Banks allowed to collect service charges on interbank funds transfer

KARACHI: The State Bank of Pakistan (SBP) on Wednesday allowed banks to collect service charges on the interbank funds transfer (IBFT) on the amount above Rs25,000/month.

The central bank issued the updated instructions to banks related to service charges in IBFT. It said the new instructions allow the banks and other service providers to charge a minimal fee on high-value transactions while protecting and encouraging the low-income segments of the population to continue using digital transactions free-of-charge.

The SBP directed the banks to provide free-of-charge digital funds transfer services to individual customers up to, at least, a minimum aggregate sending limit of Rs25,000/month/account/wallet. “However, the banks may choose to set this aggregate limit at a higher amount, as well,” it added.

This would allow individual customers to make as many free funds transfer transactions remaining within their aggregate monthly limit of free transfers. The SBP advised the banks that for transactions above the aggregate limit of Rs25,000/account in a month, the banks may charge individual customers a transaction fee of not more than 0.1 per cent of the transaction amount, or Rs200, whichever is lower.

This will enable the service providers to recover part of costs they incur on providing interbank funds transfer service and build sustainable and innovative business models.

Nevertheless, the new instructions encourage the banks to provide free-of-charge digital funds transfer services to their customers to promote adoption of digital payments in the country, the central bank said.

The SBP has also advised the banks that all digital funds transfer transactions between different accounts within the same bank (intra-bank fund transfers) would remain free.

Further, the incoming interbank funds transfer transactions would also remain free. The banks have also been advised to ensure proper disclosure of charged and free IBFT amounts along with the applicable fees to their customers by sending regular notifications through SMS, apps and email.

After every digital transaction, the banks are required to send free-of-charge SMS to their customers on their registered mobile numbers, intimating them about the transaction amount and the charges being recovered.
To provide seamless digital banking services to the public, the central bank has also advised the banks to remove any limits on the number of funds transfer transactions on their customer accounts/wallets unless there are genuine concerns related to AML/CFT or frauds.

To cope with the extraordinary situation of lockdowns, amid Covid-19 pandemic in 2020, it had advised the banks and other service providers in March 2020 to offer free-of-charge IBFT services to all their customers regardless of the size of the transaction.

The objective was to facilitate the bank customers to meet their banking services needs through online services during exceptionally difficult times and to avoid in person interaction to curb the spread of Covid. This step resulted in an overwhelming response by the customers, with the internet and mobile banking transactions more than doubling in the second quarter of FY21 over the last year.

The SBP appreciates the support of all service providers for this initiative by allowing free-of-charge interbank funds transfer services to the public without recovering their operational cost and incurring substantial revenue losses.
It is encouraging that the Covid-19 situation has improved significantly, and despite fluctuation in the number of cases, the overall conditions now allow relaxations in mobility restrictions while following proper SOPs.
In this backdrop, the State Bank reviewed the current IBFT pricing mechanism and has made some changes to ensure that the free-of-charge IBFT services are provided by the banks and other financial institutions on a sustainable basis.

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