Pakistan's central bank has tightened the rules for premium prize bond transactions, mandating that commercial banks settle all sale proceeds with the State Bank of Pakistan's Banking Services Corporation (SBP BSC) on the same day. The directive, issued on Thursday, introduces penalties for non-compliance, including charges for the use of funds during any delay. The State Bank of Pakistan (SBP) amended its Standard Operating Procedures (SOPs) for the issuance of Premium Prize Bonds (PPBs) through commercial banks, following a review of the existing reporting mechanism. Under the new framework, all banks must report PPB sale transactions through the DAP system within prescribed timelines, and SBP BSC Karachi will debit each bank's account daily based on the reported sales. Main Developments Any bank failing to settle sale proceeds on the same day will be liable to pay a fee for the use of funds during the delay, calculated at the SBP Overnight Reverse Repo (Ceiling) rate prevailing on each day of the period. The SBP BSC Karachi office will calculate and recover these charges by debiting the concerned bank's account and crediting the Central (Non-Food) Account No. I against Account Head C02247. Read also: Pakistan-Iran FTA edges closer after three-day trade talks Additionally, if profit or prize money is paid erroneously due to non-reporting, delayed reporting, or misreporting of sale, encashment, or transfer transactions, the responsible commercial bank must bear the gross amount wrongly paid, subject to adjustment of income tax where possible. The SBP emphasized that all other instructions on PPBs remain unchanged. Background Premium Prize Bonds are a popular savings instrument in Pakistan, issued through commercial banks and the SBP BSC. The move follows a review of the prevailing reporting mechanism, which likely revealed inefficiencies or delays in the settlement of sale transactions. The SBP's directive aims to standardize the process and ensure timely reporting, reducing the risk of errors and unauthorized fund usage. Why It Matters This regulatory change enhances transparency in PPB transactions, protecting both the government and bondholders. By enforcing same-day settlement, the SBP minimizes the window for banks to use customer funds without authorization, reducing systemic risk. It also ensures accurate and timely payment of profits and prizes, strengthening public confidence in government-backed savings schemes. What's Next Banks must now align their internal systems to comply with the new settlement timelines. The SBP BSC Karachi will monitor compliance and enforce penalties, which could be adjusted based on prevailing market rates. Further clarifications or updates to the SOPs may follow as the central bank assesses the effectiveness of the revised mechanism.