Islamabad, Oct 2: SBP Eases Rules for Conventional Banks to Convert to Islamic Banking
To better assist banks in converting their branches, the State Bank of Pakistan has updated the criteria for transitioning conventional banking branches to Islamic banking branches, addressing the industry’s evolving needs.
This revision comes as several banks plan to switch their operations from conventional to Islamic banking in the coming years, seeking regulatory support to simplify the conversion process.
The initiative follows a ruling from the Federal Sharia Court aimed at abolishing interest-based banking in the country. In alignment with government plans, the banking regulator has modified the rules for conventional banks looking to transform their operations into Islamic banking.
- Eligibility: All conventional banks with existing Islamic operations or those intending to start Islamic banking can apply to convert their conventional branches into Islamic without incurring a licensing fee.
- Annual Branch Conversion Plan (ABCP): Banks must submit an ABCP aligned with their overall conversion strategy and a request for in-principal approval to the Banking Policy & Regulations Department (BPRD) by October 31 of the preceding calendar year.
- Non-Muslim Accounts: No accounts belonging to non-Muslim customers can be converted to Islamic without explicit consent.
SBP may grant in-principal approval after evaluating the bank’s request for conversion of conventional branches. The bank shall initiate the conversion process as per the conversion plan and in-principal approval.
