State Bank of Pakistan Sets Rs20 Billion Capital Requirement for Banks

KARACHI:
The State Bank of Pakistan (SBP) has announced an increase in the Minimum Capital Requirements (MCR) for all local and foreign banks, effective immediately. This decision, communicated through a circular on Wednesday, aims to address the rising operational costs associated with establishing and maintaining financial institutions in the country.

According to the new regulations, locally incorporated banks, including Islamic banking subsidiaries, are now required to maintain a minimum capital of Rs20 billion. For foreign banks operating through branches in Pakistan, the capital requirements vary: banks with up to five branches must hold at least Rs5 billion, while those with six to 50 branches are required to maintain Rs10 billion.

The circular also specifies that Development Financial Institutions (DFIs) must meet a minimum capital threshold of Rs10 billion. Existing banks and DFIs are given a deadline of December 31, 2030, to comply with these new capital requirements. The SBP has stated that statutory reserves created under Section 21 of the Banking Companies Ordinance 1962 will be eligible for inclusion in the MCR, alongside other items previously outlined in BPRD circular no. 06 of 2013.

This regulatory change is expected to strengthen the banking sector’s resilience and stability, ensuring that financial institutions are better equipped to manage risks and support economic growth. As the SBP continues to adapt its policies to the evolving financial landscape, stakeholders will be closely monitoring the implications for lending practices and overall economic health in Pakistan.