SBP Raises Minimum Capital Requirements for Banks to Rs20 Billion
The central bank sets higher capital thresholds for local banks, foreign bank branches and development finance institutions, giving existing banks and DFIs until December 2030 to comply.
SBP Capital rules raise minimum capital requirements for banks and development finance institutions in Pakistan
KARACHI: The State Bank of Pakistan (SBP) has increased the minimum capital requirements (MCR) for locally incorporated banks, foreign bank branches and development finance institutions (DFIs), citing rising operating costs and the need to maintain sustainable financial operations.
In a circular issued on Wednesday, the central bank announced revised capital thresholds for new and existing financial institutions. The changes aim to ensure that banks maintain adequate capital to withstand financial shocks and protect depositors.
Under the revised rules, locally incorporated banks, including Islamic banking subsidiaries of banks, must maintain minimum capital of Rs20 billion.
Revised Capital Requirements for Foreign Banks
Foreign banks operating in Pakistan through branches must maintain assigned capital, net of losses, according to the number of branches they operate.
The revised requirements are:
Up to five branches: Rs5 billion.
Six to 50 branches: Rs10 billion.
Development finance institutions: Rs10 billion.
The SBP has directed existing banks and DFIs to meet the revised minimum capital requirements by December 31, 2030.
SBP Allows Statutory Reserves to Count as Capital
The circular also allows statutory reserves created under Section 21 of the Banking Companies Ordinance, 1962, to count towards the minimum capital requirement.
These reserves will qualify in addition to the capital items already prescribed under the SBP’s Banking Policy and Regulations Department (BPRD) Circular No. 6 of 2013.
However, financial institutions cannot withdraw statutory reserves counted towards their MCR without prior approval from the central bank.
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Higher Capital Requirements Aim to Strengthen Banking Stability
Minimum capital requirements establish the financial buffer banks must maintain to absorb unexpected losses. Adequate capital helps institutions manage bad loans, economic downturns and other financial shocks without jeopardising their operations.
The requirements also support depositor protection and confidence in the banking system.
The revised thresholds will require affected institutions to assess their capital positions and plan for compliance within the prescribed timeframe. The longer transition period gives existing banks and DFIs until the end of 2030 to meet the new requirements.
