Under BPRD Circular No. 02 of 2026, locally incorporated banks, including Islamic banking subsidiaries, must meet a PKR 20 billion minimum capital requirement, while development finance institutions must meet PKR 10 billion. Existing institutions have until 31 December 2030.
New capital thresholds
The State Bank of Pakistan issued BPRD Circular No. 02 of 2026 on 27 October 2026, revising minimum capital requirements for banks, foreign bank branches and development finance institutions. SBP refers to the increased operating costs of establishing and managing regulated financial institutions on a sustainable basis as the reason for the changes. These are capital floors, not a replacement for risk-based capital adequacy requirements.
The stated minimum capital requirement for locally incorporated banks is PKR 20 billion, expressly including Islamic banking subsidiaries of banks. The requirement for development finance institutions is PKR 10 billion. The circular does not announce a universal capital figure for every institution regulated by SBP; categories outside its text must be assessed under their own applicable instructions.
Foreign banks operating through branches
The capital treatment is framed as assigned capital net of losses for foreign banks carrying on business in Pakistan in branch mode. The circular states a PKR 5 billion minimum where the foreign bank has up to five branches and a PKR 10 billion minimum where it operates from six to fifty branches.
These are the two explicit branch-count bands set out in the circular. The text should not be extended by implication to an unmentioned branch category without checking the institution's applicable supervisory approvals and any additional SBP directions. Bank groups should distinguish capital maintained by a Pakistan-incorporated subsidiary from assigned capital for a Pakistan branch operation.
Transitional deadline: 31 December 2030
Existing banks and DFIs must meet the revised minimum capital requirement by 31 December 2030. The circular also addresses new institutions, but its specified 2030 accommodation is expressly for existing institutions. An applicant for a new banking or DFI authorisation should therefore assess its proposed funding against the current licensing framework rather than assume that a new entrant enjoys the same transition.
A multi-year deadline allows a staged capital plan, but does not itself waive earlier prudential obligations, supervisory restrictions or risk-based standards. Affected institutions should calculate present eligible capital, forecast planned losses and deductions, and identify a credible source and timeline for any required capital support.
Treatment of statutory reserves
SBP permits statutory reserves created under section 21 of the Banking Companies Ordinance, 1962 to be included in the minimum capital requirement, in addition to items already prescribed by BPRD Circular No. 06 of 2013. Importantly, statutory reserves counted towards the minimum cannot be withdrawn without prior SBP approval.
Boards and finance teams should reconcile ledger balances and the statutory-reserve calculation against their capital-compliance schedules. This allowance is not a general permission to distribute or release statutory reserves. Other instructions on the subject remain unchanged under the concluding provision of the new circular.
Actions for boards, investors and transactions
Financial institutions should present the revised capital floor and the 2030 deadline to the board, update capital-management policies and test the effects on dividend planning, merger proposals, shareholder support and fundraising structures. The assessment needs to distinguish the assigned-capital rules for foreign branches from paid-up and eligible capital measures used for locally incorporated banks.
Investors and counterparties considering bank or DFI acquisitions should review whether the institution can meet the revised threshold on a stand-alone basis and whether any capital injection is contingent on regulatory consent. Transaction documents should allocate responsibility for capital shortfalls, reserve restrictions and post-closing compliance.
Why this development matters
The new thresholds will affect capital planning, sponsor funding, regulatory authorisations and bank or DFI transaction structuring. Existing institutions must close any shortfall by 31 December 2030.
Specific steps for affected organisations
- Calculate the institution's existing eligible capital against its revised category-specific floor.
- Present a credible capital plan to the board covering the transition to 31 December 2030.
- Reconcile statutory reserves and do not withdraw included reserves without prior SBP approval.
- Update transaction due diligence and licensing assessments to reflect the revised threshold.
Timing and legal status
Circular issued 27 October 2026; existing banks and DFIs to comply by 31 December 2030.
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SBP — BPRD Circular No. 02 of 2026, 27 October 2026