According to Governor SBP, Dr. Reza Baqir, the State Bank of Pakistan (SBP) may consider penalizing banks for inadequate digital banking services as a last resort to ensure good quality services for clients in the industry.
In response to a question at the press conference about various banks’ consistently poor digital services, he said the banking regulator could consider a number of options, including imposing penalties on banks and introducing a scoring table of key indicators, to improve banking services, particularly digital banking within the banking sector.
However, he went on to say that the banking regulator encourages strong competition among banks, which allows clients to readily migrate from one bank to another in search of superior service quality.
Governor Baqir stated that the banking regulator is working hard to build digital banks in the country in order to provide clients with better, higher-quality, and more diverse banking services.
In Pakistan, digital banking has seen a sharp increase in use in recent years, as the COVID-19 outbreak prompted customers to switch to digital banking (mobile and internet banking) as a precautionary measure.
As a result, a big number of clients have been accustomed to utilizing digital banking, but the network of a few banks has repeatedly collapsed due to a lack of capacity to handle a large volume of transactions. Customers have experienced trouble and hardship as a result of persistent service flaws, which have lowered their trust in the modern banking system.
Dr. Reza Baqir stated that the banking regulator is striving to reduce banking rules at the conclusion of the customer’s journey by developing a common Know Your Customer (KYC) rule.
In this approach, after a consumer has registered with a bank by physical forms or digital onboarding, he will have a unique identity in the banking system, which will be sufficient for him if he transfers banks.
He went on to say that once a customer has recorded his data with one bank, there is no need for him to register with another.
In response to a question concerning the banking system’s current low deposit and savings rates, the SBP Governor stated that the SBP may consider raising rates to encourage saves in the country, but that no decision has been made in this regard.
He went on to say that if inflation is kept under control, real interest rates will rise, attracting clients to participate in various deposit programs.
The SBP’s mandate is to manage inflation to the best of its ability, but administrative authorities in the country can also play a role in lowering inflation by controlling the prices of vital commodities at the local level.
Reza went on to say that inflation will likely fall in the next months as the price of petroleum goods falls on the global market, while food inflation can be controlled by increasing local production of various crops within the country.