SBP widens investment base for govt marketable securities


KARACHI: The State Bank of Pakistan (SBP) has made it mandatory for primary dealers to offer Investor Portfolio Securities (IPS) accounts to investors in a bid to encourage more investment in the faltering economy.
In addition, the central bank has instructed scheduled banks to tap alternate investor bases, including individual investors and shifting focus away from banks.
According to SBP, the move would widen the investment base by promote investment by the non-banking institutions and igniting the interest of the general public in state marketable securities.
The State Bank, through FSCD Circular No. 18, on Saturday advised scheduled banks to introduce IPS account-opening service to their customers and generate a positive response at the branch level.
Elaborating on the opening of the IPS account, the central bank stated any individual or entity which had a rupee-denominated account in any scheduled bank would be eligible for the IPS account.
Each scheduled bank and primary dealer is at liberty to devise its own internal guidelines on IPS account-opening and development of a system for IPS account maintenance. This entails that there be sufficient capacity to allocate account numbers, record transactions and generate activity statements, it indicated.
In this regard, SBP encouraged commercial banks and primary dealers to submit a copy of their individual internal guidelines to its Financial Markets Strategy and Conduct Department (FSCD) before January 31 of next year.
Furthermore, each scheduled bank and primary dealer will furnish activity statements to IPS account holders on at least a quarterly basis as per the prescribed format. The State Bank revealed that customer wise holding position in each government security category must be reported to the Public Debt Office SBP (BSC) Karachi by the fifth of every month in line with relevant regulations.
The bank stated that both scheduled banks and primary dealers would also have to ensure segregation of the securities held in IPS accounts from their own holdings. “IPS maintenance charges must be clearly defined in schedule of charges of scheduled banks/primary dealers,” it said.
The SBP opined that the development of a vibrant government debt market was a prerequisite to the enhancement of other sectors within the financial markets.
IPS accounts would allow customers to retain custody of their securities with the primary dealers and banks and allow the trading of these securities thro easy transfers to other accounts. The current range of marketable securities issued by the Government of Pakistan (GoP) includes treasury bills, Pakistan investment bonds, and ijarah sukuk. Earlier this year, SBP launched an electronic trading platform for GoP debt instruments providing real-time information about the market activity. The move was followed by active engagement of various stakeholders; it was realised that a major impediment in the development of this market was the lack of awareness among general investing institutions regarding state debt instruments.
“To address this issue and widen the investor base, the State Bank has issued these fresh instructions,” the bank said.