CBN Restricts Payment Service Banks From Insurance Business, Granting Loans

Payment Service Banks in Nigeria will have no business with Insurance underwriting, the Central Bank of Nigeria has said.

The bank revealed this in its Supervisory Framework for Payment Service Banks, seen by THE WHISTLER.

The apex bank on October 26, 2018 released the first guideline for setting up a Payment Service Bank before it issued an updated version on 27th August 2020.

PSBs are banking institutions licensed to provide financial services through digital means to low-income earners and people that do not use banks or banking institutions for financial transactions.

The banks are expected to leverage on technology to provide financial services through digital means that would be easily accessed by the unbanked population and those who are in hard-to reach areas of the country.

In the new framework, the bank in its ‘Non-Permissible Activities’ excluded PSB from the business of Insurance underwriting.

They are also not allowed to “Grant any form of loans, advances and guarantees (directly or indirectly).”

Their lending is only restricted to their employees in line with their employee loan policy and subject to the approval of their Board.

The CBN also said they are not allowed to accept foreign currency deposits; deal in the foreign exchange market except outside its regulation.

On the other hand, the CBN said they can participate in sale of foreign currencies realized from inbound cross-border personal remittances to authorized foreign exchange dealers.

However, CBN said they must comply with provisions of the extant Foreign Exchange Regulations of the CBN.

PSBs have also been given the privilege to operate electronic wallet, render financial advisory services and to invest in FGN and CBN securities.