab and whether SBP will develop such a framework for domestic consumers in the near future as well.
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