Payment Systems and Electronic Fund Transfers Act, 2007
AN
ACT
to provide regulatory framework for payment systems and electronic fund transfers
WHEREAS it is necessary to supervise and regulate Payment Systems and Electronic Fund
Transfers in Pakistan and to provide standards for protection of the consumer and to determine respective
rights and liabilities of the financial institutions and other Service Providers, their consumers and
participants;
It is hereby enacted as follows:-CHAPTER I
PRELIMINARY
1. Short title, extent and commencement, -(1) This Act may be called the Payment Systems and Electronic Fund Transfers Act, 2007.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.
2. Definitions.-(1) In this Act, unless there is anything repugnant in the subject or context,
(a) “Accepted Card”means a card, code or other means of access to a
Consumer’s Account for the purpose of initiating Electronic Fund Transfers;
(b) “Access Code”includes pin, password or code, which provides a means of
access to a Consumer’s Account for the purpose of initiating an Electronic Fund
Transfer;
(c) “Account”means a current deposit, saving deposit, or any other account
maintained by a consumer in a Financial Institution in which credits and debits
may be effected by virtue of Electronic Fund Transfers;
(d) “Authorized”means authorized by the State Bank for the purposes of this Act;
(e) “Automated Teller Machine (ATM) Card”means any card for use at any ATM
to initiate Electronic Fund Transfers.
(f) “Authorized Party”means a bank, a Financial Institution, a Clearing House, a
Service Provider or any person authorized by the State Bank to transact business
under this Act in Pakistan;
(g) “Automated Teller Machine (ATM) Operator”means any person or a Financial
Institution operating any ATM at which consumers initiate Electronic Fund
Transfers;
(h) “Bank”means a banking company as defined in section 5 of the Banking
Companies Ordinance, 1962 (LVII of 1962);
(i) “Book Entry Government Securities”means any securities issued by the
Government under any written law transferable by a book entry on a register or
otherwise;
(j) “Business Day”means any day on which offices of consumers, Financial
Institutions, operators or Service Providers involved in Electronic Fund Transfer
are open to the public;
(k) “Card”means any card including an ATM card, Electronic Fund Transfer point
of sale card, debit card, credit card or stored value card, used by a Consumer to
effect an Electronic Fund Transfer;
(l) “Cheque in the Electronic Form”means a cheque which contains the exact
image of a paper cheque in electronic form and is generated, written and signed
in a secure system ensuring minimum safety standards as may be prescribed by
the State Bank;
(m) “Clearing House”means corporation, company, association, partnership,
agency or other entity that provides clearing or settlement services for a
Payment System;
(n) “Consumer”means any person who or which avails the facility of Electronic
Fund Transfer;
(o) “Debit Instrument”means a Card, Access Code, or other device other than a
cheque, draft or similar paper instrument, by the use of which a person may
initiate an Electronic Fund Transfer;
(p) “Designated Payment Instrument”means a Payment Instrument designated by
the State Bank as Payment Instrument under section 12.
(q) “Designated Payment System” means a Payment System designated by the
State Bank under section 4 to be a Designated Payment System for the
purposes of this Act;
(r) “Electronic” has the same meaning as assigned to it by the Electronic
Transactions Ordinance, 2002 (LI of 2002);
(s) “Electronic Fund or Electronic Money”means money transferred through an
Electronic Terminal, ATM, telephone instrument, computer, magnetic medium or
any other electronic device so as to order, instruct or authorize a banking
company, a Financial Institution or any other company or person to debit or
credit an account and includes monetary value as represented by a claim on the
issuer which is stored in an electronic device or Payment Instrument, issued on
receipt of funds of an amount not less in value than the monetary value issued,
accepted as means of payment by undertakings other than the issuer and
includes electronic store of monetary value on a electronic device that may be
used for making payments or as may be prescribed by the State Bank;
(t) “Electronic Fund Transfer”means any transfer of funds, other than a
transaction originated by cheque, draft or similar paper instrument, which is
initiated through an Electronic Terminal, telephonic instrument, point-of -sale
Terminal, stored value card Terminal, debit card, ATM, computer magnetic tape
or any other electronic device so as to order, instruct, or authorize a Financial
Institution to debit or credit an Account;
(u) “Electronic Money Institution”means an undertaking, that issues means of
payment in the form of Electronic Money and is duly authorized to do so;
(v) “Electronic Payment System”means implementation of Payment System
Electronically;
(w) “Electronic Terminal”means an electronic device, operated by a consumer,
through which a consumer may initiate an Electronic Fund Transfer;
(x) “Financial Institution”means a financial institution as defined in the Financial
Institutions (Recovery of Finances) Ordinance, 2001(XLVI of 2001) and includes
a banking company or any other Electronic Money Institution or person,
authorized by the State Bank in this behalf, that directly or indirectly holds an
account belonging to a consumer.
(y) “Government”means the Federal Government or any Provincial Government;
(z) “Netting”means the conversion into one net claim or one net obligation of
claims and obligations resulting from transfer orders which a participant either
issues to, or receives from, one or more other participants with the result that
only a net claim can be demanded or a net obligation be owed;
(za) “Operator”means any financial or other institution or any person, authorized by
the State Bank to operate any Designated Payment System;
(zb) “Participant”means a party to an arrangement that establishes a Payment
System;
(zc) “Payment Instrument”means any instrument, whether tangible or intangible,
that enables a person to obtain money, goods or services or to otherwise make
payment; but excludes Payment Instruments prescribed in Negotiable Instrument
Act, 1881(XXVI of 1881);
(zd) “Payment System”inter-alia means a system relating to payment instruments,
or transfer, clearing, payment settlement, supervision, regulation or infrastructure
thereof and includes clearing, settlement or transfer of Book Entry Government
Securities;
(ze) “Person”includes a legal person or a body of persons whether incorporated or
not.
(zf) “Preauthorized Electronic Fund Transfer”means an Electronic Fund Transfer
Authorized in advance;
(zg) “Prescribed”means prescribed by rules, circulars, directions, orders or
bye-laws.
(zh) “Real Time Gross Settlement System”means a Payment System which can
effect final settlement of funds, paymentobligations and Book Entry Government
Securities and instruments on a continuous basis during such operating hours of
a processing day as the State Bank may determine on a
transaction-by-transaction basis;
(zi) “Service Provider”includes an operator or any other Electronic Fund Transfer
Service Provider.
(zj) “State Bank”means the State Bank of Pakistan established under section 3 of
the State Bank of Pakistan Act, 1956 (XXXIII of 1956);
(zk) “Systemic Risk”means the risk that relates to the inability of a participant to
meet its obligations in the Payment System as they become due or a disruption to
the Payment System that could, for whatever reason, cause other participants in
the Payment System to be unable to meet their obligations as they become due;
and
(zl) “Truncated Cheque”means a cheque which is truncated in a securesystem,
during the course of a clearing cycle, byan Authorized Party, whether paying or
receiving payment, immediately on capture of a scanned image, substituting
physical movement of the cheque in the original form, and includes a cheque in
the electronic form.
3. Powers of the State Bank.-(1) The State Bank may, generally in respect of this Act, or in respect of any particular
provision of this Act, or generally in respect of payment systems, the conduct of all or any
of the Service Providers, Operators of Payment Systems or issuers of Payment
Instruments, issue such rules, guidelines, circulars, bye-laws, standards or directions as it
may consider appropriate.
(2) The State Bank may, by written notice, require an operator of a Designated Payment
System or issuer of Designated Payment Instrument to make modifications or alterations
to –
(i) the Designated Payment System or Designated Payment Instrument including
governance arrangements;
(ii) operational arrangements;
(iii) documents and information submitted by operator of a Payment System or issuer
of Payment Instruments;
(iv) any other documents relating to the Designated Payment System or Designated
Payment Instrument.
(3) In exercising its powers under sub-section (1), the State Bank shall have regard to-(i) the Systemic Risk;
(ii) the object of the State Bank to promote monetary stability and a sound financial
structure;
(iii) the interest of the public including market conditions and behaviour;
(iv) the safety, integrity, efficiency or reliability of the Designated Payment System or
Designated Payment Instrument including security and operating standards and
infrastructure arrangements;
(v) the interests of the current Participants of the Designated Payment System or
users of the Designated Payment Instruments; or
(vi) the interests of persons who, in the future, may want access to the Designated
Payment System or may want to use the Designated Payment Instrument.
CHAPTER II
Payment Systems And Their Operation
4. Designation of Payment System.-(1) The State Bank may, if it finds it to be necessary in the public interest, by a written order
designate a Payment System as a Designated Payment System.
(2) The State Bank may, in considering whether to designate a Payment System as a
Designated Payment System, inspect the premises, equipment, machinery, apparatus,
books or other documents, or accounts and transactions relating to the Payment System.
5 Revocation of Designation of Payment System.-(1) The State Bank may revoke the designation of a Designated Payment System if it is
satisfied that –
(i) the Designated Payment System has ceased to operate effectively as a
Payment System;
(ii) the operator of the designated system has knowingly furnished information or
documents to the State Bank in connection with the designation of the Payment
System which is or are false or misleading in any material particular;
(iii) the operator or settlement institution of the Designated Payment System is in the
course of being wound up or otherwise dissolved, whether in Pakistan or
elsewhere;
(iv) any of the terms and conditions of the designation or requirements of this Act has
been contravened; or
(v) the State Bank considers that it is in the public interest to revoke the designation.
(2) The State Bank shall not revoke a designation without giving the operator of the
Designated Payment System an opportunity to be heard.
Providedthat the State Bank may, if an immediate systemic risk is involved, suspend the
designation of a Payment System without notice pending the final order.
6. Real Time Gross Settlement (RTGS) System.-(1) The State Bank may establish and operate one or more Real Time Gross Settlement
Systems for the transfer of funds and settlement of payment obligations as approved by it.
(2) A settlement system may be linked to another Payment System in Pakistan or elsewhere
for the clearing or settlement of payment obligations, securities or instruments, whether
or not such Payment System is operated on a real time gross settlement basis.
(3) The State Bank may enter into agreements with participants of a settlement system and
issue to the participants, in writing, rules for the operation of the settlement system.
(4) The State Bank may, if it considers it necessary in the interest of the Payment System,
stop or suspend the operation of the Payment System or stop or suspend the privileges or
right of any participant or class of participants;
(5) Without prejudice to the generality of sub-section (3), the rules provided for in the said
sub-section, may provide-(i) for the conduct of participants;
(ii) for the authentication of transactions carried out electronically;
(iii) for the appointment of auditors or inspectors for the auditing or inspection of the
operating systems of participants in respect of the settlement system; and
(iv) for the payment of fees to the State Bank.
7. Requirement For Retention of Electronic Record.-Financial Institutions or other Authorized Parties providing funds transfer facility shall be required
to retain complete record of electronic transactions in electronic form in the same manner as
provided in section 6 of the Electronic Transactions Ordinance, 2002 (LI of 2002) for a period as
may be determined by the State Bank.
8. Disqualification of Staff.-(1) No person shall be appointed to serve in any capacity by an operator of a Designated
Payment System if –
(i) such person has been adjudged a bankrupt, or has suspended payments, or has
compounded a debt with his creditors, whether in or outside Pakistan, within ten
years prior to the date of the appointment; or
(ii) such person has been convicted of an offence under this Act or committed any
other offence involving moral turpitude or such an offence has been compounded
against him.
(2) Any person being the chairman, director, chief executive, by whatever name called, or
official liquidator, or an officer of a designated payment system mismanages the affairs of
the payment system or misuses his position for gaining direct or indirect benefit for himself
or any of his family members or any otherperson, shall be disqualified to serve in any
capacity in a designated payment system.
9. Effect of Disqualification.-(1) Where a person becomes disqualified, as provided for in the foregoing provisions, after
his appointment –
(i) he shall immediately cease to hold office; and
(ii) the operator of the Designated Payment System shall immediately terminate his
appointment.
(2) Any person disqualified under section 8, notwithstanding any contract of service, shall not
be entitled to claim any compensation for his loss of office or termination of appointment.
