KARACHI, May 15: The State Bank has decided to implement International Bank Account Number (IBAN) standard to bring account code standardisation and efficiency in processing of payments for domestic as well as cross border transactions.

According to State Bank the IBAN implementation will help in bringing more efficiency in remittance related transactions as a significant percentage of these transactions are rejected due to inaccurate account numbers information.

Account validation at remitting institution due to IBAN’s check digit mechanism will significantly reduce errors related to account numbers, it added.

The SBP has developed the guidelines for IBAN in consultations with Pakistan Banks’ Association. All participants have been advised by SBP to ensure implementation of IBAN as per given timelines.

The IBAN, an international standard (ISO 13616) for identifying bank accounts across borders and will be implemented in two phases. In the first phase, all banks will generate and notify IBAN to all their customers by December 2012.

In the second phase, IBAN account numbers will be operationally used (capturing, recognition, processing, validation, transfer) both for domestic as well as for international financial transactions by June, 2013.

The IBAN is made up of two components. The first component is comprised of a country code and check digit and the 2nd component is called Basic Bank Account Number (BBAN). The check digit mechanism in an IBAN compliant account number will validate the accuracy of account number at the point of transactions entry at the remitting institutions (domestic or international).

A bank account standard across Pakistan will bring more efficiency in payment processing by enabling the payments and clearing systems to electronically validate account numbers and to decide the route a payment should take without manual intervention.

Elimination of delays in credit transfers originating from IBAN compliant countries to Pakistan as same are delayed, sometimes for several days due to manual intervention required for sending credit transfers to non IBAN compliant account numbers.

The State Bank has asked the banks to generate and issue IBAN to its account holders. Banks should encourage customers to use or quote their IBAN number in all financial transactions during the transition period.

Banks were further advised to develop online utilities for converting their account numbers to IBAN in order to facilitate their account holders besides quoting IBAN number in account statements issued to each account holder.

According to the guidelines, the financial institutions should validate the IBANs at the time of entry of the transaction in their system both for sending and receiving customers.