New SBP directives require commercial banks to obtain lawful authority, proper verification, and approval from a competent authority before freezing or restricting customer bank accounts.
Islamabad: Pakistan’s banking sector has introduced stronger customer protections after the State Bank of Pakistan (SBP) directed all commercial banks to stop freezing, blocking, or restricting bank accounts without a clear legal basis and approval from a competent authority.
The new instructions were issued in compliance with court directives and are intended to prevent customers from facing unnecessary financial hardship caused by unauthorized or precautionary restrictions. Under the updated framework, banks must ensure that any account freeze, debit block, or operational limitation is imposed strictly in accordance with the law and only after completing the required verification process.
The central bank emphasized that precautionary restrictions lacking legal justification should be avoided, warning that such actions can disrupt financial transactions, inconvenience customers, and result in avoidable financial losses.
To improve compliance, the SBP has authorized banks to establish stronger internal monitoring and control mechanisms. Financial institutions have also been instructed to regularly review their procedures, maintain proper documentation, and ensure accountability whenever restrictions are placed on customer accounts.
The directives follow a ruling by the Islamabad High Court, which declared that banks cannot freeze customer accounts without lawful authority or approval from a competent authority. The court held that arbitrary account restrictions violate the legal rights of account holders and instructed the SBP to develop a comprehensive regulatory framework to prevent such practices.
The judgment, delivered by Justice Arbab Muhammad Tahir, required the central bank to issue detailed directions for uniform implementation across Pakistan’s banking sector. Following the ruling, the SBP submitted its compliance report and circulated the new guidelines to all commercial banks.
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