10. Governance Arrangements.-The operator of a Designated Payment System shall establish adequate governance
arrangements which are effective, accountable and transparent or which may be required by the
State Bank to ensure the continued integrity of such Designated Payment System.
11. Operational Arrangement.-An Operator of a Designated Payment System shall establish the following operational
arrangements:
(i) rules and procedures setting out the rights and liabilities of the operator and the
participant and the financial risks the participants may incur;
(ii) procedures, controls and measures for the management of credit, liquidity and settlement
risk, including rules determining the time when a payment instruction and a settlement is
final;
(iii) criteria for participation in the Designated Payment System; and
(iv) measures to ensure the safety, security and operational reliability of the Designated
Payment System including contingency arrangements.
CHAPTER III
Payment Instruments
12. Designation of Payment Instrument.-(1) Where the State Bank is of the opinion that
(i) a Payment Instrument is or may be in widespread use as a means of making
payment and may affect the Payment Systems of Pakistan; and
(ii) it is necessary to protect the interest ofthe public or it is necessary to maintain
the integrity, efficiency and reliability of a Payment Instrument, the State Bank
may prescribe such Payment Instrument as a Designated Payment Instrument.
(2) Where a Payment Instrument is prescribed as a Designated Payment Instrument, the
issuer of such Designated Payment Instrument shall comply with the requirements of
section 13 within such period as the State Bank may specify.
13. Issuing of Designated Payment Instruments.-(1) No person shall be issued a Designated Payment Instrument unless the issuer has –
(i) complied with the requirements of this Act;
(ii) submitted to the State Bank the documents and information as may be
prescribed thereby;
(iii) paid the fee Prescribed by the State Bank; and
(iv) obtained a written approval from the State Bank to issue a Designated Payment
Instrument.
(2) The State Bank may in giving its approval –
(i) require all or any of the documents submitted to be modified and altered as it may
deem necessary; and
(ii) impose such restrictions, limitations or conditions as it may deem fit.
(3) Any Payment Instrument so issued should carry minimum security features to make its
usage secure as per the current international standards.
14. Prohibition of Issuance of Payment Instruments.-(1) The State Bank may, by a written order, prohibit any person from issuing or using any
Payment Instrument if, in its opinion –
(i) the issuing or use of the Payment Instrumentis detrimental to the reliable, safe,
efficient and smooth operation of the Payment Systems of Pakistan or monetary
policy of the State Bank;
(ii) the prohibition is in the interest of the public; or
(iii) the Payment Instrument has been issued with an object to entice or defraud the
public.
(iv) the Person has, in the opinion of the State Bank, failed to comply with the
requirements of this Act.
(2) The State Bank may, in considering whether to prohibit any Person from issuing or using
any Payment Instrument, inspect the premises, equipment, machinery, apparatus, books
or other documents, or accounts and transactions of the issuer of the Payment
Instrument.
(3) Any Person causing or attempting to cause obstruction to an officer or representative of
the State Bank in inspection of the premises or equipment shall, upon complaint made to
a court having jurisdiction, be liable to punishment which may extend to three years
imprisonment of either description or with fine which may extend to five million rupees or
with both.
(4) The State Bank shall before passing an order under this section, give such Person a
reasonable opportunity to make representation before it.
Provided that State Bank may, in appropriate cases, without notice direct a Person to
immediately stop issuing a Payment Instrument, pending the final order.
15. Security.-Financial Institutions and other institutions providing Electronic Funds Transfer facilities shall
ensure that secure means are used for transfer, compliant with current international standards and
as may be prescribed by the State Bank from time to time.
16. Third Party.-If a person other than a Financial Institution is holding a Consumer’s Account, the State Bank shall
by instructions ensure that the disclosures, required to be made for Electronic Fund Transfers,
and the protections, responsibilities and remedies created by this Act, are made applicable to
such Persons and services.
17. Payment by Truncated Cheque.-(1) Notwithstanding anything to the contrary provided in the Negotiable Instruments Act, 1881
(XXVI of 1881), or any other law, for the time being in force, Electronic Fund Transfers
may be initiated by an Authorized Party by means of a truncated cheque.
(2) In case, any transfer of funds takes place in the manner as provided in sub-section (1),
the original cheque shall cease to be negotiable.
(3) Validity of a cheque shall not be affected if for any technical reason or otherwise, transfer
of funds as provided in sub-section (1) fails to take effect.
(4) If transfer of funds does not take effect as provided in sub-section (3), the Bank or the
Authorized Financial Institution concerned may require physical delivery of the cheque
from the originator.
CHAPTER IV
Clearing and Other Obligations
18. Clearing Houses, Audit and Inspection.-(1) The State Bank may nominate one or moreClearing Houses to provide clearing or
settlement services for a Payment System on such terms and conditions as may be
determined by it.
(2) The State Bank may, for the purposes of carrying out its functions under this Act, conduct
audits and inspections of Clearing Houses, and the Clearing House shall, as required,
assist the State Bank to the extent necessary to enable it to carry out an audit or
inspection.
(3) Auditors for carrying out the purposes provided for in sub-section (1) shall be appointed
with prior approval in writing of the State Bank.
19. Notice Required of Significant Changes.-Every Clearing House shall, in respect of its Designated Payment System, provide the State Bank
with reasonable notice of not less than fifteen Business Days in advance of any change to be
made by the Clearing House that is of a significant nature in relation to the Designated Payment
System and, without limiting the generality of the foregoing, the notice shall be provided in respect
of any change affecting –
(a) the legal documents and bye-laws of the Clearing House;
(b) the operation of the Designated Payment System;
(c) the bye-laws, agreements, rules, procedures, guides or other documentation governing
the Designated Payment System;
(d) the composition of a board of directors of the Clearing House due to resignation or
otherwise; or
(e) the appointed auditor of the Clearing House.
20. Participants Responsible Where Clearing House Fails to Comply, etc. .-Where a Clearing House fails to comply with the obligations imposed on it under this Act in
respect of its Payment System or otherwise contravenes the provisions of this Act, the
Participants jointly and severally shall comply with those obligations in the same manner and to
the same extent as if the participants were the Clearing House on which the obligations are
imposed or they committed the contravention.
21. Settlement Provisions.-(1) Notwithstanding anything to the contrary provided in this Act or any other law for the time
being in force, the settlement rules of a Designated Payment System shall be valid and
binding on the operator and the participants and any action may be taken or payment
made in accordance with the settlement rules.
(2) Where the settlement rules of a Designated Payment System provide that the settlement
of a payment obligation through an entry to or a payment out of an Account of a
Participant or a Clearing House at the State Bank is final and irrevocable the entry or
payment shall not be required to be reversed, repaid or set aside.
22. Rights, etc., Not Subject to Stay.-(1) The rights and remedies of a participant, a Clearing House, or the State Bank in respect
of collateral granted to it as security for a payment or the performance of an obligation
incurred in a Designated Payment System may not be the subject of any stay to be
granted by any court or order affecting the ability of creditors to exercise rights and
remedies with respect to the collateral.
23. Settlement Rules.-(1) The State Bank may make “settlement rules” to provide the basis on which payment
obligations are calculated, netted or settled including rules for the taking of action in the
event that a participant is unable or likely to become unable to meet its obligations to the
Clearing House, or to the other participants.
(2) Every participant and Clearing House shall, in respect of its Designated Payment System,
provide the State Bank with such information, at such times and in such form as the State
Bank may require in writing.
24. Electronic Money Institution.-(1) An applicant that wants to become an Electronic Money Institution shall submit an
application to the State Bank for issue of a license to perform Electronic Money activity.
(2) An Electronic Money Institution may perform only such activities as are specified in its
license;
25. Preservation of Rights, etc. .-(1) Except to the extent expressly provided, this Act shall not operate to limit, restrict or
otherwise affect -(i) any right, title, interest, privilege, obligation or liability of a person resulting from
any transaction in respect of a transfer order which has been entered into a
Designated Payment System; or
(ii) any investigation, legal proceeding or remedy in respect of any such right, title,
interest, privilege, obligation or liability.
(2) Nothing in this Act shall be construed to require.
(i) the unwinding of any Netting done by the operator of a Designated Payment
System, whether pursuant to its default arrangements or otherwise;
(ii) the revocation of any transfer order given by a participant which is entered into a
Designated Payment System; or
(iii) the reversal of a payment or settlement made under the rules of a Designated
Payment System.
CHAPTER V
Supervisory Control of the State Bank
26. Issuance of Model Clauses.-The State Bank may issue model clauses for use by the Financial Institutions and Authorized
Parties to facilitate compliance with the disclosure requirements as specified in section 29 and to
aid consumers in understanding the rights and responsibilities of participants in Electronic Fund
Transfers by utilizing readily understandable language.
27. Modification of Requirements.-Instructions issued by the State Bank may provide for such adjustments and exceptions for any
class of Electronic Fund Transfers, as in the opinion of the State Bank are necessary or proper for
the purposes of this Act, to prevent circumvention or evasion thereof, to facilitate compliance
therewith and to alleviate any undue compliance burden on small Financial Institutions.
28. Service Providers Other Than Financial Institutions.-The State Bank shall determine, which provisionsof this Act, subject to any modifications,
adjustments or exceptions as provided for in section 26, shall apply to a person other than a
Financial Institution, holding a Consumer’s Account.
29. Requirement of Notice.-(1) The instructions issued by the State Bank under section 3 shall require any ATM Operator
or any other Service Provider who imposes a fee on any consumer for providing services
to such consumer, to provide notice in accordance with sub-sections (2) and (3) to the
consumer of the fact that –
(i) a fee is imposed by such operator or Service Provider for providing the service;
and
(ii) the amount of any such fee.
(2) The notice required by sub-section (1) with respect to any fee shall be posted at a
prominent and conspicuous location on or atthe ATM or other Electronic Terminal at
which the consumer initiates the Electronic Fund Transfer.
(3) The notice required under sub-section (1) with respect to charging of fee shall appear on
the conspicuous part of the ATM or Electronic Terminal in the manner as may be
determined and notified by the State Bank in this behalf.
(4) No fee may be imposed by any ATM Operator or other Service Provider, as the case may
be, in connection with any Electronic Fund Transfer initiated by a consumer for which a
notice is required under sub-section (1), unless the consumer receives such notice in
accordance with sub-sections (2) and (3) and such consumer elects to continue in the
manner necessary to effect the transaction after receiving such notice.
30. Terms and Conditions of Transfers.-(1) The terms and conditions of Electronic Fund Transfers involving a Consumer’s Account
shall be disclosed by a Financial Institution, operator or other Authorized Party in English
and in a manner clearly understood by the consumer, at the time the Consumer contracts
for an Electronic Fund Transfer service, in accordance with the instructions of the State
Bank.
(2) Such disclosures may include the following, namely:-(i) the Consumer’s liability for unauthorized Electronic Fund Transfers and, at the
option of the Financial Institution or Authorized Party or Operator, notice of the
advisability of prompt reporting of any loss, theft, or unauthorized use of a Card,
Access Code or other means of access;
(ii) the telephone number and address of the Person or office to be notified in the
event the Consumer believes that an unauthorized Electronic Fund Transfer has
been or may be effected;
(iii) the kind and nature of Electronic Fund Transfers which the Consumer may
initiate, including any limitations on the frequency or amount of such transfers;
(iv) any charges for Electronic Fund Transfers or for the right to make such transfers;
(v) the Consumer’s right to stop payment of a Preauthorized Electronic Fund
Transfer and the procedure to initiate such a stop payment order;
(vi) the Consumer’s right to receive information of Electronic Fund Transfers under
section 29;
(vii) a summary, in a form Prescribed by the State Bank, of the error resolution
provisions of section 36 which, the Financial Institutions, Authorized Parties or
Operators shall be required to transmit at least once per calendar year;
(viii) the Financial Institution’s, Authorized Party’s or Operator’s liability to the
Consumer;
(ix) the circumstances under which the Financial Institution, Authorized Party or
Operator will in the ordinary course of business disclose information concerning
the Consumer’s Account to third Persons; and
(x) a notice to the Consumer that a fee may be imposed by an ATM Operator or
Service Provider, if the Consumer initiates a transfer from an ATM or other
Electronic Terminal that is not operated by the Person or the Financial Institution
issuing the Card or other means of access.
