Remove Service Charge on IBFTs to Encourage Digital Transactions

Mohammad Shaaf Najib


The State Bank of Pakistan (SBP) announced on June 16, 2021,
that it has now allowed banks to charge a transaction fee of 0.1 percent
of the transaction or PKR 200, whichever is lower on Inter-Bank Funds
Transfers (IBFTs). SBP has made compulsory free-of-cost IBFTs of up to
PKR 25,000 per month per account. For accounts exceeding the limit, the
banks will charge the transaction fee as mentioned above. Following the
onset of the COVID-19 pandemic, on March 19, 2020, the Government of
Pakistan and SBP decided to make all IBFTs free of charge. The idea
behind this decision was to limit consumer visits to banks and thus
restrict the COVID-19 threat. Before that, the banks were allowed to
charge a transaction fee on IBFTs as per SBP’s defined schedule of
charges. The practice did continue for a little over a year until after
the third wave, the state bank, as mentioned above, assumed an improved
COVID-19 position for reviewing the policy and thus reimposed the
charges on digital funds transfer. Since then, Pakistan has entered the
fourth pandemic wave as a much deadly delta variant and other new
variants grow rapidly in Pakistan. Consequently, the basis of this
review and policy change can be contested on the pandemic spread
grounds, but for now, this policy viewpoint discusses the decision from
an economic and financial perspective.

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