Online fund transfers: SBP deputy governor says banks now under price control

Pakistan central bank's deputy governor Sima Kamil said that the country's banks have now been brought into a regulated structure of charging customers for online fund transfer services, calling it a "price-control" mechanism as situation around Covid-19 had eased in the country.

Kamil's explanation comes after the State Bank of Pakistan (SBP) issued a circular allowing banks, microfinance banks (MFB), and electronic money institutions (EMI) to charge a transaction fee for online fund transfers. The SBP said that customers could now be charged 0.1%, or Rs200 (whichever is lower), once the per-account monthly limit of Rs25,000 for online fund transfers has been crossed.

While the SBP, in its circular, allowed banks to start charging the fee from July 1, 2021, it did say that "however, Banks/MFBs/EMIs are encouraged to provide free of cost IBFT services to their customers to promote adoption of digital payments in the country".

The open-endedness of the SBP circular and its changed stance on online fund transfer services came to the spotlight on Thursday with many saying that the move, originally introduced last year at the outbreak of the pandemic to encourage people avoid in-person interactions, is regressive, and discourages digital adoption.

However, Kamil, the ex-president of United Bank Limited and former director of the First Microfinance Bank, said that before the pandemic, banks and MFBs used to charge Rs100 to Rs400 per transaction for money transfers.

"We reviewed the data, and decided this.

"These charges were removed during Covid-19 to facilitate customers meet their banking needs through online services, and avoid in-person interaction," said Kamil, speaking to a TV channel on Friday.

"After an improvement in the Covid-19 situation, fee for money transfers has now been set. Banks are no more independent to charge whatever they want. There is a price control to it," added Kamil, who was appointed as SBP's deputy governor by the government in August, 2020 for a period of three years.

The ex-banker said that online transactions, including those on ecommerce platforms, will be free if they stay within the limit of Rs25,000 per month. It is worth mentioning that these transactions are capped at Rs25,000 per account/mobile wallet, and not per-NIC.

"The maximum amount banks can charge is Rs200 for one transaction - no matter what the size of that transaction is."

The deputy governor clarified that funds transfer charges will not be levied on the online payment of a utility bill.

Online fund transfer services: SBP allows banks to charge customers

Background

Earlier this week, the SBP issued the circular on online fund transfer services.

"It has now been decided that banks/MFBs/EMIs shall continue to provide free of cost IBFT services to their individual customers up to, at least, a minimum aggregate sending limit of Rs25,000 per month per account/wallet," stated the circular. "Hence, individual customers of Banks/MFBs/EMIs shall continue to send out as many free IBFT transactions as long as they remain within their monthly limit of Rs25,000.

"After the monthly limit of Rs25,000 is exhausted, banks/MFBs/EMIs may charge their individual customers, a transaction fee of 0.1% of the transaction amount or Rs.200, whichever is lower. However, Banks/MFBs/EMIs are encouraged to provide free of cost IBFT services to their customers to promote adoption of digital payments in the country."

The central bank also clarified that all intra-bank fund transfers as well as incoming interbank fund transfer services shall remain free of charge.

Additionally, the SBP directed banks to ensure proper disclosure of charged and free IBFT amounts along with applicable fees to their customers by sending regular notifications through SMS, apps and email. "After every digital transaction, the customer shall receive free of charge SMS on their registered mobile numbers intimating them about the transaction amount and the charges being recovered.

"The above instructions shall come into effect from July 01, 2021."

It also advised banks, MFBs and EMIs to not limit the number of fund transfer transactions on their customer accounts/wallets "unless there are genuine concerns related to anti-money laundering/combating the financing of terrorism or frauds."

The SBP also said the move is aimed at enabling service providers to recover part of the costs they incur on providing inter-bank fund transfer service while they build sustainable and innovative business models.