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Cyberattacks rubbing salts on falling banks profit

Pakistan banking experts have revealed that Pakistan’s banking sector is a significant contributor in the promotion of the overall economic progress, socio-economic development and financial stability of Pakistan. However, its performance and contribution remains contingent upon the developments in the rest of the economy. They have revealed that the profitability of banking sector fallen to Rs 31.6 billion during the third quarter of 2018, down by 27 percent year on year basis (YoY). The fall in sector profits is mainly owed to Rs 6.8 billion total provision charge, lower non-interest income and higher non-interest expense during the quarter under review. They have also revealed that this sector has to play an effective role when it comes to provision of financial services to SMEs, agriculture and housing sectors, as growth in these sectors is necessary to facilitate employment generation in the country.

Payment systems infrastructure (31st March, 2018)
Number of Banks (Branches) 45 (14,850)
Commercial/ Specialized Banks (Branches) 13,789
Microfinance (Branches) 944
Overseas Banks Branches 117
Number of Real Time Online Branches (RTOBs) 14,710
Number of banks having ATM machines 32
Number of banks having POS machines 9
Number of banks providing Internet Banking services 26
Number of Banks providing Mobile Phone Banking services 20
Number of Banks providing Call Center Banking services 25
Total Number of PRISM System Participants 43
Total number of ATMs Interoperable Switches 2
Total number of Cash Deposits Machines (CDMs) 52
Statistics (31st March, 2018)
Total Population (Million) 207.77
Currency in Circulation (Trillion) Rs. 4.1
Number of Banks’ Accounts 49,006,112

No doubt, the banks are on a sound footing. Pakistani bankers are no less competent than any other banker globally. However, banks in Pakistan are not mobilizing their deposits like those of the neighboring states, which resulted in poor savings. It is also said that a low-saving rate is the main hindrance in the way of higher investment that brings growth to the economy. On the other hand, statistics also showed that Net Interest Income (NII) of the banks enhanced by 9 percent YoY to Rs122 billion in 3Q2018, led though higher interest rates and better deposit mix. However, on a sequential basis, NII is down 2 percent despite higher rates because of lower asset base, also differences in the re-pricing period of assets and liabilities, post the change in the policy rate.

 

Due to present macroeconomic situation, the MPC (Monetary Policy Committee) has increased the SBP target policy rate by 100 bps to 8.5 percent to stable the macroeconomic conditions in Pakistan. Furthermore, SBP reported that the commercial banks in Pakistan are enlarging their infrastructure for supporting ePayment because of SBP’s supportive strategies. The large value payment systems PRISM has 43 Direct Participants, which includes Commercial Banks, Microfinance Banks, Development Finance Institutions and Central Depository Company (CDC).

As on end quarter January-March, 2018 there are 14,850 banks branches recorded by 45 Banks/Microfinance Banks, out of which 117 are overseas branches. All branches in Pakistan, except 23 are proving online banking services to their customers. There are 13,835 ATMs and 53,509 POS machines in Pakistan. In addition to these, Banks are offering Internet, Mobile Phone and Call Centers/IVR Banking facilities.

Loss through cyberattacks

Presently Pakistan’s banking system unluckily lost Rs2.6 million in cyberattacks as online security measures failed to prevent breach of security in which overseas hackers stole customers’ data. The State Bank of Pakistan has stated the bank to take all essential initiatives to trace the vulnerability and fix it immediately. The affected bank has also been instructed to issue advisory on precautionary steps to be taken through the customers. Moreover, SBP has also issued directives to all banks to foster arrangements to ensure security of all payment cards in Pakistan and monitor on real-time basis the use of their cards, mainly overseas transactions.

The State Bank will continue to assess these developments in coordination with banks and take further initiatives, if needed. To remain on the safe side, a couple of other banks also restricted their foreign payments for the time being and sent alert messages to its customers.

Conclusion

No doubt, stolen payment cards data of Pakistani banking clients may further impact the profitability of this sector in the future. The Banks and the concerned government departments must take urgent notice of this phenomenon and also organize public awareness program.

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