SBP Minimum Capital Raised to Rs20 Billion
The State Bank of Pakistan (SBP) has doubled the minimum capital requirement for locally incorporated banks to Rs20 billion, up from Rs10 billion. The SBP minimum capital change also sets new thresholds for foreign bank branches and development finance institutions, with existing banks given until December 31, 2030 to comply.
In a circular issued this week, the central bank said the increase applies to new and existing banks, foreign bank branches and development finance institutions (DFIs). The reason given was the higher operating costs of establishing and sustainably managing financial institutions.
The new SBP minimum capital thresholds
Under the revised requirements, locally incorporated banks, including the Islamic banking subsidiaries of banks, must maintain minimum capital of Rs20 billion.
Foreign banks operating in Pakistan through branches face separate assigned capital requirements based on the number of branches they maintain. Those with up to five branches must maintain assigned capital, net of losses, of at least Rs5 billion. Those with between six and 50 branches must maintain at least Rs10 billion.
For development finance institutions, the minimum capital requirement has been set at Rs10 billion. Existing banks and DFIs must meet the revised thresholds by December 31, 2030, giving them a transition period of more than four years to strengthen their capital positions.
Statutory reserves now count towards capital
The circular also introduces flexibility in how eligible capital is calculated. Statutory reserves maintained under Section 21 of the Banking Companies Ordinance, 1962, will now be eligible for inclusion in the minimum capital requirement, in addition to the items already prescribed under the central bank’s 2013 regulations.
However, statutory reserves counted towards the requirement cannot be withdrawn without prior approval from the central bank. That condition stops banks from using the same reserves twice over, once to meet the capital rule and again for other purposes.
Minimum capital requirements exist so that financial institutions keep a strong, high-quality capital buffer. That buffer absorbs unexpected losses, helps banks handle bad loans and economic downturns without failing, protects depositors and maintains trust in the banking system.
What the change means for banks and depositors
Analysts expect the immediate impact on most banks to be limited. Arif Habib Limited noted that its coverage banks are expected to maintain sizeable buffers against the revised requirement, with the average buffer estimated at Rs50 billion. The inclusion of statutory reserves gives listed banks additional headroom under the amended rules.
Other analysts reached a similar view, expecting that the existing eligible capital and statutory reserves of most banks under their coverage would already exceed the revised Rs20 billion threshold. A few banks may still require further assessment to confirm whether they meet the new requirement.
For depositors, the change is a stability measure rather than a change to any account. Stronger capital buffers mean banks are better placed to absorb shocks, which is the point of the rule. The long transition period to 2030 also means no sudden scramble for capital, and no reason for customers to expect disruption to services.
The move fits a wider pattern of the central bank tightening the financial system’s defences while giving institutions time to adjust. Feature Pakistan recently reported the SBP governor’s view that Pakistan’s economic fundamentals have improved, with growth at 3.7 per cent and the current account deficit within one per cent of GDP. The higher capital floor is part of the same stability story: growth is recovering, and the regulator wants the banks that fund it to stand on thicker capital.
The circular also sits alongside a separate SBP push to widen credit access, with a new framework for small business and farm lending through microfinance institutions. Together, the two moves show a central bank working on both ends of banking at once: stronger banks, and wider reach for borrowers who have often struggled to get loans.
Frequently asked questions
What is the new minimum capital requirement for banks in Pakistan?
Locally incorporated banks, including Islamic banking subsidiaries, must maintain minimum capital of Rs20 billion, up from Rs10 billion.
What about foreign banks and development finance institutions?
Foreign bank branches must hold assigned capital of at least Rs5 billion for up to five branches and Rs10 billion for six to 50 branches. Development finance institutions face a Rs10 billion requirement.
