Finance Minister Shaukat Tarin has backed a plan of starting banking services by Pakistan Post Office Department (PPOD) and suggested that it should enter into joint ventures with established banks.
Tarin told the cabinet that he would discuss the matter with the minister for communications to finalise modalities in this regard.
During discussion in a recent meeting, a cabinet member highlighted the need to delve on the larger question as to whether the government should be involved in running commercial ventures.
Tarin pointed out that PPOD had an expanded national outreach with 14,000 branches across the country.
Since scheduled banks catered to only 33% of the population, the national savings rate was considerably low even when compared with regional countries. With its nationwide outreach, Tarin said, the start of banking services by PPOD could help raise the national savings rate.
While recommending approval of proposed amendments to the Rules of Business, the finance minister suggested that PPOD should enter into joint ventures with established banks, the modalities of which he would discuss with the minister for communications.
Pakistan Post Logistics Company
The Communications Division told the cabinet that Pakistan Post was an attached department of the Ministry of Communications and owing to its national outreach the federal and provincial governments had been assigning various tasks to Pakistan Post as their agent.
Some of these functions, as per the Rules of Business, include Savings Bank and Postal Life Insurance. Its role also included agency functions on behalf of other divisions such as military pensions, etc.
Pakistan Post performed these functions under Schedule-II Entry 6 and 7 of the Rules of Business 1973. The Mutual Evaluation Report (MER) of the Financial Action Task Force (FATF) in October 2019 highlighted that out of 40 recommendations, 13 pertained to Pakistan Post.
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The Ministry of Communications and Pakistan Post took a number of steps to recalibrate Pakistan Post’s financial, remittance and insurance services.
Life insurance was transferred to the newly created Postal Life Insurance Company (PLIC) under the regulatory framework of the Securities and Exchange Commission of Pakistan (SECP) while the function of Savings Bank had already been transferred to the Central Directorate of National Savings (CDNS).
There was an urgent need to amend the Rules of Business 1973 to remove existing ambiguities in Pakistan Post’s scope of work and mandate. The need for these amendments was further accentuated by the FATF-requisite reforms in various sectors undertaken by the government of Pakistan.
The impending restructuring of Pakistan Post, in line with the vision of the government, was going to further expand its scope of services.
Pakistan Post intended to perform agency functions on behalf of other divisions, provincial governments, agency alliances/partnerships with corporate entities under the government’s regulatory regime such as the State Bank of Pakistan (SBP), SECP, etc.
The instant case of the proposed amendments to Schedule-II of the Rules of Business 1973 pertaining to the Communications Division was taken up with the Cabinet Division.
As per its advice, the proposed amendments were shared with the Finance Division, Commerce Division, Law & Justice Division and Economic Affairs Division (National FATF Secretariat) for their views/comments thereto.
The proposed amendments to Schedule-II of the Rules of Business 1973 had been revised and duly incorporated in accordance with the views/comments of the Ministry of Commerce, Law & Justice Division, Finance Division and Economic Affairs Division (National FATF Secretariat).
The Law and Justice and Finance Divisions were against the inclusion of proposed amendment to ‘establish, regulate specialised entities in logistics and freight’. However, it was the considered opinion of the ministry that the legislation regarding the Logistics Regulatory Authority Bill drafted by the ministry was in the advanced stage of legislation.
Moreover, a company namely Pakistan Post Logistics Company was being established under the PPP mode with assistance of the PPP Authority.
Both were crucial initiatives in advanced stages and it was necessary for the Rules of Business to incorporate it to make PPOD a competitive and financially viable entity, instead of becoming a burden on the national exchequer.
The approval of the cabinet was solicited to the proposed amendments in Schedule-II of the Rules of Business, 1973 pertaining to the Communications Division.
The cabinet approved the amendment in the Rules of Business, 1973 of the Communications Division.
Published in The Express Tribune, September 28th, 2021.
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