31. Notification of Changes.-(1) A Financial Institution or any other Authorized party, shall notify a Consumer in writing or
such other means as may be prescribed by the State Bank from time to time, at least
twenty-one days prior to the effective date of any material change in any term or condition
of the Consumer’s Account required to be disclosed under sub-section (1) of section 29,
unless such change is immediately necessary to maintain or restore the security of an
Electronic Fund Transfer system or a Consumer’s Account.
(2) Financial Institution shall be required to make a subsequent notification, provided for in
sub-section (1), if such a change is made permanent.
CHAPTER VI
Documentation of Transfers
32. Availability of Documentation and Proof.-For each Electronic Fund Transfer initiated by a Consumer from an Electronic Terminal, the
Financial Institution holding such Consumer’s Account shall, directly or indirectly, at the time the
transfer is initiated, make available to the Consumer documentation and proof of such transfer,
clearly setting forth, as may be required by suchtransaction, the following particulars, namely –
(i) the amount involved and the date on which the transfer is initiated;
(ii) the type of transfer;
(iii) the identity of the Consumer’s Account with the Financial Institution from which or to
which funds are transferred;
(iv) the identity of any third party to whom or from whom funds are transferred;
(v) the location or identification of the Electronic Terminal involved; and
(vi) name of the Accountholder from or to which funds are transferred.
33. Periodic Statement.-(1) A Financial Institution shall provide each consumer with a periodic statement for each
account of such consumer that may be accessed electronically.
(2) Such statement shall be provided at least once every month, or as required by the
consumer, or such other period as the State Bank may determine from time to time.
(3) Such statement shall include all the necessary particulars in respect of the Consumer’s
Account and shall clearly set forth the balancesin Consumer’s Account at the beginning
and the close of the period, the amount of any fee or charge assessed by the Financial
Institution during the period, for whatever purpose and the address and telephone number
to be used by the Financial Institution for the purpose of receiving any enquiry or notice of
account error from the Consumer.
34. Documentation as Evidence.-In any action involving a Consumer or any Participant, any documentation required by either
section 31 or 32 of this Act to be given to the Consumer, which indicates that an Electronic Fund
Transfer was made to another Person, shall be admissible as evidence of such transfer and shall
constitute prima facie proof that such transfer was made.
35. Preauthorized Transfers.-(1) A preauthorized Electronic Fund Transfer from a Consumer’s Account may be authorized
by the Consumer either in writing, or in any other accepted form.
(2) A consumer may stop payment of a Preauthorized Electronic Fund Transfer by notifying
the Financial Institution.
CHAPTER VII
Notification of Error
36. Notification of error.-(1) In this section, the following shall be construed as error, namely –
(i) an unauthorized Electronic Fund Transfer;
(ii) an incorrect Electronic Fund Transfer to or from the Consumer’s Account.
(iii) the omission of an Electronic Fund Transfer from a periodic statement;
(iv) a computational or book keeping error made by the Financial Institution relating to
an Electronic Fund Transfer;
(v) the Consumer’s receipt of an incorrect amount of money from an Electronic
Terminal; or
(vi) any other error as determined by the State Bank.
(2) When an error has occurred, the Financial Institution or the Authorized Party shall
investigate the alleged error to determine whether an error has occurred, and report in
writing the result of such investigation to the consumer within ten Business Days.
(3) The Financial Institution may require written confirmation to be provided to it within ten
Business Days of an oral notification of error.
(4) A Financial Institution or Authorized Party shall not be liable to credit a Consumer’s
Account in accordance with the provisions of section 37 in case no error is found pursuant
to investigation under subsection (2) and or the written confirmation required by it is not
received by it within the ten days period, provided for in sub-section (3).
37. Correcting Error.-If the Financial Institution or Authorized Party determines that an error did occur, it shall promptly,
and in no event later than one Business Day after such determination, correct the error, including
the crediting of a Consumer’s Account with mark up where applicable:
Providedthat such investigation shall be concluded not later than ten Business Days after receipt
of notice of the error.
38. Absence of Error.-If the Financial Institution or the Authorized Party determines after its investigation that an error
did not occur, it shall deliver or mail to the consumer an explanation of its findings within three
Business Days after the conclusion of its investigation, and upon request of the consumer
promptly deliver or mail to the consumer copies of all documents which the Financial Institution or
the Authorized Party relied on to conclude that such error did not occur.
39. Triple Damages.-(1) If in any case filed under section 50 of this Act, the court finds that a Financial Institution
and/or an Authorized Party is guilty of the commission of any act, provided for in
sub-section (2) or (3) of this section, the Financial Institution, shall in addition to costs
incurred by the consumer, be further liable to pay to the Consumer, triple damages
determined under section 50.
(2) The Financial Institution or the Authorized Party shall be liable to pay damages, provided
for in sub-section (1), if it did not re-credit a Consumer’s Account within the ten days
period specified in section 37 and the Financial Institution and/ or the Authorized Party
did not make a good faith investigation of the alleged error or it did not have reasonable
basis for believing that the Consumer’s Account was not in error.
(3) The Financial Institution or the Authorized Party shall also be liable to pay damages,
provided in sub-section (1), if it knowingly and willfully concluded that the Consumer’s
Account was not in error when such conclusion could not reasonably have been drawn
from the evidence available to the Financial Institution or the Authorized Party at the time
of its investigation.
CHAPTER VIII
Liability of Parties
40. Consumer’s Liability.-A consumer shall be liable for any unauthorized Electronic Fund Transfer involving the Account of
such consumer only if the card or other means of access utilized for such transfer was an
Accepted Card or other means of access and if the issuer of such card, code or other means of
access has provided a means whereby the user of such card, code or other means of access can
be identified as the person authorized to use it, such as by signature, photograph, or finger print or
by electronic or mechanical confirmation.
41. Burden of Proof.-In any action which involves a consumer’s liability for an unauthorized Electronic Fund Transfer,
the burden of proof shall be upon the Financial Institution or the Authorized Party to show that the
Electronic Fund Transfer was authorized or, if the Electronic Fund Transfer was authorized, then
the burden of proof shall be upon the Financial Institution or the Authorized Party to establish that
the conditions of liability set forth in this Act were met, and the disclosures required to be made to
the consumer under this Act were in fact made in accordance with the provision thereof.
42. Liability in Case of Extension of Credit.-In the event of transaction which involves both an unauthorized Electronic Fund Transfer and an
extension of credit limit pursuant to an agreement between the consumer and the Financial
Institution or the Authorized Party, nothing shall impose liability upon a consumer for an
unauthorized Electronic Fund Transfer in excess of his liability for such transfer under any other
applicable law or under any agreement with the Consumer’s Financial Institution or Authorized
Party.
43. Liability of Financial Institutions/ Authorized Parties.-Subject to what is provided in this section or section 44, a Financial Institution or the Authorized
Party shall be liable to a consumer for all damages proximately caused by –
(i) the Financial Institution’s or Authorized Party’s failure to make an Electronic Fund
Transfer, in accordance with the terms and conditions of an Account, in the correct
amount or in a timely manner when properly instructed to do so by the consumer, except
where-(a) the Consumer’s Account has insufficient funds;
(b) the funds are subject to legal process or other encumbrance restricting such
transfer;
(c) such transfer would exceed an established credit limit;
(d) as otherwise provided in instructions by the State Bank.
(ii) the Financial Institution’s or Authorized Party’s failure to make an Electronic Fund
Transfer due to insufficient funds when the Financial Institution or Authorized Party failed
to credit, in accordance with the terms and conditions of an Account, a deposit of funds to
the Consumer’s Account which would have provided sufficient funds to make the transfer,
and
(iii) the Financial Institution’s or Authorized Party’s failure to stop payment of Preauthorized
transfer from a Consumer’s Account when instructed to do so in accordance with the
terms and conditions of Account.
44. Force Majeure.-A Financial Institution, an Authorized Party, Operator or a Participant shall not be liable under
clauses (i) and (ii) of section 43 if it shows bya preponderance of evidence that its action or failure
to act resulted from –
(i) force majeure or other circumstance beyond its control, that it exercised reasonable care
to prevent such an occurrence, and that it exercised such diligence as the circumstances
required;
(ii) a technical malfunction which was known to the Consumer at the time he attempted to
initiate an Electronic Fund Transfer or, in case of Preauthorized transfer, at the time such
transfer should have occurred
45. Intent.-In case of failure described in clauses (i) and (ii) of section 43 was not intentional and it resulted
from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to
avoid any such error, the Financial Institution, Authorized Party, operator or the participant shall
be liable for actual damages proved.
46. Prohibition on Improper Issuance.-No person may issue to a Consumer any Card, code or other means of access to such
Consumer’s Account for the purpose of initiating an Electronic Funds Transfer other than in
response to a request or application therefor; or as a renewal of, or in substitution for, an
Accepted Card, code or other means of access, whether issued by the initial issuer or a
successor.
47. Exceptions.-(1) Notwithstanding the provisions of section 46,a person may distribute to a consumer on an
unsolicited basis a card, code or other means of access for use in initiating an Electronic
Fund Transfer from such Consumer’s account if –
(i) such card, code or other means of access is not validated;
(ii) such distribution is accompanied by a complete disclosure, in accordance with
section 29 of the Consumers’ rights and liabilities which will apply if such Card,
code or other means of access is validated;
(iii) such distribution is accompanied by a clear explanation, in accordance with
instructions of the State Bank, that such card, code, or other means of access is
not validated and how the Consumer may dispose of such code, card, or other
means of access if validation is not desired and such Card, code, or other means
of access is validated only in response to a request or application from the
Consumer, upon verification of the Consumer’s identity.
(2) For the purpose of this section, a card, code, or other means of access is validated when
it may be used to initiate an Electronic Fund Transfer.
48. Suspension of Obligation.-If a technical malfunction prevents the effectuation of an Electronic Fund Transfer initiated by a
consumer to another person, and such other person has agreed to accept payment by such
means, the Consumer’s obligation to the other person shall be suspended until the malfunction is
corrected and the Electronic Fund Transfer may be completed, unless such other Person has
subsequently, by written request, demanded paymentby means other than an Electronic Fund
Transfer.
49. Waiver of Rights.-No writing or other agreement between a Consumer and any other Person may contain any
provision which constitutes a waiver of any right conferred or cause of action created by this Act,
and any such writing waiving any right or cause of action shall be void and of no legal effect.
CHAPTER IX
Action Before the Court
50. Damages.-Except as otherwise provided by this section or the provisions of this Act, any person who fails to
comply with any provision of this Act with respect to any other person, except for an error resolved
in accordance with the provisions of this Act, shall, upon an action brought before a court, be
liable to such person for payment of an amount equal to the sum of any actual damage sustained
by that person as a result of such failure.
51. Bonafide Error.-Except as provided by section 50, a person may not be held liable in any action brought under this
chapter for any violation of this Act if the person shows by preponderance of evidence that the
violation was not intentional and resulted froma bonafide error notwithstanding the maintenance
of procedures reasonably adopted to avoid any such error.
52. Actions Taken in Good Faith.-(1) The provisions of section 50 shall not apply to any act done or omitted in good faith, or
purported to be done in conformity with any rule, instruction or interpretation of approval
by an official of the State Bank duly authorized to issue such interpretations or approvals
under such procedure of the State Bank as may be prescribed for.
(2) A Financial Institution or an Authorized Party shall not incur any liability under section 50
on account of any failure to make a disclosure in proper form, if such institution utilized an
appropriate model clause issued by the State Bank, notwithstanding the fact that after
such act, omission, or failure has occurred, such rule, instruction, approval or model
clause under sub-section (1) was amended, rescinded or determined by judicial or other
authority as invalid for any reason.
53. Notification to Consumer Prior to Action.-A person shall not incur any liability for any failure to comply with any requirement under this Act,
if prior to the institution of an action under this Act, such person notifies the consumer concerned
of the failure, complies with the requirements of this Act and makes an appropriate adjustment to
the Consumer’s account and pays actual damages or, where applicable, damages in accordance
with section 39.
