Roshan Digital Accounts (RDA) crossed billion-dollar mark in less than eight months since its launch. The number is growing at an increasing rate. It took around eighteen weeks to get to the first $500 million, and nine for the next $500 million. It may not be too optimistic to assume that the figure may cross $2 billion within this calendar year.
Around two third of the flows are in the Naya Pakistan Certificates (NPC). These are reported in the financial account (not current account) within balance of payment as government’s debt; and within foreign reserves, these are recorded under SBP reserves.
Remaining one third is mainly used for local consumption or parked in RDAs as foreign currency – these are recorded in the current account. The amount being used locally is marked in remittances and is not repatriable, while the amount parked in RDAs is recorded as other current transfers in secondary income account. These flows are part of banks’ foreign reserves. A small portion of Rs1.5 billion ($10 mn) is deployed in the stock market.
The RDA flows are coming from 100+ countries and over 120,000 accounts have been opened – giving an average account inflow of $8,000-9,000. That is healthy—smaller the ticker size, stickier the flows. Some of the amount in RDA are from resident Pakistanis’ declared wealth outside Pakistan. It is hard to tell how much of flows within RDAs are from resident Pakistanis.
The product was started with eight domestic banks and by now eleven have been on-boarded. Some banks are performing better than others in terms of account opening, amounts received and product offerings. The top performing banks are HBL, Meezan, Bank Alfalah and UBL.
The central bank is working with banks to come up with new products for RDA holders. Right now, the leveraging products available against NPCs are offered by foreign banks operating outside the jurisdiction of Pakistan. SBP will soon announce new products in an event planned with PM in attendance to offer gratitude to expats for reposing their trust in RDA.
Two new products are likely to be offered soon. One is car financing for RDA holders -Roshan Apni Car. There will be some nuggets to be offered such as low interest and insurance rates, buying cars remotely, and quicker delivery times. That may encourage expats to finance cars for their families in Pakistan.
The other product is to create a platform for donation and charity through RDAs -Roshan Samaji Khidmat. Expats usually send their charity through remittances via family and friends, and directly to charitable organizations routed through other current transfers. Soon, RDA can be used to remit these as well.
SBP offered a discount (better rate on NPCs) to RDAs as a marketing tool to attract new market, and to compensate expats on their opportunity cost of investing in their resident country. The question is how long will this discount continue. There are around 7-9 million expats residing outside Pakistan – conservative estimate is 2-3 million households – right now less than 5 percent is being tapped. The SBP’s view is to strengthen this base to 10-15 percent of households and by this count $2-3 billion should be in RDA assuming current average inflow per person, before the Bank can start thinking of tapering off the discount.