State Bank directs banks to increase footprint of Islamic banking

ISLAMABAD: The State Bank of Pakistan has issued instructions to the presidents and CEOs of all banks and Micro Finance Banks (MFBs) for revising the Annual Plan Expansion Plan (ABFP) for 2023 to increase the Islamic Banking branches/offices all over the country.

According to instructions issued by the SBP’s Banking Policy and Regulation Departments to all presidents/CEO of all banks and MFBs, they were encouraged to increase the footprint of Islamic banking in Pakistan.

Recently, Federal Minister for Finance Ishaq Dar instructed the SBP and National Bank of Pakistan to withdraw their petitions filed against the verdict of the Federal Shariat Court to implement Riba free banking system in Pakistan in five years. The government also showed its intentions to ensure interest-free banking and financial system in five years period by adopting the approach of implementing the Shariah-compliant banking and financial system in a phased manner.

The SBP in its letter says that in order to encourage Islamic banking system in the country and to set direction for banks to enhance their Islamic banking footprint, it has been decided to allow banks/MFBs having Islamic banking operations to revise their Annual Branch Expansion Plan (ABEN) for 2023 to the extent of including additional Islamic banking branches/ offices/ conversion proposals. These banks /MFS may also consider replacing conventional banking branches/offices proposed in the ABEP-2023, with Islamic banking/branches/offices.

Further, those banks/MFBs, which have not opted for any expansion during the year 2023, are also encouraged to submit their ABEP-2023 by including their proposals for opening of new Islamic Banking branches/offices and conversion proposals.

Accordingly, concerned banks/MFBs may revise their ABFP 2023 by including the maximum possible number of new Islamic banking branches/ offices/ conversion proposals and resubmit the same to BPRD on or before December 16, 2022, positively. Other banks/MFBs are also expected to submit their ABFP-2023, as explained above, by the same date.