CBN bars PSBs from accepting foreign currency, granting loans

The Central of Nigeria (CBN) has released the guidelines for the operation of Payment Service Banks (PSBs) in Nigeria.

In a document released by the apex bank on Friday, the PSBs were barred from granting any form of loans, advances, and guarantees (directly or indirectly) to customers.

Also, the PSBs are not expected to accept foreign currency deposits, deal in the foreign exchange market, insurance underwriting or undertake other transactions which are not prescribed by the guidelines.

In addition, the banks were restrained from accepting closed scheme electronic value (e.g. airtime) as a form deposit or payment; establish any subsidiary except as prescribed in the CBN regulation on the scope of Banking and Ancillary Matters, No 3, 2010.

However, the regulator allows the PSBs to grant loans to their employees in line with their established loan policy and subject to the Board approval, accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme and carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria, among others.

The document read: “This framework hereby provides a set of regulations that are targeted at streamlining operations of PSBs, ensuring transparency in their operations as well as ensuring adequate customer protection.

“The framework focuses on corporate governance, risks management of the PSBs and safety of funds to the consumers of the PSBs’ products.

“This framework also aims to ensure that sound risk management practices are embedded in the operations of the PSBs.”

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The CBN stressed that PSBs were required to comply with relevant extant regulations and prudential guidelines and circulars which were issued periodically.

“They shall use the words ‘Payment Service Bank’ in their names to differentiate them from other banks.

“However, the name of a PSB shall not include any word that links it to its parent company or promoter,’’ it added.

The apex bank also declared that the banks shall operate mostly in the rural areas and unbanked locations targeting financially excluded persons with not less than 25 percent financial service touchpoints in such areas as defined from time to time.

“They are to enter into direct partnership with card scheme operators. Such cards shall not be eligible for foreign currency transactions.

“Deploy ATMs in some of these areas; deploy Point of Sale devices, and be at liberty to operate through banking.

“Rollout agent networks with the prior approval of the CBN; use other channels including electronic platforms to reach out to its customers; establish coordinating centres in clusters of outlets to superintend and control activities of the various financial service touchpoints and banking agents,” the document stated.

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