The State Bank of Pakistan (SBP) has raised the minimum capital requirement for locally incorporated banks to Rs. 20 billion, directing existing banks and development finance institutions (DFIs) to meet the revised thresholds by December 31, 2030.
In a circular issued on Wednesday, the central bank said the increase would apply to new and existing banks, foreign bank branches and DFIs, citing higher operating costs associated with establishing and sustainably managing financial institutions.
Under the revised requirements, locally incorporated banks, including Islamic banking subsidiaries, must maintain a minimum capital of Rs. 20 billion.
Foreign banks operating in Pakistan through branches will be required to maintain assigned capital, net of losses, of at least Rs. 5 billion if they operate up to five branches. Those with between six and 50 branches must maintain at least Rs. 10 billion.
The minimum capital requirement for DFIs has been set at Rs. 10 billion.
Statutory reserves included in capital requirement
The SBP said statutory reserves established under Section 21 of the Banking Companies Ordinance, 1962, would be eligible for inclusion in the minimum capital requirement, in addition to the items already prescribed under its 2013 regulations.
However, statutory reserves counted toward the requirement cannot be withdrawn without prior approval from the central bank.
Minimum capital requirements ensure that financial institutions maintain adequate capital to absorb unexpected losses, manage bad loans and withstand economic downturns.
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