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Ishrat calls for internet, online banking system

Recorder Report

LAHORE: State Bank Governor, Dr. Ishrat Hussain has urged the commercial banks to go for internet and online banking system in order to ensure efficient and smooth payment system. He said that this would not only help in documentation of the transactions but also reduce the expenditure incurred on the exercise.

He was addressing the inaugural ceremony of the automated cheque clearing system introduced by the National Institutional Facilitation Technologies (NIFT) (Pvt) Limited here on Tuesday. Nift has already launched this service successfully in Karachi.

The facility is a consortium of six major banks - National Bank of Pakistan, Habib Bank Limited, Muslim Commercial Bank, United Bank Limited, Allied Bank Limited, First Women Bank - and the private sector.

The SBP governor said that Pakistan has a cash-based economy, but the present government was committed to getting it documented through various measures, including tax reforms and use of the cheque system.

He said that the cheque system in business transactions is not only useful from the security point of view, but it also makes the process of transactions easy for the customers.

Dr. Ishrat said Nift helped in upgradation of technology for one of the chartered responsibilities of the SBP, which was an efficient and smooth payment system.

He said that prior to the launching of Nift, the banking institutions in Pakistan were operating through manual system, which had not only increased the time of business transaction but the cost as well.

He said that the new system would also help in eliminating the intermediation cost on transactions and pass on the benefit to the customers.

"We are living in the era of on-line and internet banking, and, hopefully, the facility introduced by Nift would be a prelude to internet banking system," he observed.

The commercial banks should benefit from this latest technology and devise a timetable to switch over to this goal, he added.

The SBP governor said that Nift was the best example of partnership between the infrastructure of the banks and technology of the private sector.

He expressed the hope that with the help of the private sector the country's banking system would move towards competitiveness.

Appreciating the 'express same-day clearance service' introduced by Nift, the Governor asked the financial institutions to utilise the service for attracting remittances from the overseas Pakistanis, especially those living in the Middle East.

He said that the volume of remittances had fallen to $1 billion from $ 1.8 billion two years back.

He said that if families of the overseas Pakistanis were given assurance that they would get their money within 24 hours, it would be a service to the country and the nation. This would attract more remittances, which would help in bridging the gap in the balance of payments and, hence, increase foreign exchange reserves.

He was of the view that if the overseas Pakistanis were given this assurance they could sacrifice the marginal increase they get by sending their money through other means.

He said that ATM was a very cost-effective system and called upon all the banks to go for it. He urged the banks to create a platform for using the ATM facility.

He said that the utility bills payment should be encouraged through the cheque system. He regretted that people stood in queues for payment of utility bills, and suggested that the technology introduced by Nift should also be utilised for this purpose and the banks needed to initiate a dialogue with the utility agencies to convince them to take advantage of this facility.

Earlier, Nift Chief Executive M. M. Khan said that the facility was being introduced as a venture of a six-bank consortium and the private sector and all the scheduled banks operating in Pakistan (a total of 47) had become its members by signing an agreement with Nift.

He said that Nift was providing cheque clearing services under an agreement with the State Bank, which supervises the clearing operations.

He further said that Nift had launched automated clearing in Karachi in March 1997 and now it was introducing the same in Lahore. The facility included latest image based technology with high-speed sorters at both the centres. The services were being provided to 800 bank branches in Karachi and 530 in Lahore.

Automated clearing helps availability of funds to the client next day as compared to three days in case of the manual system. Nift is also planning to establish similar centres in all the major cities, facilitating availability of funds for the inter-city clearing in three days as compared to 8 to 10 days. Nift has also introduced Express Same Day Clearance Service, which makes the funds available to the client on the same day before the close of the counter hours. Karachi has already had the facility and Lahore would soon have it.

Image-based technology installed at Nift will lead to introduction of electronic clearing as soon as the technology is installed in the bank branches. The technology employed by Nift will also enable streamlining of utility bills payment system since the same technology can be used for processing of stubs of the utility bills and the corresponding cheques.

The utility consumer will be able to drop the stub and the cheque through a drop box arrangement, which will not only eliminate the long queues outside the bank branches but will also help production of correct bills and the documentation of the economy.

Those who were present on the occasion included Chairman Nift, Khaleeq Kiyani, Directors Asif A. Zuberi, Arshad A. Zuberi and representatives of the banks and financial institutions.