54. Action in Bad Faith.-On finding by the court that an unsuccessful action for any alleged failure was brought in bad faith
or for the purposes of harassment, the court may award to the defendant(s) costs of such litigation
and the attorney’s fees found reasonable in relation to the work.
55. Jurisdiction of Courts.-(1) With regard to the amount in controversy, any civil action under this Act may be brought in
any court of competent jurisdiction.
(2) The court exercising jurisdiction shall not adjourn the case for more than ten days at a
time; provided that the aggregate of adjournments granted to the defendant shall not
exceed three.
(3) The court shall announce its judgment within ninety days after notice upon the defendant
in the case was first served.
56. Criminal Liability.-Whoever knowingly and willfully gives false information or inaccurate information or fails to provide
information which he is required to disclose by this Act or any instruction issued thereunder, or
otherwise fails to comply with any provision of this Act shall be punished with imprisonment of
either description which may extend to three years, or with fine which may extend to three million
rupees, or with both.
57. Violations Affecting Electronic Commerce.-Whoever –
(i) knowingly, in a transaction effected by electronic commerce, uses or attempts or
conspires to use any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently
obtained Debit Instrument to obtain money, goods, services or anything else of value
aggregating five thousand rupees or more, or
(ii) knowingly receives, conceals, uses or transports money, goods, services or anything else
of value aggregating five thousand rupees or more obtained by use of any counterfeit,
fictitious, altered, forged, lost, stolen,or fraudulently obtained Debit Instrument, or
(iii) knowingly receives, conceals, uses, sells, or transports one or more tickets for
transportation, and which have been purchased or obtained with one or more counterfeit,
fictitious, altered, forged, lost, stolen or fraudulently obtained Debit Instrument,
shall be punished with imprisonment of either description for a term which may extend to seven
years, or with fine which may extend to one million rupees, or with both.
Explanation.-For the purpose of this section e-commerce means the activity of buying, selling or
contracting for goods, services and making payments using internet or worldwide web through
communication networks including of wireless networks, within or outside Pakistan.
58. Cheating by Use of Electronic Device.-Whosoever cheats by pretending to be some otherperson, or by knowingly substituting one
person for another, or representing that he or any other person is a person other than he or such
other person really is, or by cheating by impersonation, fraudulently or dishonestly uses any credit
or debit card, or code or any other means of access to an Electronic Fund Transfer device, and
thereby causes any wrongful gain to himself orany wrongful loss to any other person, shall be
punished with imprisonment of either description for a term which may extend to seven years, or
with fine which shall not be less than the wrongful loss caused to any person, or with both.
CHAPTER X
Miscellaneous
59. Act to override Law of Insolvency:
(1) Notwithstanding anything to the contrary provided in the law of insolvency, rights and
liabilities of persons arising from transfer orders in this Act shall be governed subject to
the provisions of this section, in case such person is a participant.
(2) No transfer order passed under this Act, any disposition of property in pursuance of such
order, or the default arrangements of a designated system shall be regarded to any extent
as invalid on the ground of inconsistency with the law of insolvency.
(3) No order of the court or any office holder acting under the law of insolvency shall interfere
with settlement of a transfer order passed in accordance with the rules of the designated
system.
(4) A debt or other liability arising out of a transfer order which is the subject of action taken
under default arrangements, may not be proved in a bankruptcy or winding up
proceedings, or may not be taken into account for the purpose of any set-off until the
completion of the action taken under default arrangements.
(5) The Netting arrangement shall be valid and enforceable and an operator or participant of
a designated system shall be required to give effect to such arrangement.
(6) Nothing in this section shall be construed to require the unwinding of any netting or gross
payment done by the operator of a Designated Payment System, whether pursuant to its
default arrangements or otherwise:
Providedthat this section shall not apply in relation to any transfer order which is entered into a
Designated Payment System after the expiry of the day on which a court made an order for
insolvency, judicial management or winding up in respect of the participant, or after a resolution
for voluntary winding up of the participant was passed.
Explanation.- In this section “Default Arrangements” means the arrangements put in place by a
designated system to limit systemic and other kinds of risks which arise in the event of a
participant appearing to be unable, or likely to become unable, to meet its obligations in respect of
a transfer order, including any arrangements for netting.
60. Operator of Designated Payment System Insolvent:
(1) Where the State Bank is satisfied that any operator of a Designated Payment System is
insolvent or likely to become insolvent, or has become or likely to become unable to meet
all or any of his obligations, or has suspended payments or compounded with his
creditors, or where it is in the public interest, State Bank may:
(i) assume control of the whole of the property, business and affairs of the operator
of the Designated Payment System and carry on the whole of his business and
affairs and appoint its own officers, or assume control of such part of its property,
business and affairs and carry on such part of its business and affairs as the
State Bank may determine, and it may further order that the cost and expenses
of the State Bank or the remuneration of any Person so appointed by the State
Bank, may be paid out of the funds and properties of the operator of the
Designated Payment System which shall be regarded as the first charge thereon;
and
(ii) take any action or initiate any proceedings against the operator under the law of
insolvency, whether or not an order has been made under the preceding
sub-section.
(2) No order under this section shall be made unless the operator of a Designated Payment
System or any director or officer of the operator of the Designated Payment System in
respect of which an order is to be made, or who in pursuance of such order is to be
removed from office, has been given a reasonable opportunity of making representation
against the proposed order.
Provided that State Bank may, if an immediate systemic risk is involved, take immediate
action under this section pending the final order.
61. Application of Fine.-A court imposing any fine under this Act may directthat the whole or any part thereof shall be
applied towards compensation to the aggrieved person for any loss caused by the person
committing an offence under this Act.
62. Power to Investigate.-(1) Notwithstanding anything to the contrary provided by any other law for the time being in
force, any information relating to commission of an offence under this Act shall be
recorded in writing by an officer in-charge of a police station, generally empowered in this
behalf under the Code of Criminal Procedure,1898 (Act V of 1898).
(2) Investigation of offences committed under this Act shall be carried out by an
officer-in-charge of the police station empowered under the Code of Criminal Procedure,
1898 (Act V of 1898) to exercise such powers, including power to examine witnesses, to
arrest any person or to seize any document or thing or search any place, and do all other
acts or things necessary for such purpose;
Provided that such officer shall be subject to the same restrictions in respect of any
document or record of a financial or Electronic Money Institution as is provided in respect
of documents in custody of a Bank or a banker in section 94 of the Code of Criminal
Procedure 1898 (Act V of 1898).
63. Trial of Offence.-(1) Notwithstanding anything to the contrary provided by any other law for the time being in
force, offences provided for in Chapter IX of this Act shall be tried by the Court of
Sessions, having territorial jurisdiction in the case, which shall observe the same
procedure as provided for trial of offences bythe Code of Criminal Procedure,1898 (Act V
of 1898).
(2) Cognizance shall be taken by the court upon a report of facts made in writing by a police
officer or upon receiving a complaint of facts which constitute the offence.
(3) In case of a complaint, the court may postpone the issue of process for attendance of the
person complained against and refer the complaint to the officer-in-charge of a police
station for investigation and report.
64. Application to acts done outside Pakistan.-The provisions of this Act shall apply notwithstanding the matters being the subject hereof
occurring outside Pakistan, in so far as they are directly or indirectly connected to, or have an
effect on or bearing in relation to persons, Payment Systems or events within the territorial
jurisdiction of Pakistan.
65. Offences to be non-cognizable etc.-Notwithstanding anything contained in the Code ofCriminal Procedure, 1898 (Act V of 1898), all
offences under this Act are bailable, non-cognizable and compoundable with the permission of the
court.
66. Procedure.-(1) Notwithstanding anything to the contrary provided in this Act or any other law for the time
being in force, no Court or authority or officer shall take cognizance of any offence against
this Act which is alleged to have been committed by any person, party, participant,
Service Provider, operator or Financial Institution or any officer or auditor thereof, who is
authorized, licensed or designated under the Act, except on the complaint in writing of the
State Bank:
Provided that nothing in this sub-section shall apply to a prosecution by a person, party,
participant, Service Provider, operator or Financial Institution or any of its officers or
employees:
Provided further that, where the State Bank is itself empowered to impose a penalty or
fine, it may take cognizance of the offence and start proceedings on the basis of a
memorandum of allegations placed on record by an officer of State Bank.
(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act V of
1898), the personal attendance of the complainant before the Court or authority trying the
offence shall not be necessary unless the Court, for reasons to be recorded, requires his
personal attendance at the trial.
67. Overriding Effect.-This Act shall have effect notwithstanding anything to the contrary provided in any other law for
the time being in force or any agreement, contract, memorandum or articles of association.
68. Removal of Difficulties.-If any difficulty arises in giving effect to any provision of this Act, the Federal Government may, in
consultation with the State Bank, make such order as appears to it to be necessary for the
purpose of removing the difficulty.
69. Power to Call For Information.-(1) The State Bank may direct any Financial Institution or Service Provider or any other
Authorized Party to give or furnish to the State Bank, within such time as the State Bank
may specify in this behalf, such information, documents or records in respect of any
business carried on by such institution or Service Provider or other Authorized Party, as
may be within its knowledge or under its possession, custody or control.
(2) If such institution or Service Provider or other Authorized party fails or omits to furnish any
information required by the State Bank under subsection (1) or willfully makes a statement
which is false in any material particular it shall be liable to get its license under section 24
withdrawn by the State Bank and to pay it fine which may extend to one million rupees.
(3) Any party or person aggrieved by an order passed under sub-section (2) may appeal
within fifteen days of such order to the Governor of the State Bank, who shall dispose of
the appeal within sixty days.
70. Secrecy and Privacy.-(1) A Financial Institution or any other Authorized party shall, except as otherwise required by
law, not divulge any information relating to an Electronic Fund Transfer, affairs or account
of its consumer, except in circumstances in which, according to the practice and usage
customary among bankers, it is necessary or appropriate for a Financial Institution to
divulge such information, or the consumer has given consent therefor.
(2) No person other than an officer or agent appointed by the Financial Institution that
maintains the account of a consumer may have access through an Electronic Terminal to
information relating to Electronic Fund Transfer, the affairs, or the account of the
consumer.
(3) The rules governing the operation of individual accounts will be applicable to Electronic
Fund Transfers in relation to disclosure of information to third parties.
71. Complaint Resolution.-(1) A consumer, not satisfied with the outcome of a complaint made to a Financial Institution
in relation to any Electronic Fund Transfer or disclosure made by a Financial Institution to
a third party, without prejudice to any right toseek any other remedy under the law, may
make a complaint to the State Bank.
(2) The State Bank after hearing the parties may pass such order as it deems fit under the
circumstances of the case.
72. Suspension of Operation.-(1) The Federal Government in consultation with the State Bank may by a general order, for
the time being suspend operation of any provision of this Act, and from the date of such
order, such provision shall cease to apply.
(2) When the order made under sub-section (1) is withdrawn by the Federal Government
such suspension shall cease to operate with effect from the date specified by the Federal
Government in this behalf.
73. Immunity of the State Bank and its Employees, etc.-(1) No suit or other legal proceedings shall lie against the State Bank or any officer or
employee thereof or any person acting under its direction:
(i) for any act done in good faith,-(a) in the performance, or intended performance, of any function or duty; or
(b) in the exercise, or intended exercise, of any power, in the capacity of the
State Bank as the designated Bank under this Act; or
(ii) for any neglect or default in the performance or exercise in good faith of such
function, duty or power.
74. Penalties.-(1) Any financial Institution or Service Provider, who willfully fails to comply with any provision
of this Act or rules, circulars, directions, orders or bye-laws issued under this Act or any
provision thereof, shall be liable to pay fine to the State Bank which may extend to one
million rupees.
(2) In case of failure to pay the fine, State Bank may suspend or revoke the license of the
Service Provider or Financial Institution concerned, as the case may be.
(3) If any amount of fine under sub-section (1) remains unpaid, it may be recovered as
arrears of land revenue.”
