The SBP digital bank framework is reshaping how millions of Pakistanis access money, savings, and credit. In a country where a huge share of adults still has no bank account, five newly approved digital banks are working through a strict phased process to bring fully app-based banking to the masses. One of them already has a commercial license. Here is what it all means and how it affects you.
What Is the SBP Digital Bank Framework?
The State Bank of Pakistan launched a licensing and regulatory framework for digital banks as a separate and distinct category in banking. A digital bank is defined as a bank that offers all kinds of financial products and services primarily through digital platforms or electronic channels instead of physical branches.
The SBP introduced this framework in January 2022. It was a fresh start. The goal was not just to digitise old banking, but to build a new kind of bank from scratch, one that lives entirely on your phone.
Two Types of Licenses: DRB vs DFB Explained
Under the SBP digital bank framework, two types of licenses exist. Knowing the difference matters.
SBP may grant two types of digital bank licenses: a Digital Retail Bank (DRB) and a Digital Full Bank (DFB). DRBs will primarily focus on retail customers, while DFBs can deal with retail customers as well as business and corporate entities.
In simple words: a DRB is for ordinary people, offering accounts, savings, and personal loans. A DFB goes further and can also serve companies and businesses. Think of the DRB as a starting point. The minimum capital for a DRB is set at PKR 1.5 billion during the pilot phase, gradually increasing to PKR 4 billion over three years. After the transition phase, DRBs may graduate to receive a DFB license, subject to meeting capital requirements and completing a two-year progression phase.
The SBP will also license DRBs and DFBs to offer both conventional and Islamic banking services, which is important for Pakistan’s large faith-sensitive market.
The Five Approved Banks
In a move to drive financial inclusion and expand access to affordable digital financial services, the SBP issued In-Principle Approval (IPA) to establish five digital retail banks: HugoBank Limited, KT Bank Pakistan Limited, Mashreq Bank Pakistan Limited, Raqami Islamic Digital Bank Limited, and Telenor Microfinance Bank Limited (now Easypaisa Bank).
Who are these players?
- HugoBank is backed by local business group Getz Bros along with Atlas Consolidated and M&P Pakistan.
- KT Bank is a joint venture that includes Pakistani companies Fatima Fertilizer and City School alongside Nigerian-origin fintech KudaBank.
- Mashreq Bank Pakistan is a wholly owned subsidiary of Mashreq Bank PSC from the UAE, bringing deep regional banking experience.
- Raqami Islamic Digital Bank is a Shariah-compliant digital bank backed by the Kuwait Investment Authority.
- Easypaisa Bank (formerly Telenor Microfinance Bank) is one of Pakistan’s most recognised digital wallets, now stepping into full digital banking.
The SBP received 20 applications by March 2022 from commercial banks, microfinance banks, electronic money institutions, and fintechs. As a principle, the SBP decided not to grant licenses to existing banks, to encourage new entrants in the market.
How the Phased Rollout Works
Getting from approval to your phone screen is not a single step. The SBP digital bank framework uses a careful stage-by-stage process to protect customers.
The process follows a no-objection step, then an in-principle approval, then a demonstration of operational readiness, and a pilot stage under a restricted license, before commercial operations begin.
The in-principle approvals enable the proposed DRBs to proceed with achieving operational readiness in all functions, including governance, risk management, capital requirements, compliance, consumer protection, cybersecurity, product development, and deployment of technological infrastructure.
After passing all checks, each bank runs a pilot for a minimum of three months and up to nine months. Only then can it apply for a full commercial license.
Raqami Makes History, Others Follow
The process is working. Raqami Islamic Digital Bank Limited has been granted a Digital Retail Banking License by the State Bank of Pakistan for commencement of commercial operations, becoming the first fully digital Shariah-compliant retail bank in Pakistan.
The formal license was conferred at a ceremony at the Prime Minister’s House, with Prime Minister Mian Muhammad Shehbaz Sharif as Chief Guest. That kind of ceremony signals how seriously the government treats this project.
Raqami Islamic Digital Bank has been designed to serve the evolving needs of individuals, freelancers, women, the agricultural sector, youth, and small and medium enterprises across Pakistan.
Close behind, the SBP has awarded the first restricted license for pilot operations as a digital retail bank to Mashreq Bank Pakistan Limited. The other three banks are working through the same pipeline.
Why This Matters for Pakistan’s Unbanked Millions
Pakistan still has a massive financial inclusion gap. Despite global progress, 1.3 billion adults remain outside the formal financial system, and Pakistan is among just eight countries that together account for over half of them.
The good news is that progress is happening. Financial inclusion, measured as the share of the adult population with a bank account, jumped from 16 per cent in 2015 to 64 per cent in 2023, according to the SBP. But that still leaves tens of millions of people out. With 91 million unique financial institution accounts, two-fifths of the adult population still lack access to formal financial services.
Digital banks could change that equation. There is a big opportunity for Pakistan’s new digital banks to push into excluded sectors such as women and rural populations. The microfinance sector’s high operating costs, due to a physical branch model, mean interest rates on loans are still very high. A fully digital model has far lower costs, which should mean cheaper loans and accounts for ordinary people.
The SBP’s own targets are ambitious. The SBP is launching the 3rd edition of its National Financial Inclusion Strategy for 2024 to 2028, aiming to tackle persistent bottlenecks and capitalise on further digitalisation. Pakistan’s central bank has set a target to increase bank account coverage to 75 per cent of the adult population within the next few years, and to reduce the gender gap to 25 per cent by 2028.
Digital banks fit directly into this plan. No branches to visit. No long queues. Just a phone, an ID, and a few minutes to open an account. For farmers in rural Punjab or a young woman in a small town, that is a real shift.
If you are interested in how Pakistan’s fintech and startup ecosystem is growing alongside these banking changes, see our piece on how the Pakistan Series B gap is leaving startups stuck after early traction, which shows the funding challenges fintech ventures face as they try to scale.
Key Challenges Ahead
The SBP has been clear-eyed about the risks. The SBP chief said that cybersecurity and data privacy are paramount for digital banks, and that digital banks must invest in robust security measures to protect against cyberattacks, breaches, and fraud.
The SBP has also said that digital banks should work on improving digital literacy in Pakistan. Many people who most need these services have never used a banking app before. Building trust takes time.
You can read the full official framework on the SBP’s Digital Financial Services page.
Frequently Asked Questions
What is a Digital Retail Bank (DRB) in Pakistan?
A DRB is a bank that works entirely through digital channels, with no physical branches. It serves individual customers for services like accounts, savings, and personal loans. Under the SBP digital bank framework, five DRBs have received in-principle approval, and one, Raqami, has already launched commercial operations.
Which five digital banks did the SBP approve?
The SBP granted in-principle approval to HugoBank Limited, KT Bank Pakistan Limited, Mashreq Bank Pakistan Limited, Raqami Islamic Digital Bank Limited, and Telenor Microfinance Bank Limited. Easypaisa Bank is the current name for Telenor Microfinance Bank.
What is the difference between a DRB and a DFB?
The SBP may grant two types of digital bank licenses: a Digital Retail Bank and a Digital Full Bank. DRBs focus on retail customers, while DFBs can also deal with business and corporate entities. A DRB can eventually upgrade to a DFB after meeting capital and operational requirements.
Has any digital bank actually launched in Pakistan yet?
Yes. Raqami Islamic Digital Bank Limited was granted a Digital Retail Banking License by the SBP for commencement of commercial operations in May 2026, making it the first fully digital Shariah-compliant retail bank in Pakistan. Mashreq Bank Pakistan has received a restricted pilot license and is running its pilot phase. Others are in the pipeline.
