SBP new direction for banks to block customer accounts in Pakistan

ISLAMABAD – The State Bank of Pakistan (SBP) has directed all commercial banks not to block customers’ bank accounts without a valid legal basis, approval from a competent authority, and proper verification, in compliance with directions issued by the Islamabad High Court (IHC). The State Bank of Pakistan has issued fresh instructions to banks across the country, making it clear that customer accounts cannot be blocked arbitrarily or without fulfilling the legal requirements. The directive was submitted to the Islamabad High Court as part of the SBP’s compliance report on the implementation of a court order. The report was filed following directions from Justice Arbab Muhammad Tahir, who had instructed the central bank to establish an internal mechanism and issue clear guidelines to commercial banks regarding the freezing or blocking of bank accounts. According to the compliance report, the SBP has instructed banks to ensure that no account is blocked unless there is a lawful reason, authorisation from a competent authority, and proper verification of the relevant facts. The central bank stressed that any action affecting customers’ accounts must strictly comply with applicable laws and regulatory procedures. The SBP further directed banks to avoid imposing unnecessary or precautionary restrictions that could unintentionally harm account holders or disrupt their access to banking services. It emphasized that customers should not suffer financial losses or inconvenience due to arbitrary or unjustified account restrictions. To ensure uniform implementation of the new instructions, the central bank has issued a revised circular to all banks operating in Pakistan. The circular requires financial institutions to review their existing procedures and align them with the latest regulatory guidance. The SBP also advised banks to develop appropriate internal mechanisms and standard operating procedures to ensure full compliance with the new directives.