AN
ACT
to provide regulatory framework for payment systems and electronic fund transfers
WHEREAS it is necessary to supervise and regulate Payment Systems and Electronic Fund
Transfers in Pakistan and to provide standards for protection of the consumer and to determine respective
rights and liabilities of the financial institutions and other Service Providers, their consumers and
participants;
It is hereby enacted as follows:-CHAPTER I
PRELIMINARY
1. Short title, extent and commencement, -(1) This Act may be called the Payment Systems and Electronic Fund Transfers Act, 2007.
(2) It extends to the whole of Pakistan.
(3) It shall come into force at once.
2. Definitions.-(1) In this Act, unless there is anything repugnant in the subject or context,
(a) “Accepted Card”means a card, code or other means of access to a
Consumer’s Account for the purpose of initiating Electronic Fund Transfers;
(b) “Access Code”includes pin, password or code, which provides a means of
access to a Consumer’s Account for the purpose of initiating an Electronic Fund
Transfer;
(c) “Account”means a current deposit, saving deposit, or any other account
maintained by a consumer in a Financial Institution in which credits and debits
may be effected by virtue of Electronic Fund Transfers;
(d) “Authorized”means authorized by the State Bank for the purposes of this Act;
(e) “Automated Teller Machine (ATM) Card”means any card for use at any ATM
to initiate Electronic Fund Transfers.
(f) “Authorized Party”means a bank, a Financial Institution, a Clearing House, a
Service Provider or any person authorized by the State Bank to transact business
under this Act in Pakistan;
(g) “Automated Teller Machine (ATM) Operator”means any person or a Financial
Institution operating any ATM at which consumers initiate Electronic Fund
Transfers;
(h) “Bank”means a banking company as defined in section 5 of the Banking
Companies Ordinance, 1962 (LVII of 1962);
(i) “Book Entry Government Securities”means any securities issued by the
Government under any written law transferable by a book entry on a register or
otherwise;
(j) “Business Day”means any day on which offices of consumers, Financial
Institutions, operators or Service Providers involved in Electronic Fund Transfer
are open to the public;
(k) “Card”means any card including an ATM card, Electronic Fund Transfer point
of sale card, debit card, credit card or stored value card, used by a Consumer to
effect an Electronic Fund Transfer;
(l) “Cheque in the Electronic Form”means a cheque which contains the exact
image of a paper cheque in electronic form and is generated, written and signed
in a secure system ensuring minimum safety standards as may be prescribed by
the State Bank;
(m) “Clearing House”means corporation, company, association, partnership,
agency or other entity that provides clearing or settlement services for a
Payment System;
(n) “Consumer”means any person who or which avails the facility of Electronic
Fund Transfer;
(o) “Debit Instrument”means a Card, Access Code, or other device other than a
cheque, draft or similar paper instrument, by the use of which a person may
initiate an Electronic Fund Transfer;
(p) “Designated Payment Instrument”means a Payment Instrument designated by
the State Bank as Payment Instrument under section 12.
(q) “Designated Payment System” means a Payment System designated by the
State Bank under section 4 to be a Designated Payment System for the
purposes of this Act;
(r) “Electronic” has the same meaning as assigned to it by the Electronic
Transactions Ordinance, 2002 (LI of 2002);
(s) “Electronic Fund or Electronic Money”means money transferred through an
Electronic Terminal, ATM, telephone instrument, computer, magnetic medium or
any other electronic device so as to order, instruct or authorize a banking
company, a Financial Institution or any other company or person to debit or
credit an account and includes monetary value as represented by a claim on the
issuer which is stored in an electronic device or Payment Instrument, issued on
receipt of funds of an amount not less in value than the monetary value issued,
accepted as means of payment by undertakings other than the issuer and
includes electronic store of monetary value on a electronic device that may be
used for making payments or as may be prescribed by the State Bank;
(t) “Electronic Fund Transfer”means any transfer of funds, other than a
transaction originated by cheque, draft or similar paper instrument, which is
initiated through an Electronic Terminal, telephonic instrument, point-of -sale
Terminal, stored value card Terminal, debit card, ATM, computer magnetic tape
or any other electronic device so as to order, instruct, or authorize a Financial
Institution to debit or credit an Account;
(u) “Electronic Money Institution”means an undertaking, that issues means of
payment in the form of Electronic Money and is duly authorized to do so;
(v) “Electronic Payment System”means implementation of Payment System
Electronically;
(w) “Electronic Terminal”means an electronic device, operated by a consumer,
through which a consumer may initiate an Electronic Fund Transfer;
(x) “Financial Institution”means a financial institution as defined in the Financial
Institutions (Recovery of Finances) Ordinance, 2001(XLVI of 2001) and includes
a banking company or any other Electronic Money Institution or person,
authorized by the State Bank in this behalf, that directly or indirectly holds an
account belonging to a consumer.
(y) “Government”means the Federal Government or any Provincial Government;
(z) “Netting”means the conversion into one net claim or one net obligation of
claims and obligations resulting from transfer orders which a participant either
issues to, or receives from, one or more other participants with the result that
only a net claim can be demanded or a net obligation be owed;
(za) “Operator”means any financial or other institution or any person, authorized by
the State Bank to operate any Designated Payment System;
(zb) “Participant”means a party to an arrangement that establishes a Payment
System;
(zc) “Payment Instrument”means any instrument, whether tangible or intangible,
that enables a person to obtain money, goods or services or to otherwise make
payment; but excludes Payment Instruments prescribed in Negotiable Instrument
Act, 1881(XXVI of 1881);
(zd) “Payment System”inter-alia means a system relating to payment instruments,
or transfer, clearing, payment settlement, supervision, regulation or infrastructure
thereof and includes clearing, settlement or transfer of Book Entry Government
Securities;
(ze) “Person”includes a legal person or a body of persons whether incorporated or
not.
(zf) “Preauthorized Electronic Fund Transfer”means an Electronic Fund Transfer
Authorized in advance;
(zg) “Prescribed”means prescribed by rules, circulars, directions, orders or
bye-laws.
(zh) “Real Time Gross Settlement System”means a Payment System which can
effect final settlement of funds, paymentobligations and Book Entry Government
Securities and instruments on a continuous basis during such operating hours of
a processing day as the State Bank may determine on a
transaction-by-transaction basis;
(zi) “Service Provider”includes an operator or any other Electronic Fund Transfer
Service Provider.
(zj) “State Bank”means the State Bank of Pakistan established under section 3 of
the State Bank of Pakistan Act, 1956 (XXXIII of 1956);
(zk) “Systemic Risk”means the risk that relates to the inability of a participant to
meet its obligations in the Payment System as they become due or a disruption to
the Payment System that could, for whatever reason, cause other participants in
the Payment System to be unable to meet their obligations as they become due;
and
(zl) “Truncated Cheque”means a cheque which is truncated in a securesystem,
during the course of a clearing cycle, byan Authorized Party, whether paying or
receiving payment, immediately on capture of a scanned image, substituting
physical movement of the cheque in the original form, and includes a cheque in
the electronic form.
3. Powers of the State Bank.-(1) The State Bank may, generally in respect of this Act, or in respect of any particular
provision of this Act, or generally in respect of payment systems, the conduct of all or any
of the Service Providers, Operators of Payment Systems or issuers of Payment
Instruments, issue such rules, guidelines, circulars, bye-laws, standards or directions as it
may consider appropriate.
(2) The State Bank may, by written notice, require an operator of a Designated Payment
System or issuer of Designated Payment Instrument to make modifications or alterations
to –
(i) the Designated Payment System or Designated Payment Instrument including
governance arrangements;
(ii) operational arrangements;
(iii) documents and information submitted by operator of a Payment System or issuer
of Payment Instruments;
(iv) any other documents relating to the Designated Payment System or Designated
Payment Instrument.
(3) In exercising its powers under sub-section (1), the State Bank shall have regard to-(i) the Systemic Risk;
(ii) the object of the State Bank to promote monetary stability and a sound financial
structure;
(iii) the interest of the public including market conditions and behaviour;
(iv) the safety, integrity, efficiency or reliability of the Designated Payment System or
Designated Payment Instrument including security and operating standards and
infrastructure arrangements;
(v) the interests of the current Participants of the Designated Payment System or
users of the Designated Payment Instruments; or
(vi) the interests of persons who, in the future, may want access to the Designated
Payment System or may want to use the Designated Payment Instrument.
CHAPTER II
Payment Systems And Their Operation
4. Designation of Payment System.-(1) The State Bank may, if it finds it to be necessary in the public interest, by a written order
designate a Payment System as a Designated Payment System.
(2) The State Bank may, in considering whether to designate a Payment System as a
Designated Payment System, inspect the premises, equipment, machinery, apparatus,
books or other documents, or accounts and transactions relating to the Payment System.
5 Revocation of Designation of Payment System.-(1) The State Bank may revoke the designation of a Designated Payment System if it is
satisfied that –
(i) the Designated Payment System has ceased to operate effectively as a
Payment System;
(ii) the operator of the designated system has knowingly furnished information or
documents to the State Bank in connection with the designation of the Payment
System which is or are false or misleading in any material particular;
(iii) the operator or settlement institution of the Designated Payment System is in the
course of being wound up or otherwise dissolved, whether in Pakistan or
elsewhere;
(iv) any of the terms and conditions of the designation or requirements of this Act has
been contravened; or
(v) the State Bank considers that it is in the public interest to revoke the designation.
(2) The State Bank shall not revoke a designation without giving the operator of the
Designated Payment System an opportunity to be heard.
Providedthat the State Bank may, if an immediate systemic risk is involved, suspend the
designation of a Payment System without notice pending the final order.
6. Real Time Gross Settlement (RTGS) System.-(1) The State Bank may establish and operate one or more Real Time Gross Settlement
Systems for the transfer of funds and settlement of payment obligations as approved by it.
(2) A settlement system may be linked to another Payment System in Pakistan or elsewhere
for the clearing or settlement of payment obligations, securities or instruments, whether
or not such Payment System is operated on a real time gross settlement basis.
(3) The State Bank may enter into agreements with participants of a settlement system and
issue to the participants, in writing, rules for the operation of the settlement system.
(4) The State Bank may, if it considers it necessary in the interest of the Payment System,
stop or suspend the operation of the Payment System or stop or suspend the privileges or
right of any participant or class of participants;
(5) Without prejudice to the generality of sub-section (3), the rules provided for in the said
sub-section, may provide-(i) for the conduct of participants;
(ii) for the authentication of transactions carried out electronically;
(iii) for the appointment of auditors or inspectors for the auditing or inspection of the
operating systems of participants in respect of the settlement system; and
(iv) for the payment of fees to the State Bank.
7. Requirement For Retention of Electronic Record.-Financial Institutions or other Authorized Parties providing funds transfer facility shall be required
to retain complete record of electronic transactions in electronic form in the same manner as
provided in section 6 of the Electronic Transactions Ordinance, 2002 (LI of 2002) for a period as
may be determined by the State Bank.
8. Disqualification of Staff.-(1) No person shall be appointed to serve in any capacity by an operator of a Designated
Payment System if –
(i) such person has been adjudged a bankrupt, or has suspended payments, or has
compounded a debt with his creditors, whether in or outside Pakistan, within ten
years prior to the date of the appointment; or
(ii) such person has been convicted of an offence under this Act or committed any
other offence involving moral turpitude or such an offence has been compounded
against him.
(2) Any person being the chairman, director, chief executive, by whatever name called, or
official liquidator, or an officer of a designated payment system mismanages the affairs of
the payment system or misuses his position for gaining direct or indirect benefit for himself
or any of his family members or any otherperson, shall be disqualified to serve in any
capacity in a designated payment system.
9. Effect of Disqualification.-(1) Where a person becomes disqualified, as provided for in the foregoing provisions, after
his appointment –
(i) he shall immediately cease to hold office; and
(ii) the operator of the Designated Payment System shall immediately terminate his
appointment.
(2) Any person disqualified under section 8, notwithstanding any contract of service, shall not
be entitled to claim any compensation for his loss of office or termination of appointment.
10. Governance Arrangements.-The operator of a Designated Payment System shall establish adequate governance
arrangements which are effective, accountable and transparent or which may be required by the
State Bank to ensure the continued integrity of such Designated Payment System.
