SBP Sets Rs20 Billion Minimum Capital for Local Commercial Banks

SBP Issues New Licensing Handbook for Banks and Financial Institutions

KARACHI: The State Bank of Pakistan (SBP) has introduced a consolidated licensing and authorisation handbook for regulated financial institutions, bringing together existing rules and updated requirements for banks, digital banks, microfinance banks, exchange companies and other financial service providers.

Through BPRD Circular No. 03, issued on October 28, 2026, the central bank directed that all new applications for licences or authorisations to establish regulated entities would be processed under the requirements set out in the handbook.

The framework consolidates licensing procedures, eligibility standards, capital requirements, governance rules and documentation requirements for businesses seeking to enter Pakistan's financial sector.

Issued under Section 4C(h) of the State Bank of Pakistan Act, 1956, the handbook covers seven broad categories: conventional and Islamic commercial banks, digital retail and full banks, microfinance banks, exchange companies, electronic money institutions, payment system operators and service providers, and private credit bureaus.

Eligibility Criteria and Application Fees

Applicants must demonstrate financial strength, transparent ownership, legitimate funding sources and commercially viable business plans. Sponsors, beneficial owners, directors, chief executives and key management personnel must also satisfy the SBP's fit-and-proper criteria.

The central bank has clarified that licences will not be issued to shell companies or shell banks. Applicants must demonstrate their ability to comply with anti-money laundering, counter-terrorism financing, consumer protection, data security and other applicable regulatory requirements.

The handbook also identifies individuals and entities that may be disqualified from obtaining licences or sponsoring financial institutions. These include people convicted of serious offences, declared bankrupt, disqualified by regulators or associated with institutions whose licences were revoked because of financial or regulatory misconduct.

Members or office-bearers of political parties, elected legislators and public office holders are also ineligible to obtain licences or become sponsor shareholders under the specified criteria.

The SBP has set non-refundable application processing fees at Rs5 million for commercial and digital banks, Rs2 million for microfinance banks and exchange companies, and Rs200,000 for electronic money institutions, payment system operators, payment service providers and private credit bureaus.

According to the handbook, decisions on complete applications that satisfy the prescribed requirements generally take six to eight weeks. Processing times may vary depending on the quality of submitted documents, external feedback and applicants' responsiveness. Cases requiring additional regulatory approvals may take longer.

Capital Requirements for Commercial Banks

The handbook sets a minimum paid-up capital requirement of Rs20 billion for locally incorporated commercial banks, subject to subsequent changes prescribed by the SBP.

It also maintains a moratorium on establishing new commercial banks wholly owned by local sponsors. Foreign investors may establish banks independently or in partnership with local investors, provided they meet the applicable regulatory conditions.

Foreign bank branches are generally required to maintain assigned capital of Rs5 billion for up to five branches and Rs10 billion for networks comprising six to 50 branches.

Separate Capital Rules for Digital Banks

The framework distinguishes between digital retail banks and digital full banks, with different capital thresholds and licensing stages.

Digital retail banks must maintain minimum capital of Rs1.5 billion at the restricted licensing stage. This rises to Rs2 billion at commercial launch and subsequently increases to Rs4 billion by the third financial year after launch.

Digital full banks face a minimum capital requirement of Rs6.5 billion at licensing, rising to Rs8 billion and then Rs10 billion during the subsequent stages of progression.

The handbook also specifies eligibility, ownership, capital and operational approval requirements for microfinance banks, exchange companies, electronic money institutions, payment system operators and service providers, and private credit bureaus.

Governance and Commercial Launch Requirements

The SBP has outlined corporate governance standards covering minimum board composition, independent directors, restrictions on family representation, and assessments of sponsors and senior management.

For commercial banks, the licensing process involves initial regulatory clearance, in-principle approval, operational readiness assessments, restricted pilot operations and final authorisation to begin commercial activities.

The central bank has retained the requirement for commercial banks to list on the Pakistan Stock Exchange. Institutions that are not listed when they commence business may have up to four years to complete the listing process.

The handbook also empowers the SBP to revoke an approval or licence obtained through misrepresentation, false information or other specified grounds. Applicants whose applications are rejected may appeal to the central bank for reconsideration.

The consolidated framework aims to bring licensing requirements for Pakistan's regulated financial institutions under a unified set of procedures and standards.