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Pakistan: lending & credit regulation

Regulated

Pakistan lending regulated by SBP under Basel III/IFRS 9; no specific consumer credit act cited

Lead regulator:
State Bank of Pakistan
Key law:
Banking Companies Ordinance, 1962 (implied by SBP authority)
Last updated:
2026-07-12

The State Bank of Pakistan (SBP) is the primary regulator for lending activities conducted by banks and development finance institutions (DFIs). The regulatory framework is heavily influenced by international standards, specifically the Basel III Capital Adequacy Framework and International Financial Reporting Standard 9 (IFRS 9). Recent directives focus on credit risk standardization, impairment provisioning, and benchmark rate transitions.

Licensing for lending entities is governed by the SBP's prudential regulations for banks and DFIs. While the provided documents do not detail a separate licensing regime for non-bank consumer credit providers, the SBP's oversight of 'consumer lending' portfolios under IFRS 9 indicates that any entity classified as a bank or DFI must adhere to these strict reporting and capital rules.

Notable restrictions include the mandatory adoption of the Standardized Approach for credit risk and specific Days Past Due (DPD) criteria for loan impairment. The regulatory direction of travel emphasizes alignment with global best practices, including the replacement of LIBOR with Relevant Benchmark Rates and retrospective modification accounting for modified loans.

Who regulates

  • State Bank of Pakistan

    Primary supervisor for banks and DFIs; issues prudential regulations for lending

    [1][2][3][4]

Core laws & rules

  • Basel Capital Adequacy Framework: Revised Instructions for Credit Risk (2025)

    Establishes the Standardized Approach for credit risk for all banks and DFIs, requiring parallel run implementation from September 2025 to June 2026.

    [1]

  • Implementation of IFRS 9 - DPD Criteria (2025)

    Mandates specific Days Past Due criteria and stage allocations for impairment provisioning across corporate, consumer, housing, SME, and agriculture portfolios.

    [2]

  • Implementation of IFRS 9 (2025)

    Updates application instructions for financial institutions, mandating retrospective modification accounting for loans modified on or after January 1, 2020.

    [4]

Licensing & registration

  • Banking and DFI Lending

    Lending activities by banks and DFIs are regulated under SBP prudential frameworks. Specific licensing categories for non-bank consumer credit are not detailed in the provided documents.

    [1]

Restrictions & warnings

  • Banks and DFIs must adhere to revised credit risk standardization and IFRS 9 impairment provisioning rules, including specific DPD criteria.

    [1][2]

  • Foreign exchange borrowing costs must use 'Relevant Benchmark Rate' instead of LIBOR.

    [3]

Direction of travel

  • The regulatory environment is moving towards stricter alignment with international standards (Basel III, IFRS 9) and enhanced transparency in loan impairment and benchmark rates.

    [1][2]

Sources

  1. Basel Capital Adequacy Framework: Revised Instructions for Credit Risk · 2025-09-24
  2. Implementation of International Financial Reporting Standard 9 (IFRS 9) - DPD Criteria for Banks and DFIs · 2025-09-12
  3. Replacement of Term “LIBOR” with “Relevant Benchmark Rate” · 2025-04-07
  4. Implementation of International Financial Reporting Standard 9 (IFRS 9) · 2025-01-22

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This guide is compiled automatically from 4 primary-source documents published by Pakistan's regulators, reviewed by RegAlert, and refreshed monthly (last updated 2026-07-12). It is not legal advice — always confirm requirements with the regulator or local counsel before acting.