11. Operational Arrangement.-An Operator of a Designated Payment System shall establish the following operational
arrangements:
(i) rules and procedures setting out the rights and liabilities of the operator and the
participant and the financial risks the participants may incur;
(ii) procedures, controls and measures for the management of credit, liquidity and settlement
risk, including rules determining the time when a payment instruction and a settlement is
final;
(iii) criteria for participation in the Designated Payment System; and
(iv) measures to ensure the safety, security and operational reliability of the Designated
Payment System including contingency arrangements.
CHAPTER III
Payment Instruments
12. Designation of Payment Instrument.-(1) Where the State Bank is of the opinion that
(i) a Payment Instrument is or may be in widespread use as a means of making
payment and may affect the Payment Systems of Pakistan; and
(ii) it is necessary to protect the interest ofthe public or it is necessary to maintain
the integrity, efficiency and reliability of a Payment Instrument, the State Bank
may prescribe such Payment Instrument as a Designated Payment Instrument.
(2) Where a Payment Instrument is prescribed as a Designated Payment Instrument, the
issuer of such Designated Payment Instrument shall comply with the requirements of
section 13 within such period as the State Bank may specify.
13. Issuing of Designated Payment Instruments.-(1) No person shall be issued a Designated Payment Instrument unless the issuer has –
(i) complied with the requirements of this Act;
(ii) submitted to the State Bank the documents and information as may be
prescribed thereby;
(iii) paid the fee Prescribed by the State Bank; and
(iv) obtained a written approval from the State Bank to issue a Designated Payment
Instrument.
(2) The State Bank may in giving its approval –
(i) require all or any of the documents submitted to be modified and altered as it may
deem necessary; and
(ii) impose such restrictions, limitations or conditions as it may deem fit.
(3) Any Payment Instrument so issued should carry minimum security features to make its
usage secure as per the current international standards.
14. Prohibition of Issuance of Payment Instruments.-(1) The State Bank may, by a written order, prohibit any person from issuing or using any
Payment Instrument if, in its opinion –
(i) the issuing or use of the Payment Instrumentis detrimental to the reliable, safe,
efficient and smooth operation of the Payment Systems of Pakistan or monetary
policy of the State Bank;
(ii) the prohibition is in the interest of the public; or
(iii) the Payment Instrument has been issued with an object to entice or defraud the
public.
(iv) the Person has, in the opinion of the State Bank, failed to comply with the
requirements of this Act.
(2) The State Bank may, in considering whether to prohibit any Person from issuing or using
any Payment Instrument, inspect the premises, equipment, machinery, apparatus, books
or other documents, or accounts and transactions of the issuer of the Payment
Instrument.
(3) Any Person causing or attempting to cause obstruction to an officer or representative of
the State Bank in inspection of the premises or equipment shall, upon complaint made to
a court having jurisdiction, be liable to punishment which may extend to three years
imprisonment of either description or with fine which may extend to five million rupees or
with both.
(4) The State Bank shall before passing an order under this section, give such Person a
reasonable opportunity to make representation before it.
Provided that State Bank may, in appropriate cases, without notice direct a Person to
immediately stop issuing a Payment Instrument, pending the final order.
15. Security.-Financial Institutions and other institutions providing Electronic Funds Transfer facilities shall
ensure that secure means are used for transfer, compliant with current international standards and
as may be prescribed by the State Bank from time to time.
16. Third Party.-If a person other than a Financial Institution is holding a Consumer’s Account, the State Bank shall
by instructions ensure that the disclosures, required to be made for Electronic Fund Transfers,
and the protections, responsibilities and remedies created by this Act, are made applicable to
such Persons and services.
17. Payment by Truncated Cheque.-(1) Notwithstanding anything to the contrary provided in the Negotiable Instruments Act, 1881
(XXVI of 1881), or any other law, for the time being in force, Electronic Fund Transfers
may be initiated by an Authorized Party by means of a truncated cheque.
(2) In case, any transfer of funds takes place in the manner as provided in sub-section (1),
the original cheque shall cease to be negotiable.
(3) Validity of a cheque shall not be affected if for any technical reason or otherwise, transfer
of funds as provided in sub-section (1) fails to take effect.
(4) If transfer of funds does not take effect as provided in sub-section (3), the Bank or the
Authorized Financial Institution concerned may require physical delivery of the cheque
from the originator.
CHAPTER IV
Clearing and Other Obligations
18. Clearing Houses, Audit and Inspection.-(1) The State Bank may nominate one or moreClearing Houses to provide clearing or
settlement services for a Payment System on such terms and conditions as may be
determined by it.
(2) The State Bank may, for the purposes of carrying out its functions under this Act, conduct
audits and inspections of Clearing Houses, and the Clearing House shall, as required,
assist the State Bank to the extent necessary to enable it to carry out an audit or
inspection.
(3) Auditors for carrying out the purposes provided for in sub-section (1) shall be appointed
with prior approval in writing of the State Bank.
19. Notice Required of Significant Changes.-Every Clearing House shall, in respect of its Designated Payment System, provide the State Bank
with reasonable notice of not less than fifteen Business Days in advance of any change to be
made by the Clearing House that is of a significant nature in relation to the Designated Payment
System and, without limiting the generality of the foregoing, the notice shall be provided in respect
of any change affecting –
(a) the legal documents and bye-laws of the Clearing House;
(b) the operation of the Designated Payment System;
(c) the bye-laws, agreements, rules, procedures, guides or other documentation governing
the Designated Payment System;
(d) the composition of a board of directors of the Clearing House due to resignation or
otherwise; or
(e) the appointed auditor of the Clearing House.
20. Participants Responsible Where Clearing House Fails to Comply, etc. .-Where a Clearing House fails to comply with the obligations imposed on it under this Act in
respect of its Payment System or otherwise contravenes the provisions of this Act, the
Participants jointly and severally shall comply with those obligations in the same manner and to
the same extent as if the participants were the Clearing House on which the obligations are
imposed or they committed the contravention.
21. Settlement Provisions.-(1) Notwithstanding anything to the contrary provided in this Act or any other law for the time
being in force, the settlement rules of a Designated Payment System shall be valid and
binding on the operator and the participants and any action may be taken or payment
made in accordance with the settlement rules.
(2) Where the settlement rules of a Designated Payment System provide that the settlement
of a payment obligation through an entry to or a payment out of an Account of a
Participant or a Clearing House at the State Bank is final and irrevocable the entry or
payment shall not be required to be reversed, repaid or set aside.
22. Rights, etc., Not Subject to Stay.-(1) The rights and remedies of a participant, a Clearing House, or the State Bank in respect
of collateral granted to it as security for a payment or the performance of an obligation
incurred in a Designated Payment System may not be the subject of any stay to be
granted by any court or order affecting the ability of creditors to exercise rights and
remedies with respect to the collateral.
23. Settlement Rules.-(1) The State Bank may make “settlement rules” to provide the basis on which payment
obligations are calculated, netted or settled including rules for the taking of action in the
event that a participant is unable or likely to become unable to meet its obligations to the
Clearing House, or to the other participants.
(2) Every participant and Clearing House shall, in respect of its Designated Payment System,
provide the State Bank with such information, at such times and in such form as the State
Bank may require in writing.
24. Electronic Money Institution.-(1) An applicant that wants to become an Electronic Money Institution shall submit an
application to the State Bank for issue of a license to perform Electronic Money activity.
(2) An Electronic Money Institution may perform only such activities as are specified in its
license;
25. Preservation of Rights, etc. .-(1) Except to the extent expressly provided, this Act shall not operate to limit, restrict or
otherwise affect -(i) any right, title, interest, privilege, obligation or liability of a person resulting from
any transaction in respect of a transfer order which has been entered into a
Designated Payment System; or
(ii) any investigation, legal proceeding or remedy in respect of any such right, title,
interest, privilege, obligation or liability.
(2) Nothing in this Act shall be construed to require.
(i) the unwinding of any Netting done by the operator of a Designated Payment
System, whether pursuant to its default arrangements or otherwise;
(ii) the revocation of any transfer order given by a participant which is entered into a
Designated Payment System; or
(iii) the reversal of a payment or settlement made under the rules of a Designated
Payment System.
CHAPTER V
Supervisory Control of the State Bank
26. Issuance of Model Clauses.-The State Bank may issue model clauses for use by the Financial Institutions and Authorized
Parties to facilitate compliance with the disclosure requirements as specified in section 29 and to
aid consumers in understanding the rights and responsibilities of participants in Electronic Fund
Transfers by utilizing readily understandable language.
27. Modification of Requirements.-Instructions issued by the State Bank may provide for such adjustments and exceptions for any
class of Electronic Fund Transfers, as in the opinion of the State Bank are necessary or proper for
the purposes of this Act, to prevent circumvention or evasion thereof, to facilitate compliance
therewith and to alleviate any undue compliance burden on small Financial Institutions.
28. Service Providers Other Than Financial Institutions.-The State Bank shall determine, which provisionsof this Act, subject to any modifications,
adjustments or exceptions as provided for in section 26, shall apply to a person other than a
Financial Institution, holding a Consumer’s Account.
29. Requirement of Notice.-(1) The instructions issued by the State Bank under section 3 shall require any ATM Operator
or any other Service Provider who imposes a fee on any consumer for providing services
to such consumer, to provide notice in accordance with sub-sections (2) and (3) to the
consumer of the fact that –
(i) a fee is imposed by such operator or Service Provider for providing the service;
and
(ii) the amount of any such fee.
(2) The notice required by sub-section (1) with respect to any fee shall be posted at a
prominent and conspicuous location on or atthe ATM or other Electronic Terminal at
which the consumer initiates the Electronic Fund Transfer.
(3) The notice required under sub-section (1) with respect to charging of fee shall appear on
the conspicuous part of the ATM or Electronic Terminal in the manner as may be
determined and notified by the State Bank in this behalf.
(4) No fee may be imposed by any ATM Operator or other Service Provider, as the case may
be, in connection with any Electronic Fund Transfer initiated by a consumer for which a
notice is required under sub-section (1), unless the consumer receives such notice in
accordance with sub-sections (2) and (3) and such consumer elects to continue in the
manner necessary to effect the transaction after receiving such notice.
30. Terms and Conditions of Transfers.-(1) The terms and conditions of Electronic Fund Transfers involving a Consumer’s Account
shall be disclosed by a Financial Institution, operator or other Authorized Party in English
and in a manner clearly understood by the consumer, at the time the Consumer contracts
for an Electronic Fund Transfer service, in accordance with the instructions of the State
Bank.
(2) Such disclosures may include the following, namely:-(i) the Consumer’s liability for unauthorized Electronic Fund Transfers and, at the
option of the Financial Institution or Authorized Party or Operator, notice of the
advisability of prompt reporting of any loss, theft, or unauthorized use of a Card,
Access Code or other means of access;
(ii) the telephone number and address of the Person or office to be notified in the
event the Consumer believes that an unauthorized Electronic Fund Transfer has
been or may be effected;
(iii) the kind and nature of Electronic Fund Transfers which the Consumer may
initiate, including any limitations on the frequency or amount of such transfers;
(iv) any charges for Electronic Fund Transfers or for the right to make such transfers;
(v) the Consumer’s right to stop payment of a Preauthorized Electronic Fund
Transfer and the procedure to initiate such a stop payment order;
(vi) the Consumer’s right to receive information of Electronic Fund Transfers under
section 29;
(vii) a summary, in a form Prescribed by the State Bank, of the error resolution
provisions of section 36 which, the Financial Institutions, Authorized Parties or
Operators shall be required to transmit at least once per calendar year;
(viii) the Financial Institution’s, Authorized Party’s or Operator’s liability to the
Consumer;
(ix) the circumstances under which the Financial Institution, Authorized Party or
Operator will in the ordinary course of business disclose information concerning
the Consumer’s Account to third Persons; and
(x) a notice to the Consumer that a fee may be imposed by an ATM Operator or
Service Provider, if the Consumer initiates a transfer from an ATM or other
Electronic Terminal that is not operated by the Person or the Financial Institution
issuing the Card or other means of access.
