''Regulations for EMIs'' launched: Government sees higher growth in last half of tenure

Finance Minister Asad Umar said on Monday the government would require minimum two years from now onward to handle the economic challenges in an effective and meaningful manner and the country will move on growth trajectory in the third year to provide relief to people.
Speaking to media persons after the launch of ''Regulations for Electronic Money Institutions (EMIs)'' by the State Bank of Pakistan (SBP), the finance minister stated, "There is no doubt that inflation has increased during the tenure of the present government but this is not unusual and same situation had been in 2008 and 2013 due to balance of payment crises."
He said the balance of payment crisis was more acute this time as compared to what was inherited by the previous two governments; however, increase in inflation is much less now if compared with 2008 and 2013.
The finance minister said that the government received $ 2 billion from the UAE, $3 billion from Saudi Arabia and $2.1 billion from China to strengthen balance of payment position.
Replying to questions, the finance minister stated that revenue mobilisation problem cannot be fixed in three months as it requires reforms and the present government is taking measures to undertake structural reforms to increase the tax collection. He said that some other reasons for shortfall in revenue collection were import compression, some court decisions and a reduction in taxes on petroleum products.
To a question about depreciation of rupee against dollar, Asad Umar responded that the then Prime Minister Shahid Khaqan Abbasi and Finance Minister Miftah Ismail had not only acknowledged on record that rupee was overvalued but they had also taken the decision in 2017 to allow depreciation from Rs 105 to Rs 127 (Rs 22). The depreciation during present government is Rs 12-14. Now the exchange rate is in equilibrium, he said, adding this was stated by the SBP.
To another question, he stated that discussion with the International Monetary Fund (IMF) on a bailout package has reached ''landing zone.'' He said that there was disagreement with the Fund on timing and sequencing on implementation of the agreed reforms. The finance minister stated that he has full backing of the federal cabinet on the IMF and other economic decision-making.
Earlier, the finance minister formally launched the regulations for electronic money institutions (EMI) and stated that digital system will revolutionise the entire financial system. At the same time, he asked the State Bank of Pakistan (SBP) and Federal Investigation Agency (FIA) to ensure effective cyber security so that no one could threaten the system.
The minister said, "As we move towards digitalisation, it is absolutely important to ensure cyber security because one or two high profile incidents can cause huge damage to the system and economy." He also wanted the SBP to review the policy with regard to confidentiality of data. The finance minister said, "Pakistan is a victim of elite capture and only those who have relations with the Q Block (Finance Division) get benefits."
This EMI will complement the efforts of government of Pakistan in creating an enabling environment to empower stakeholders in trade and commerce and help businesses improve productivity and contribute towards positioning the nation for global competition.
Deputy Governor SBP Jamil Ahmed said that EMIs are non-bank entities that will be licensed by the SBP to issue e-money for the purpose of digital payments. In his address, the deputy governor SBP shared the bank''s initiatives in transforming itself into a modern, digital and fully technology-oriented central bank.
He briefly elaborated the strategy of SBP to embrace technology and innovation in digitising banking & payments, and added that the launch of EMIs regulations was the first step of SBP''s strategy in that direction. The deputy governor stated that digital currency will be issued in 2025. "These landmark regulations are a testament of SBP''s commitment towards openness, adoption of technology and digitisation of our financial system," he added.
Ahmad recalled that SBP had issued the regulations for branchless banking about a decade ago that enabled the entry of telecommunication companies into the arena of banking and payments. "The prime objective of branchless banking was to enable the delivery of financial services using telco-based agent network," he said and added, "Over the past few years, branchless banking providers have evolved well and are now offering financial services to a large segment of our population".
Director Payment Systems Department, Sohail Jawaad gave a detailed presentation in which he highlighted the objective and scope of regulations, licensing procedure, governance arrangement, capital requirement, funds safeguarding arrangements, customer due diligence, use of agents and interoperability. He said the EMIs will offer innovative digital payment solutions and services to the industry.
He went on to add that the regulations also cover other regulatory requirements including outsourcing activities, AML/CFT, consumer protection, complaint handling mechanism, oversight and regulatory reporting, etc.
The State Bank of Pakistan (SBP) has decided to license non-banking entities as Electronic Money Institutions (EMIs) with initial capital requirement of Rs 200 million to foster innovation in the payments industry and promote financial inclusion in the country.
