Roshan Digital Accounts (RDA) is picking up pace. The run rate (flow) is around $250 million a month currently. The inflows have crossed $1.5 billion mark within 10 months of its launch. It took around four months to reach $250 million. In the next four months, the billion-dollar mark shall be achieved. Add another $500 million in the next two months to reach $1.5 billion. At this pace, within a year, $2 billion will be very much achievable – not a bad start by any stretch of imagination.
Some have apprehensions that domestic biggies are using an (arbitrage) opportunity to invest in Naya Pakistan Certificate (NPC) by sending money from FE25 accounts to outside Pakistan and investing back in NPC through RDA as they have declared money outside. FE holdings were $7.81 billion in August 2020 (prior to RDA) and $7.88 billion in May21. Thus, there is no evidence to back the claim.
But even if it has happened in rare cases, it seems majority of the money has come from retail expat investors. To date, 178,000 accounts have been opened from around 170 counties whereas higher chunk is coming from Middle East - mainly UAE and KSA. The average amount per account is $8,500 – which may be considered a neat and sticky number. NPC has proven itself a star product right from the beginning. Two third of the amount ($1 bn) is invested in NPC at a lucrative rate of return at 5.5-7 percent in foreign currency.
Having said that, overall foreign currency deposits are growing slowly. A new head ‘Foreign currency value accounts (FEVA)’ has been added where RDA account holders’ foreign currency deposits are recorded. The amount is standing at $103 million. Thus, $1.1 billion are in NPC or FEVA – both are in foreign currency - NPC amount reflects in SBP’s reserves while FEVA reflects in commercial banks’ reserves.
The remaining $400 million has been converted to Pak Rupee and has either been invested in stock market (Rs2 bn or $13 mn), some in the real estate, while the rest is being spent locally or in non-resident rupee value account (NRVA). This part can or is cannibalizing remittances. But this is a tiny fraction of home remittances, and 29 percent growth in home remittances this year suggests that RDA is perhaps catering to a different segment of overseas citizens altogether.
There are a many domestic banks who are in race to open RDA accounts and offering newly developed products. At the time of reaching billion-dollar mark HBL, UBL, Bank Alfalah and Meezan were the top performers. Today, at $1.5 billion mark, these four are still a head in the race. An emerging bank in the game is Habib Metro where flows are picking up fast.
Couple of months back, two new products were offered to RDA account holders – one is Roshan Apni Car, and the other is Roshan Samaji Khidmat (read ‘RDA’s billion-dollar ride’ published on 28th April 2021). The SBP is working with banks on another product related to home financing. These products will help expats to financially engage more in Pakistan and could help in generating steady flows in the form of loan repayments.
There is little doubt that RDA has become a success and with financing products, expats association with Pakistan will deepen. To attract expats, better returns and superior services are offered to them. Now with RDA becoming popular, its about time that SBP starts rationalizing the returns on NPC - it would be best for the SBP to announce new rate of returns on NPC’s at RDA’s first anniversary.
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