31. Notification of Changes.-(1) A Financial Institution or any other Authorized party, shall notify a Consumer in writing or
such other means as may be prescribed by the State Bank from time to time, at least
twenty-one days prior to the effective date of any material change in any term or condition
of the Consumer’s Account required to be disclosed under sub-section (1) of section 29,
unless such change is immediately necessary to maintain or restore the security of an
Electronic Fund Transfer system or a Consumer’s Account.
(2) Financial Institution shall be required to make a subsequent notification, provided for in
sub-section (1), if such a change is made permanent.
CHAPTER VI
Documentation of Transfers
32. Availability of Documentation and Proof.-For each Electronic Fund Transfer initiated by a Consumer from an Electronic Terminal, the
Financial Institution holding such Consumer’s Account shall, directly or indirectly, at the time the
transfer is initiated, make available to the Consumer documentation and proof of such transfer,
clearly setting forth, as may be required by suchtransaction, the following particulars, namely –
(i) the amount involved and the date on which the transfer is initiated;
(ii) the type of transfer;
(iii) the identity of the Consumer’s Account with the Financial Institution from which or to
which funds are transferred;
(iv) the identity of any third party to whom or from whom funds are transferred;
(v) the location or identification of the Electronic Terminal involved; and
(vi) name of the Accountholder from or to which funds are transferred.
33. Periodic Statement.-(1) A Financial Institution shall provide each consumer with a periodic statement for each
account of such consumer that may be accessed electronically.
(2) Such statement shall be provided at least once every month, or as required by the
consumer, or such other period as the State Bank may determine from time to time.
(3) Such statement shall include all the necessary particulars in respect of the Consumer’s
Account and shall clearly set forth the balancesin Consumer’s Account at the beginning
and the close of the period, the amount of any fee or charge assessed by the Financial
Institution during the period, for whatever purpose and the address and telephone number
to be used by the Financial Institution for the purpose of receiving any enquiry or notice of
account error from the Consumer.
34. Documentation as Evidence.-In any action involving a Consumer or any Participant, any documentation required by either
section 31 or 32 of this Act to be given to the Consumer, which indicates that an Electronic Fund
Transfer was made to another Person, shall be admissible as evidence of such transfer and shall
constitute prima facie proof that such transfer was made.
35. Preauthorized Transfers.-(1) A preauthorized Electronic Fund Transfer from a Consumer’s Account may be authorized
by the Consumer either in writing, or in any other accepted form.
(2) A consumer may stop payment of a Preauthorized Electronic Fund Transfer by notifying
the Financial Institution.
CHAPTER VII
Notification of Error
36. Notification of error.-(1) In this section, the following shall be construed as error, namely –
(i) an unauthorized Electronic Fund Transfer;
(ii) an incorrect Electronic Fund Transfer to or from the Consumer’s Account.
(iii) the omission of an Electronic Fund Transfer from a periodic statement;
(iv) a computational or book keeping error made by the Financial Institution relating to
an Electronic Fund Transfer;
(v) the Consumer’s receipt of an incorrect amount of money from an Electronic
Terminal; or
(vi) any other error as determined by the State Bank.
(2) When an error has occurred, the Financial Institution or the Authorized Party shall
investigate the alleged error to determine whether an error has occurred, and report in
writing the result of such investigation to the consumer within ten Business Days.
(3) The Financial Institution may require written confirmation to be provided to it within ten
Business Days of an oral notification of error.
(4) A Financial Institution or Authorized Party shall not be liable to credit a Consumer’s
Account in accordance with the provisions of section 37 in case no error is found pursuant
to investigation under subsection (2) and or the written confirmation required by it is not
received by it within the ten days period, provided for in sub-section (3).
37. Correcting Error.-If the Financial Institution or Authorized Party determines that an error did occur, it shall promptly,
and in no event later than one Business Day after such determination, correct the error, including
the crediting of a Consumer’s Account with mark up where applicable:
Providedthat such investigation shall be concluded not later than ten Business Days after receipt
of notice of the error.
38. Absence of Error.-If the Financial Institution or the Authorized Party determines after its investigation that an error
did not occur, it shall deliver or mail to the consumer an explanation of its findings within three
Business Days after the conclusion of its investigation, and upon request of the consumer
promptly deliver or mail to the consumer copies of all documents which the Financial Institution or
the Authorized Party relied on to conclude that such error did not occur.
39. Triple Damages.-(1) If in any case filed under section 50 of this Act, the court finds that a Financial Institution
and/or an Authorized Party is guilty of the commission of any act, provided for in
sub-section (2) or (3) of this section, the Financial Institution, shall in addition to costs
incurred by the consumer, be further liable to pay to the Consumer, triple damages
determined under section 50.
(2) The Financial Institution or the Authorized Party shall be liable to pay damages, provided
for in sub-section (1), if it did not re-credit a Consumer’s Account within the ten days
period specified in section 37 and the Financial Institution and/ or the Authorized Party
did not make a good faith investigation of the alleged error or it did not have reasonable
basis for believing that the Consumer’s Account was not in error.
(3) The Financial Institution or the Authorized Party shall also be liable to pay damages,
provided in sub-section (1), if it knowingly and willfully concluded that the Consumer’s
Account was not in error when such conclusion could not reasonably have been drawn
from the evidence available to the Financial Institution or the Authorized Party at the time
of its investigation.
CHAPTER VIII
Liability of Parties
40. Consumer’s Liability.-A consumer shall be liable for any unauthorized Electronic Fund Transfer involving the Account of
such consumer only if the card or other means of access utilized for such transfer was an
Accepted Card or other means of access and if the issuer of such card, code or other means of
access has provided a means whereby the user of such card, code or other means of access can
be identified as the person authorized to use it, such as by signature, photograph, or finger print or
by electronic or mechanical confirmation.
41. Burden of Proof.-In any action which involves a consumer’s liability for an unauthorized Electronic Fund Transfer,
the burden of proof shall be upon the Financial Institution or the Authorized Party to show that the
Electronic Fund Transfer was authorized or, if the Electronic Fund Transfer was authorized, then
the burden of proof shall be upon the Financial Institution or the Authorized Party to establish that
the conditions of liability set forth in this Act were met, and the disclosures required to be made to
the consumer under this Act were in fact made in accordance with the provision thereof.
42. Liability in Case of Extension of Credit.-In the event of transaction which involves both an unauthorized Electronic Fund Transfer and an
extension of credit limit pursuant to an agreement between the consumer and the Financial
Institution or the Authorized Party, nothing shall impose liability upon a consumer for an
unauthorized Electronic Fund Transfer in excess of his liability for such transfer under any other
applicable law or under any agreement with the Consumer’s Financial Institution or Authorized
Party.
43. Liability of Financial Institutions/ Authorized Parties.-Subject to what is provided in this section or section 44, a Financial Institution or the Authorized
Party shall be liable to a consumer for all damages proximately caused by –
(i) the Financial Institution’s or Authorized Party’s failure to make an Electronic Fund
Transfer, in accordance with the terms and conditions of an Account, in the correct
amount or in a timely manner when properly instructed to do so by the consumer, except
where-(a) the Consumer’s Account has insufficient funds;
(b) the funds are subject to legal process or other encumbrance restricting such
transfer;
(c) such transfer would exceed an established credit limit;
(d) as otherwise provided in instructions by the State Bank.
(ii) the Financial Institution’s or Authorized Party’s failure to make an Electronic Fund
Transfer due to insufficient funds when the Financial Institution or Authorized Party failed
to credit, in accordance with the terms and conditions of an Account, a deposit of funds to
the Consumer’s Account which would have provided sufficient funds to make the transfer,
and
(iii) the Financial Institution’s or Authorized Party’s failure to stop payment of Preauthorized
transfer from a Consumer’s Account when instructed to do so in accordance with the
terms and conditions of Account.
44. Force Majeure.-A Financial Institution, an Authorized Party, Operator or a Participant shall not be liable under
clauses (i) and (ii) of section 43 if it shows bya preponderance of evidence that its action or failure
to act resulted from –
(i) force majeure or other circumstance beyond its control, that it exercised reasonable care
to prevent such an occurrence, and that it exercised such diligence as the circumstances
required;
(ii) a technical malfunction which was known to the Consumer at the time he attempted to
initiate an Electronic Fund Transfer or, in case of Preauthorized transfer, at the time such
transfer should have occurred
45. Intent.-In case of failure described in clauses (i) and (ii) of section 43 was not intentional and it resulted
from a bona fide error, notwithstanding the maintenance of procedures reasonably adopted to
avoid any such error, the Financial Institution, Authorized Party, operator or the participant shall
be liable for actual damages proved.
46. Prohibition on Improper Issuance.-No person may issue to a Consumer any Card, code or other means of access to such
Consumer’s Account for the purpose of initiating an Electronic Funds Transfer other than in
response to a request or application therefor; or as a renewal of, or in substitution for, an
Accepted Card, code or other means of access, whether issued by the initial issuer or a
successor.
47. Exceptions.-(1) Notwithstanding the provisions of section 46,a person may distribute to a consumer on an
unsolicited basis a card, code or other means of access for use in initiating an Electronic
Fund Transfer from such Consumer’s account if –
(i) such card, code or other means of access is not validated;
(ii) such distribution is accompanied by a complete disclosure, in accordance with
section 29 of the Consumers’ rights and liabilities which will apply if such Card,
code or other means of access is validated;
(iii) such distribution is accompanied by a clear explanation, in accordance with
instructions of the State Bank, that such card, code, or other means of access is
not validated and how the Consumer may dispose of such code, card, or other
means of access if validation is not desired and such Card, code, or other means
of access is validated only in response to a request or application from the
Consumer, upon verification of the Consumer’s identity.
(2) For the purpose of this section, a card, code, or other means of access is validated when
it may be used to initiate an Electronic Fund Transfer.
48. Suspension of Obligation.-If a technical malfunction prevents the effectuation of an Electronic Fund Transfer initiated by a
consumer to another person, and such other person has agreed to accept payment by such
means, the Consumer’s obligation to the other person shall be suspended until the malfunction is
corrected and the Electronic Fund Transfer may be completed, unless such other Person has
subsequently, by written request, demanded paymentby means other than an Electronic Fund
Transfer.
49. Waiver of Rights.-No writing or other agreement between a Consumer and any other Person may contain any
provision which constitutes a waiver of any right conferred or cause of action created by this Act,
and any such writing waiving any right or cause of action shall be void and of no legal effect.
CHAPTER IX
Action Before the Court
50. Damages.-Except as otherwise provided by this section or the provisions of this Act, any person who fails to
comply with any provision of this Act with respect to any other person, except for an error resolved
in accordance with the provisions of this Act, shall, upon an action brought before a court, be
liable to such person for payment of an amount equal to the sum of any actual damage sustained
by that person as a result of such failure.
51. Bonafide Error.-Except as provided by section 50, a person may not be held liable in any action brought under this
chapter for any violation of this Act if the person shows by preponderance of evidence that the
violation was not intentional and resulted froma bonafide error notwithstanding the maintenance
of procedures reasonably adopted to avoid any such error.
52. Actions Taken in Good Faith.-(1) The provisions of section 50 shall not apply to any act done or omitted in good faith, or
purported to be done in conformity with any rule, instruction or interpretation of approval
by an official of the State Bank duly authorized to issue such interpretations or approvals
under such procedure of the State Bank as may be prescribed for.
(2) A Financial Institution or an Authorized Party shall not incur any liability under section 50
on account of any failure to make a disclosure in proper form, if such institution utilized an
appropriate model clause issued by the State Bank, notwithstanding the fact that after
such act, omission, or failure has occurred, such rule, instruction, approval or model
clause under sub-section (1) was amended, rescinded or determined by judicial or other
authority as invalid for any reason.
53. Notification to Consumer Prior to Action.-A person shall not incur any liability for any failure to comply with any requirement under this Act,
if prior to the institution of an action under this Act, such person notifies the consumer concerned
of the failure, complies with the requirements of this Act and makes an appropriate adjustment to
the Consumer’s account and pays actual damages or, where applicable, damages in accordance
with section 39.