The SBP on Monday issued regulations for licensing of non-banking entities as EMIs under the powers conferred on State Bank of Pakistan (SBP) by Payment Systems and Electronic Fund Transfers Act, 2007.
These Regulations will remove entry barriers and provide a level playing field to EMIs in payment''s arena which will eventually lead to the development of payments ecosystem in Pakistan. SBP, therefore, expects that the prospective EMIs will offer convenient, cost effective, interoperable and secure digital payment products and services to end users in the country.
EMIs are entities that offer innovative, user-friendly and cost effective low value digital payment prepaid instruments like wallets, prepaid cards, and contactless payment instruments including wearables.
Globally, these innovative payment instruments have been instrumental in promoting cashless payments like merchant checkouts, e-commerce, transportation and toll payments, etc.
Traditionally, payment instruments in Pakistan are issued by banks without participation of non-banking entities. New technological innovations are now enabling non-banking sector to deliver innovative and efficient payment services to consumers at much lower cost.
These regulations are primarily aimed at removing entry barriers for non-banking entities by providing them a guiding as well as an enabling regulatory framework for the establishment and operations of EMIs in Pakistan. These regulations also address potential risks in order to ensure consumer protection in line with legal framework of the country while promoting digital payments and financial inclusion.
The basic objectives of the regulations are to provide regulatory framework for EMIs desirous of offering innovative payment services to the general public and prescribe minimum service standards and requirements for EMIs to ensure delivery of payment services in a safe, sound and cost effective manner. According to Regulations, E-money platforms will only be used for permissible activities. E-money will be used to make payment services i.e. payments for goods and services, bill payments, fund transfers and cash deposits and withdrawals from e-money accounts.
However, EMI will not conduct the business of banking including the acceptance of funds from public for the purpose of lending, investments or any speculative activity.
EMI will neither pay interest/returns to customers nor offer anything that adds to the monetary value of e-money, however, EMI may offer discounts etc. on goods and services provided such discounts are not linked to the amount or length of time e-money is held by the customer. SBP may revoke or suspend the license of an EMI, if it found to be involved in illegal or prohibited activities or fails to comply with conditions of the License; regulations, rules, guidelines, instructions, directions and circulars issued by SBP from time to time and/or any other applicable laws.
An entity desirous of becoming an EMI is required to fulfill initial/startup capital requirement of Rs 200 million for Average Daily Outstanding E-Money Balance (OEB) of up to Rs 4 billion. The entities will be required to maintain minimum ongoing capital at all times as per SBP''s slabs. An entity is required to maintained on-going capital of Rs 200 million plus 5 percent of Outstanding E-Money Balances (OEB) in excess of R 4 Billion
Between Rs 4 billion and Rs 10 billion average daily OEB, entities will be required On-Going Capital of Rs 200 million plus 5 percent of OEB in excess of Rs 4 billion. Between Rs 10 billion to Rs 20 billion average daily OEB, EMIs will maintain Rs 500 million plus 7.5 percent of OEB in excess of Rs 10 billion.
On average daily OEB of above Rs 20 billion, entities will be required to maintain Rs 1.25 billion capital plus 10 percent of OEB in excess of Rs 20 billion and the EMI will also be required to inform SBP as soon as the OEB exceeds Rs 20 billion.
EMIs will maintain at all times, at least ten percent (10%) of the required capital or any other amount prescribed by SBP from time to time, as security deposit at SBP-BSC Office.
Five percent (5%) of the security deposit will be kept in a non-remunerative current account with the SBP Banking Service Corporation and five percent (5%) in the form of Government securities to be kept under lien at SBP-BSC. The aggregate monthly load limit of an e-money payment instrument will be Rs 50,000 on CNIC verification (NADRA VeriSys) and Rs 200,000 on biometric verification from NADRA. Cash withdrawal limit for e-money holders shall be Rs 10,000 per day subject to biometric verification or at least two-factor authentication.
EMI will submit the annual audited financial statements to SBP within three months of the financial year-end and deploy the automated transaction monitoring system to proactively monitor the transactions for avoiding the ML/TF risks.
EMI will also adopt risk-based approach to mitigate the money laundering and terrorist financing activities. In this regard, EMI will comply with all the AML/CFT Laws, Guidelines, Regulations issued by SBP or any other authority from time to time.