Regulatory Alerts2026-06-12 | IFPD Circular No. 01Prohibition on Placement of Islamic Banking Funds with Conventional Parent or Head Office
The Islamic Finance Policy Department issued Circular No. 01 of 2026 to prohibit Islamic Banking Institutions from placing funds with their conventional parent or head office under loan (Qard) or subsidized financing contracts. This directive mandates the immediate withdrawal of any such existing placements, while explicitly exempting funds held to meet regulatory requirements. The order is issued under the authority of Section 39H of the Banking Companies Ordinance, 1962.
Circulars/Notifications - Islamic Finance Policy Department
IFPD Circular No. 01 of 2026
June 12, 2026
The Presidents/Chief Executives All Conventional Banks having Islamic Banking Branches
Dear Sir/Madam,
Placement of Funds of Islamic Banking Institutions (IBIs) with Conventional Parent or Head Office based on the Contract of Loan (Qard) or any other form of Subsidized Financing
In terms of the powers conferred under Section 39H of the Banking Companies Ordinance, 1962, it is clarified that Islamic Banking Institutions (IBIs) are not permitted to place any funds with their conventional parent or head office based on the contract of loan (Qard) or any other form of subsidized financing. However, any such existing placements, if already executed, should be withdrawn with immediate effect.
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Moreover, the above instructions are not applicable on funds placed at Head office for meeting any regulatory requirements.
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Please acknowledge receipt.
Yours truly,
Sd/-
(Dr. Zahid Ur Rehman Khokher) Director