The State Bank of Pakistan (SBP) has introduced updated guidelines to facilitate the conversion of conventional banking branches into Islamic banking branches, according to the latest circular issued by the Islamic Finance Policy Department (IFPD).
The circular, addressed to the presidents and chief executives of all conventional banks with Islamic banking branches, outlines revised criteria aimed at simplifying the conversion process.
These updates come as part of SBP’s ongoing efforts to promote Islamic banking and streamline the integration of conventional banking operations into Islamic frameworks.
The revised guidelines cover key areas, including enhanced disclosures for the conversion of accounts, the use of digital channels to seek customer consent, and flexibility in the conversion process.
One significant change is the ability to establish virtual conventional cost centers, providing banks with more flexibility in transitioning conventional accounts into Islamic ones.
The updated criteria also focus on maintaining securities and collaterals during the phase-out of conventional portfolios, along with improved reporting lines for banks undergoing the conversion.
The SBP’s updated criteria are applicable with immediate effect, providing banks the necessary framework to expedite the transition of their conventional branches into Islamic banking operations.
