KARACHI: The State Bank of Pakistan (SBP) on Thursday allowed banks to outsource their cash processing functions that includes sorting, authentication and packing of banknotes to cash processing companies.
However, banks while engaging the service provider will also ensure compliance with the SBP instructions on outsourcing arrangement with third parties and report all such arrangements to the SBP within 7 days of signing of contract with the service provider.
As per the SBP’s Currency Management Strategy (CMS), banks are required to automate cash processing function and disburse only machine authenticated good quality banknotes of higher denomination to the public. Presently, all banks are issuing machine processed banknotes (Rs. 100 and above) to the public.
The CMS has given flexibility to banks to either have their own cash processing facilities or make arrangements with other banks having the required capacity to get their cash processed. The outsourcing of processing of higher denominated banknotes was, however, kept restricted to other banks only having the requisite capacity as CMS did not allow outsourcing of this function to commercial cash processing companies.
Now, the SBP has decided to allow banks to outsource their cash processing functions to further enhance the flexibility for banks to get their cash processed and encourage greater innovation and development of cost effective models for cash processing.
With this permission, banks may outsource their cash processing functions of sorting, authentication, and packing for all denominations of banknotes to such cash processing companies having capacity to process the cash in full conformity with the CMS instruction.
However, the Banks will report all such arrangements to Finance Department SBP along with details of branches and ATMs to be fed through the outsourced service providers within seven (7) days of signing of contract with the service provider. In addition, the Banks will also share the address of the cash processing centers of the service provider and contact details of the CEOs and other senior management for SBP’s information and record.
As per SBP’s fresh directives, banks will ensure that the cash processing company (service provider), if any engaged, operates in full conformity with the CMS instructions as the compliance with these instructions is the responsibility of banks outsourcing cash processing.
The SBP has warned that any non-compliance of instruction by the service provider will, for all intents and purposes be treated as non-compliance by the concerned bank, making the bank liable to penal action under the CMS.
Banks will contractually bind the service provider that SBP may conduct surprise visits of its cash processing centers, to assess the control environment and regulatory compliance regarding CMS.—RIZWAN BHATTI