Don’t grant loans, advances, CBN instructs payment service banks

The Central Bank of Nigeria (CBN) has instructed the Payment Service Banks (PSBs) not to grant any form of loans, advances and guarantees (directly or indirectly) but may lend to their employees in line with their employee loan policy, subject to the approval of their Board.

Also, the PSB banks are not expected to accept foreign currency deposits; deal in the foreign exchange market, Insurance underwriting; undertake any other transaction which is not prescribed by this Guidelines; accept any 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.

The stated this in supervisory framework for payment service banks released on its website on Thursday.

However, the regulator allows the payment service banks to carry out the following: Accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria; and carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria, among others.
To ensure sound corporate governance culture, all Payment Service Banks shall adopt structures and practices that will protect the interest of all stakeholders, the CBN stated in the framework.

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Consequently, the CBN in the framework, outlined specific provisions, in addition to the provisions of Corporate Governance Guidelines for Payment Service Banks.
The CBN has introduced various initiatives to enhance access to financial services for the unbanked population of the Nigerian economy. This included the deployment and facilitation of the use of technology to drive the financial inclusion ambition of the CBN. To this end, the Guidelines for the Licensing and Regulation of Payment Service Banks (PSBs) in Nigeria was issued in 2018 and revised in 2020.

The Payment Service Banks are expected to leverage on technology to provide services that would be easily accessed by the unbanked population and those who are in hard-to-reach areas of the country.

According to the CBN, the framework provides a set of regulations that are targeted at streamlining the operations of Payment Service Banks, 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 Payment Service Banks’ products. This Framework also aims to ensure that sound risk management practices are embedded in the operations of the Payment Service Banks.