New measures allow banks and microfinance banks greater flexibility in converting branches to Islamic banking operations.
KARACHI: The State Bank of Pakistan (SBP) on Wednesday issued revised instructions governing Islamic Banking Windows (IBWs), introducing measures aimed at facilitating the conversion of conventional branches into Islamic banking operations and enhancing customer access to Shariah-compliant financial services.
According to the central bank, the revised framework is designed to support banks and microfinance banks (MFBs) in accelerating their transition towards Islamic banking while ensuring operational efficiency and regulatory compliance.
Banks allowed to establish interim Islamic banking windows
Under the new guidelines, banks and MFBs will be permitted to establish Islamic Banking Windows within conventional branches approved for conversion without obtaining prior approval from the SBP.
The facility will be available for branches approved either under annual branch conversion plans or through separate conversion requests.
The SBP clarified that these IBWs may operate on an interim basis from the commencement of the branch conversion process until the branch is fully converted into an Islamic banking branch.
Wider range of Islamic products permitted
During the conversion phase, banks and MFBs will be allowed to offer a comprehensive range of Shariah-compliant products and services through these windows.
These include:
• Islamic deposit products
• Funded financing facilities
• Non-funded financing products
The move is expected to enhance customer convenience by ensuring uninterrupted access to Islamic banking services during branch transitions.
Conversion plans to include IBW details
The central bank has directed banks and MFBs to specify their plans for establishing Islamic Banking Windows when applying for branch conversion approvals.
This requirement applies both to annual branch conversion plans and separate requests submitted to the SBP.
Fee exemptions for interim IBWs
To encourage the expansion of Islamic banking services, the SBP has waived both processing fees and annual fees for Islamic Banking Windows established as part of the branch conversion process.
The exemption will apply throughout the interim period until the branch completes its conversion.
Relaxation in signage requirements
The SBP has also relaxed existing signage requirements for Islamic Banking Windows.
Previously, banks were required to dedicate one-fourth of a conventional branch’s signboard to indicate the presence of an IBW. Under the revised instructions, this requirement has been eased.
However, banks and MFBs must ensure alternative arrangements at branch entrances and display prominent signage within branch premises highlighting the availability of Islamic banking products and services.
Technology requirements revised
The central bank has updated operational requirements related to fund segregation between conventional and Islamic banking operations.
The earlier requirement for real-time connectivity between Islamic Banking Windows and the nearest Islamic banking branch or hub has been revised.
Banks and MFBs are now required to ensure connectivity with the controlling branch, hub, or centralised data centre, enabling them to leverage technology more effectively while maintaining segregation of Islamic and conventional funds.
Rules extended to microfinance banks
The SBP confirmed that the existing regulatory instructions applicable to Islamic Banking Windows operated by conventional banks will also apply to microfinance banks offering Islamic products and services through IBWs.
Additionally, all banks and MFBs operating Islamic Banking Windows will continue to submit quarterly data through the Data Acquisition Portal (DAP) within seven days after the end of each quarter.
The latest measures form part of the SBP’s broader strategy to promote the growth of Islamic banking and facilitate Pakistan’s transition towards a more Shariah-compliant financial system.
