SBP allows banks to outsource cash processing activities for all denominations

The State Bank of Pakistan (SBP) has allowed banks to banks to outsource their cash processing functions for all denominations of banknotes.

The decision has been made in order to further enhance the flexibility for banks to get their cash processed and encourage greater innovation and development of cost effective models for cash processing.

The central bank said that the banks may thus outsource their cash processing functions (sorting, authentication, and packing) for all denominations of banknotes to such cash processing companies having capacity to process the cash in full conformity with the Cash Management Strategy (CMS) instruction.

It is pertinent to inform that the outsourcing of processing of higher denominated banknotes was, however, kept restricted to other banks only having the requisite capacity as CMS did not allow outsourcing of this function to commercial cash processing companies.

As per SBP’s directions, banks shall ensure that the cash processing company (service provider), if any engaged, operates in full conformity with the CMS instructions issued vide FD Circulars No. 03 /2015 dated August 26, 2015 and No. 02 / 2017 dated March 10, 2017, as amended from time to time.

“It is reiterated that compliance with the CMS instructions is the responsibility of banks outsourcing cash processing and any non-compliance of instruction by the service provider shall, for all intents and purposes be treated as non-compliance by the concerned bank, making the bank liable to penal action under the CMS,” said SBP.

Furthermore, banks shall contractually bind the service provider that SBP may conduct surprise visits of its CPCs, to assess the control environment and regulatory compliance regarding CMS.

The banks while engaging the service provider shall ensure compliance with SBP instructions on outsourcing arrangement with third parties, as issued vide BPRD Circular No. 6 of 2019 dated December 17, 2019, as amended from time to time.

SBP also directed the banks to report all such arrangements to Finance Department SBP along with details of branches and ATMs to be fed through the outsourced service providers within seven (7) days of signing of contract with the service provider. “The Banks shall also share the address(es) of the cash processing centers of the service provider and contact details of the CEOs and other senior management for SBP’s information and record,” it said.