The State Bank of Pakistan (SBP) has decided to implement International Bank Account Number (IBAN) standard in the country to bringing about account code standardization and efficiency in processing of payments for domestic as well as cross border transactions.
To this effect, the central bank Wednesday issued IBAN guidelines that contain details for the number’s generation, validation and implementation timelines.
According to the guidelines, the IBAN, an international standard (ISO 13616) for identifying bank accounts across borders, would be implemented in two phases.
In the first phase, all banks shall generate and notify IBAN to all their customers by December this year while the second phase would mark the operational usage, including capturing, recognition, processing, validation and transfer, of the number both for domestic and international financial transactions by June next year.
It may be pointed out that IBAN is made up of two components. While the first component is comprised of a country code and check digit, the 2nd one is called Basic Bank Account Number (BBAN). The check digit mechanism in an IBAN compliant account number would validate the accuracy of account number at the point of transactions entry at the remitting institutions, domestic or international.
About benefits of the IBAN, the State Bank said a bank account standard across Pakistan would bring more efficiency in payment processing by enabling the payments and clearing systems to electronically validate account numbers and to decide the route a payment should take without manual intervention.
The elimination of delays in credit transfers originating from IBAN compliant countries to Pakistan as same are delayed, sometimes for several days due to manual intervention required for sending credit transfers to non IBAN compliant account numbers.
IBAN implementation would help in bringing more efficiency in remittance related transactions as a significant percentage of these transactions are rejected due to inaccurate account numbers information.
Account validation at remitting institution due to IBAN’s check digit mechanism would significantly reduce errors related to account numbers. The State Bank has asked the banks to generate and issue IBAN to its account holders.
The banks should encourage customers to use or/and quote their IBAN number in all financial transactions during the transitionary period. The banks have also been advised to develop online utilities for converting their account numbers to IBAN to facilitate their account holders besides quoting IBAN number in account statements issued to each account holder. Moreover, the beneficiary customer should notify ordering customer of their IBAN.
Under the SBP guidelines the financial institutions should validate the IBANs at the time of entry of the transaction in their system both for sending and receiving customers. The central bank said the guidelines had been developed in consultation with Pakistan Banks’ Association (PBA) nominated committee on IBAN. All participants have been advised by the SBP to ensure implementation of IBAN as per given timelines.
‘SBP plays major role in spreading market of Islamic Banking’
The State Bank of Pakistan is playing a major in role in spreading the market of Islamic Banking in Pakistan and we salute their efforts.
The conventional banks are also exploring the avenues in the Islamic sector due to the promotion of parallel banking by the State Bank in 2002. So unlike the concept which was introduced in 1970s when the customers were forcefully being pushed towards Islamic Banking, now the concept is effectively evolving when the customers have a free choice because more industry players are becoming visible. It was stated by Vice President – Product Development & Shariah Compliance Mezan Bank Ltd Fayyaz-ur-Rehman Khan at a seminar on “Islamic Banking” organized by COMMECS Institute of Business and Emerging Sciences (CIBES) recently. The Management of CIBES along with the faculty, staff and students participated in this seminar. A large number of guests from industry were also present in this seminar. Fayyaz-ur-Rehman Khan started his speech with the concept and prohibition of Interest/markup in Islam and its culture as opposed to conventional banking, with the reference of Verses from Holy Quran and Ahadees. He also cleared several misconceptions about Islamic Banking in the minds of people focusing on the difference between the conventional banking and Islamic Banking. He specially targeted those people who think that both are the same. During the question and answer session he thoroughly the audience by explaining the efficacy and benefits of Islamic banking to citizens as well as the government. It was predicted that Islamic Banking will become the future pillar of the country’s economy. He also said that ‘Pakistan being an Islamic Republic with Muslim population of 98 % has indeed a general notion that the people should adhere to Islamic principles. So when a customer knows that he/she can avail products, services and benefits of banking, in an Islamic way, the person will definitely move towards it’. Highlighting the benefits of Islamic Banking for students Fayaaz-ur-Rehman announced QarzeHasna of Rs. 1.00 Million per annum to CIBES Students, repayable in easy monthly installments. At the end Director CIBES, Mohammad Arif Dossal thanked the respected speaker and all the participants for their interest in such nation building events conducted by CIBES. He said that the main objective of the seminar was to create awareness of issues regarding Islamic Banking. The audience expressed satisfaction that they had acquired greater knowledge and that the discourse had corrected many concepts about Islamic Banking. The Commecs Management reiterated that such informal but directed efforts would be continued to create “out-of-the-box” learning for its students enabling them to get the professional edge needed to take them successfully towards their careers.
