Regulatory Alerts2026-06-10 | IFPD Circular Letter No. 02Instructions on Islamic Banking Windows Operations
The State Bank of Pakistan issued Circular Letter No. 02 of 2026 to amend existing instructions for Islamic Banking Windows to facilitate the conversion of conventional branches. The directive allows banks and microfinance banks to establish interim Islamic Banking Windows without prior approval, waiving processing fees and relaxing signage requirements while mandating specific technological connectivity for fund segregation. These consolidated instructions require immediate compliance and continued quarterly data submission through the designated reporting format.
Circulars/Notifications - Islamic Finance Policy Department
IFPD Circular Letter No. 02 of 2026
June 10, 2026
The Presidents/Chief Executives All Conventional Banks having Islamic Banking Branches and Microfinance Banks having Islamic Operations
Dear Sir/Madam,
Instructions on Islamic Banking Windows (IBWs) Operations
Please refer to IBD Circular No. 2 of 2020 on the captioned subject. 2. In order to facilitate Banks/Microfinance Banks (MFBs) in conversion of conventional branches into Islamic and enhance facilitation in Islamic banking window operations, it has been decided to amend existing instructions, as under:
Banks/MFBs may establish IBWs within conventional branches approved for conversion either under the annual branch conversion plan or through a separate request, without prior SBP approval. Such IBWs may be established for an interim period starting from date of initiation of an individual branch conversion process till its final conversion.
During the branch conversion phase [as permitted under point (i)], banks/MFBs may offer Shariah Compliant products including deposits and all types of financing (funded/non-funded).
Banks/MFBs shall specify their plan for establishing IBWs at the time of seeking SBP's permission for branch conversion under annual branch conversion plan or through a separate request.
No processing or annual fee shall be applicable on IBWs to be opened for the interim period as a part of branch conversion.
The requirement related to display of the name of IBW on the sign board of the conventional branch, i.e. ¼th portion of the board, has been relaxed to support banks/MFBs in opening of IBWs. However, banks/MBFs shall ensure existence of appropriate alternate arrangements at the branch entrance and display prominent signage within the branch premises indicating the availability of Islamic banking products and services through windows.
To allow banks/MFBs to leverage technology for effective segregation of conventional and Islamic funds, the requirement for real-time connectivity of IBWs with closest Islamic banking branch/hub has been revised to mandate connectivity with the controlling branch/hub/centralized data centre.
The existing instructions pertaining to IBWs of conventional banks shall also be applicable to microfinance banks for offering Islamic products and services through IBWs.
All banks/MFBs operating IBWs shall continue to submit quarterly data through DAP within seven (7) days after the quarter end using the attached template Annexure-II .
- The consolidated instructions on IBWs operations incorporating the above changes are enclosed for meticulous compliance with immediate effect. 4. Please acknowledge receipt.
Encl.
Annexure-I: Instructions on IBWs Operations
Annexure-II: Reporting Format
Yours truly,
Sd/-
(Dr. Zahid Ur Rehman Khokher) Director