54. Action in Bad Faith.-On finding by the court that an unsuccessful action for any alleged failure was brought in bad faith
or for the purposes of harassment, the court may award to the defendant(s) costs of such litigation
and the attorney’s fees found reasonable in relation to the work.
55. Jurisdiction of Courts.-(1) With regard to the amount in controversy, any civil action under this Act may be brought in
any court of competent jurisdiction.
(2) The court exercising jurisdiction shall not adjourn the case for more than ten days at a
time; provided that the aggregate of adjournments granted to the defendant shall not
exceed three.
(3) The court shall announce its judgment within ninety days after notice upon the defendant
in the case was first served.
56. Criminal Liability.-Whoever knowingly and willfully gives false information or inaccurate information or fails to provide
information which he is required to disclose by this Act or any instruction issued thereunder, or
otherwise fails to comply with any provision of this Act shall be punished with imprisonment of
either description which may extend to three years, or with fine which may extend to three million
rupees, or with both.
57. Violations Affecting Electronic Commerce.-Whoever –
(i) knowingly, in a transaction effected by electronic commerce, uses or attempts or
conspires to use any counterfeit, fictitious, altered, forged, lost, stolen, or fraudulently
obtained Debit Instrument to obtain money, goods, services or anything else of value
aggregating five thousand rupees or more, or
(ii) knowingly receives, conceals, uses or transports money, goods, services or anything else
of value aggregating five thousand rupees or more obtained by use of any counterfeit,
fictitious, altered, forged, lost, stolen,or fraudulently obtained Debit Instrument, or
(iii) knowingly receives, conceals, uses, sells, or transports one or more tickets for
transportation, and which have been purchased or obtained with one or more counterfeit,
fictitious, altered, forged, lost, stolen or fraudulently obtained Debit Instrument,
shall be punished with imprisonment of either description for a term which may extend to seven
years, or with fine which may extend to one million rupees, or with both.
Explanation.-For the purpose of this section e-commerce means the activity of buying, selling or
contracting for goods, services and making payments using internet or worldwide web through
communication networks including of wireless networks, within or outside Pakistan.
58. Cheating by Use of Electronic Device.-Whosoever cheats by pretending to be some otherperson, or by knowingly substituting one
person for another, or representing that he or any other person is a person other than he or such
other person really is, or by cheating by impersonation, fraudulently or dishonestly uses any credit
or debit card, or code or any other means of access to an Electronic Fund Transfer device, and
thereby causes any wrongful gain to himself orany wrongful loss to any other person, shall be
punished with imprisonment of either description for a term which may extend to seven years, or
with fine which shall not be less than the wrongful loss caused to any person, or with both.
CHAPTER X
Miscellaneous
59. Act to override Law of Insolvency:
(1) Notwithstanding anything to the contrary provided in the law of insolvency, rights and
liabilities of persons arising from transfer orders in this Act shall be governed subject to
the provisions of this section, in case such person is a participant.
(2) No transfer order passed under this Act, any disposition of property in pursuance of such
order, or the default arrangements of a designated system shall be regarded to any extent
as invalid on the ground of inconsistency with the law of insolvency.
(3) No order of the court or any office holder acting under the law of insolvency shall interfere
with settlement of a transfer order passed in accordance with the rules of the designated
system.
(4) A debt or other liability arising out of a transfer order which is the subject of action taken
under default arrangements, may not be proved in a bankruptcy or winding up
proceedings, or may not be taken into account for the purpose of any set-off until the
completion of the action taken under default arrangements.
(5) The Netting arrangement shall be valid and enforceable and an operator or participant of
a designated system shall be required to give effect to such arrangement.
(6) Nothing in this section shall be construed to require the unwinding of any netting or gross
payment done by the operator of a Designated Payment System, whether pursuant to its
default arrangements or otherwise:
Providedthat this section shall not apply in relation to any transfer order which is entered into a
Designated Payment System after the expiry of the day on which a court made an order for
insolvency, judicial management or winding up in respect of the participant, or after a resolution
for voluntary winding up of the participant was passed.
Explanation.- In this section “Default Arrangements” means the arrangements put in place by a
designated system to limit systemic and other kinds of risks which arise in the event of a
participant appearing to be unable, or likely to become unable, to meet its obligations in respect of
a transfer order, including any arrangements for netting.
60. Operator of Designated Payment System Insolvent:
(1) Where the State Bank is satisfied that any operator of a Designated Payment System is
insolvent or likely to become insolvent, or has become or likely to become unable to meet
all or any of his obligations, or has suspended payments or compounded with his
creditors, or where it is in the public interest, State Bank may:
(i) assume control of the whole of the property, business and affairs of the operator
of the Designated Payment System and carry on the whole of his business and
affairs and appoint its own officers, or assume control of such part of its property,
business and affairs and carry on such part of its business and affairs as the
State Bank may determine, and it may further order that the cost and expenses
of the State Bank or the remuneration of any Person so appointed by the State
Bank, may be paid out of the funds and properties of the operator of the
Designated Payment System which shall be regarded as the first charge thereon;
and
(ii) take any action or initiate any proceedings against the operator under the law of
insolvency, whether or not an order has been made under the preceding
sub-section.
(2) No order under this section shall be made unless the operator of a Designated Payment
System or any director or officer of the operator of the Designated Payment System in
respect of which an order is to be made, or who in pursuance of such order is to be
removed from office, has been given a reasonable opportunity of making representation
against the proposed order.
Provided that State Bank may, if an immediate systemic risk is involved, take immediate
action under this section pending the final order.
61. Application of Fine.-A court imposing any fine under this Act may directthat the whole or any part thereof shall be
applied towards compensation to the aggrieved person for any loss caused by the person
committing an offence under this Act.
62. Power to Investigate.-(1) Notwithstanding anything to the contrary provided by any other law for the time being in
force, any information relating to commission of an offence under this Act shall be
recorded in writing by an officer in-charge of a police station, generally empowered in this
behalf under the Code of Criminal Procedure,1898 (Act V of 1898).
(2) Investigation of offences committed under this Act shall be carried out by an
officer-in-charge of the police station empowered under the Code of Criminal Procedure,
1898 (Act V of 1898) to exercise such powers, including power to examine witnesses, to
arrest any person or to seize any document or thing or search any place, and do all other
acts or things necessary for such purpose;
Provided that such officer shall be subject to the same restrictions in respect of any
document or record of a financial or Electronic Money Institution as is provided in respect
of documents in custody of a Bank or a banker in section 94 of the Code of Criminal
Procedure 1898 (Act V of 1898).
63. Trial of Offence.-(1) Notwithstanding anything to the contrary provided by any other law for the time being in
force, offences provided for in Chapter IX of this Act shall be tried by the Court of
Sessions, having territorial jurisdiction in the case, which shall observe the same
procedure as provided for trial of offences bythe Code of Criminal Procedure,1898 (Act V
of 1898).
(2) Cognizance shall be taken by the court upon a report of facts made in writing by a police
officer or upon receiving a complaint of facts which constitute the offence.
(3) In case of a complaint, the court may postpone the issue of process for attendance of the
person complained against and refer the complaint to the officer-in-charge of a police
station for investigation and report.
64. Application to acts done outside Pakistan.-The provisions of this Act shall apply notwithstanding the matters being the subject hereof
occurring outside Pakistan, in so far as they are directly or indirectly connected to, or have an
effect on or bearing in relation to persons, Payment Systems or events within the territorial
jurisdiction of Pakistan.
65. Offences to be non-cognizable etc.-Notwithstanding anything contained in the Code ofCriminal Procedure, 1898 (Act V of 1898), all
offences under this Act are bailable, non-cognizable and compoundable with the permission of the
court.
66. Procedure.-(1) Notwithstanding anything to the contrary provided in this Act or any other law for the time
being in force, no Court or authority or officer shall take cognizance of any offence against
this Act which is alleged to have been committed by any person, party, participant,
Service Provider, operator or Financial Institution or any officer or auditor thereof, who is
authorized, licensed or designated under the Act, except on the complaint in writing of the
State Bank:
Provided that nothing in this sub-section shall apply to a prosecution by a person, party,
participant, Service Provider, operator or Financial Institution or any of its officers or
employees:
Provided further that, where the State Bank is itself empowered to impose a penalty or
fine, it may take cognizance of the offence and start proceedings on the basis of a
memorandum of allegations placed on record by an officer of State Bank.
(2) Notwithstanding anything contained in the Code of Criminal Procedure, 1898 (Act V of
1898), the personal attendance of the complainant before the Court or authority trying the
offence shall not be necessary unless the Court, for reasons to be recorded, requires his
personal attendance at the trial.
67. Overriding Effect.-This Act shall have effect notwithstanding anything to the contrary provided in any other law for
the time being in force or any agreement, contract, memorandum or articles of association.
68. Removal of Difficulties.-If any difficulty arises in giving effect to any provision of this Act, the Federal Government may, in
consultation with the State Bank, make such order as appears to it to be necessary for the
purpose of removing the difficulty.
69. Power to Call For Information.-(1) The State Bank may direct any Financial Institution or Service Provider or any other
Authorized Party to give or furnish to the State Bank, within such time as the State Bank
may specify in this behalf, such information, documents or records in respect of any
business carried on by such institution or Service Provider or other Authorized Party, as
may be within its knowledge or under its possession, custody or control.
(2) If such institution or Service Provider or other Authorized party fails or omits to furnish any
information required by the State Bank under subsection (1) or willfully makes a statement
which is false in any material particular it shall be liable to get its license under section 24
withdrawn by the State Bank and to pay it fine which may extend to one million rupees.
(3) Any party or person aggrieved by an order passed under sub-section (2) may appeal
within fifteen days of such order to the Governor of the State Bank, who shall dispose of
the appeal within sixty days.
70. Secrecy and Privacy.-(1) A Financial Institution or any other Authorized party shall, except as otherwise required by
law, not divulge any information relating to an Electronic Fund Transfer, affairs or account
of its consumer, except in circumstances in which, according to the practice and usage
customary among bankers, it is necessary or appropriate for a Financial Institution to
divulge such information, or the consumer has given consent therefor.
(2) No person other than an officer or agent appointed by the Financial Institution that
maintains the account of a consumer may have access through an Electronic Terminal to
information relating to Electronic Fund Transfer, the affairs, or the account of the
consumer.
(3) The rules governing the operation of individual accounts will be applicable to Electronic
Fund Transfers in relation to disclosure of information to third parties.
71. Complaint Resolution.-(1) A consumer, not satisfied with the outcome of a complaint made to a Financial Institution
in relation to any Electronic Fund Transfer or disclosure made by a Financial Institution to
a third party, without prejudice to any right toseek any other remedy under the law, may
make a complaint to the State Bank.
(2) The State Bank after hearing the parties may pass such order as it deems fit under the
circumstances of the case.
72. Suspension of Operation.-(1) The Federal Government in consultation with the State Bank may by a general order, for
the time being suspend operation of any provision of this Act, and from the date of such
order, such provision shall cease to apply.
(2) When the order made under sub-section (1) is withdrawn by the Federal Government
such suspension shall cease to operate with effect from the date specified by the Federal
Government in this behalf.
73. Immunity of the State Bank and its Employees, etc.-(1) No suit or other legal proceedings shall lie against the State Bank or any officer or
employee thereof or any person acting under its direction:
(i) for any act done in good faith,-(a) in the performance, or intended performance, of any function or duty; or
(b) in the exercise, or intended exercise, of any power, in the capacity of the
State Bank as the designated Bank under this Act; or
(ii) for any neglect or default in the performance or exercise in good faith of such
function, duty or power.
74. Penalties.-(1) Any financial Institution or Service Provider, who willfully fails to comply with any provision
of this Act or rules, circulars, directions, orders or bye-laws issued under this Act or any
provision thereof, shall be liable to pay fine to the State Bank which may extend to one
million rupees.
(2) In case of failure to pay the fine, State Bank may suspend or revoke the license of the
Service Provider or Financial Institution concerned, as the case may be.
(3) If any amount of fine under sub-section (1) remains unpaid, it may be recovered as
arrears of land revenue.”
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