RTGS operations: Islamic banking branches allowed direct membership

The State Bank of Pakistan (SBP) Monday allowed Islamic Banking Branches (IBBs) of the conventional banks direct membership of Real-Time Gross Settlement (RTGS) system aimed at enhancing the outreach of electronic transfer of large value funds. According to PSD Circular No 06 of 2016, issued on December 5, 2015, IBBs can establish a separate Pakistan Real-time Interbank Settlement Mechanism (PRISM) setup for their RTGS operations after meeting the SBP's conditions.
"In order to improve the efficiency of the financial services of the banking system and to enhance the outreach of electronic transfer of large value funds, it has been decided by the SBP to allow direct membership of RTGS (PRISM) System for Islamic Banking Branches (IBBs) of conventional banks," the circular said.
Accordingly, PRISM participants having IBBs are allowed to establish a separate PRISM setup for their RTGS operations subject to fulfilment of the conditions, it added. As per requirements for PRISM setup, IBBs will be required to maintain adequate funds/liquidity in their current accounts with SBP BSC (Bank), Karachi Office and will constantly monitor and replenish funds in their current accounts to mitigate the liquidity/settlement risk as IBBs are not eligible for Intraday Liquidity Facility (ILF) and Discount Window Facility (DWF).
IBBs would be required to establish Funding Arrangements (FA)/Credit Lines (CL) through Islamic modes in compliance with relevant SBP rules and regulations with direct participants of PRISM, enabling direct participants to replenish Islamic Branch Settlement Account as and when required within stipulated time. In addition, interested IBBs will establish separate Central Processing Unit (CPU), arrange necessary equipment/hardware for RTGS installation and will set up RTGS technical team for setting up IT infrastructure, connectivity issues, network line, PTCL landlines etc.
As per requirements, IBBs will set up separate disaster recovery site and Business Continuity Planning (BCP) along with its primary site and submit undertaking form to Payment System Department (PSD) of the SBP containing certain terms & conditions. IBBs will also ensure compliance with all PRISM Operating Rules, other laws/rules applicable and issued from time to time in letter and spirit; along with fulfilment of membership requirements and criteria.