The State Bank of Pakistan (SBP) has updated its criteria for the conversion of conventional bank branches into Islamic banking branches, aiming to address industry needs and enhance the efficiency of the transition process. The revised guidelines are designed to streamline and simplify branch conversions for banks engaging in or initiating Islamic banking operations.

Initially established in 2010, SBP’s criteria for branch conversions have now been adjusted to further accelerate the process. Banks can now establish temporary virtual conventional cost centers to manage deposits and assets that cannot be immediately converted, subject to approval from the bank’s Shariah Board.

All conventional banks with Islamic operations, or those planning to start Islamic banking, are eligible to apply for the conversion of their branches. Banks must submit an Annual Branch Conversion Plan (ABCP) by October 31st, outlining their conversion strategy and requesting approval from SBP’s Banking Policy & Regulations Department (BPRD) and the Islamic Finance Policy Department (IFPD).

Additionally, banks are required to inform their customers and the general public about upcoming branch conversions at least three and a half months in advance. Customers will be given 30 days to provide their consent for account conversion to Islamic banking, or to request an account transfer or closure.

The new instructions also apply to microfinance banks (MFBs) undergoing branch conversions. These changes are intended to support banks in maintaining transparency with account holders and ensuring proper transition to Islamic banking services.