The banking sector in Pakistan is central to the country’s economic stability, monetary policy implementation, and financial inclusion. Establishing a banking company in Pakistan is a highly regulated process, governed by the State Bank of Pakistan (SBP) under the Banking Companies Ordinance, 1962, and involves a rigorous licensing framework, financial due diligence, and continuous regulatory oversight. This article outlines the complete process to register a banking company in Pakistan, including incorporation, SBP licensing, capital requirements, and operational readiness.

Regulatory Framework Governing Banking Companies

Banking operations in Pakistan are primarily regulated under the following legal and regulatory instruments:

• Banking Companies Ordinance, 1962 (BCO)

• State Bank of Pakistan (SBP) Prudential Regulations

• Companies Act, 2017 (for corporate incorporation)

• SBP Licensing Criteria for Commercial Banks and Islamic Banks

• SBP Fit and Proper Criteria (FAPC)

• Foreign Exchange Regulation Act, 1947 (for foreign banks)

• Anti-Money Laundering Act, 2010

• FBR and SECP Regulations (for tax and corporate filings)

The State Bank of Pakistan (SBP) is the sole licensing and supervisory authority for all banking companies in Pakistan.

Types of Banking Licenses in Pakistan

Before starting the registration process, promoters must determine the type of banking company they wish to establish. SBP issues licenses for the following types:

1. Scheduled Commercial Bank (Conventional) – Full-service banks offering retail, corporate, and investment banking
2. Islamic Bank – Offers Shariah-compliant banking under Islamic banking principles
3. Microfinance Bank (MFB) – Offers small-value financial services to low-income individuals (regulated separately)
4. Foreign Bank Branch or Subsidiary – International banks establishing local presence
5. Digital-Only Bank (DigiBank) – Fully digital bank with no physical branches (introduced in 2022 by SBP)

This article focuses on registering commercial and Islamic banks, which require a full SBP license and compliance with banking laws.

Step 1: Prepare a Detailed Feasibility and Business Plan

Before seeking regulatory approvals, the promoters must prepare a comprehensive Business Feasibility Report and Strategic Business Plan, including:

• Proposed bank type: commercial or Islamic

• Justification for establishing the bank (gap analysis)

• Target market and competitive landscape

• Projected balance sheets and income statements for 5 years

• Organizational structure, board, and governance framework

• Risk management, AML/CFT, and IT infrastructure

• Capitalization structure and sources of funds

• Rollout strategy (branches, digital services, staff, technology)

SBP requires the business plan to demonstrate financial soundness, sustainability, and public interest.

Step 2: Form a Public Limited Company with SECP

In parallel with preparing the business plan, promoters must incorporate a Public Limited Company under the Companies Act, 2017, through the Securities and Exchange Commission of Pakistan (SECP).

Key requirements:

• Reserve a name using SECP’s e-Services Portal

• Submit:

  • Form I (Declaration of compliance)

  • Form 21 (Address of registered office)

  • Form 29 (Details of directors and CEO)

  • Memorandum and Articles of Association (with banking as the core objective)

  • CNIC/passport of promoters and directors

  • Paid incorporation fee challan

The company will receive a Certificate of Incorporation, but cannot commence any banking activities until SBP issues a banking license.

Step 3: Apply to SBP for a Banking License

The core part of the process is submitting an application to the State Bank of Pakistan, as per the Licensing Criteria for Establishing a Banking Company in Pakistan.

Documents Required:

• Formal Application Letter

• Feasibility Report and Business Plan (as described in Step 1)

• Incorporation Certificate and MoA/AoA

• Proof of Minimum Paid-Up Capital (as per latest requirement)

• List of Promoters, Shareholders, and Directors with:

  • CNIC/passport copies

  • Source of funds declarations

  • Bank statements

  • Net worth statements

  • Tax compliance history

  • No criminal record affidavits

• Fit and Proper Criteria Declaration for Directors and CEO

• Initial Capital Injection Certificate issued by a scheduled bank in Pakistan

• Draft Organizational Chart and key management appointments

• AML/CFT and Risk Management Policies

• Core Banking System (CBS) Deployment Plan

• Branch Rollout and Digital Strategy

Step 4: Fulfill Minimum Capital Requirements

As of 2025, the SBP requires the following minimum paid-up capital for banking companies:

This capital must be:

• Deposited in a scheduled bank

• Verified by SBP through audit trails

• Free from encumbrance or borrowing

• Declared in promoters’ source of funds documentation

Step 5: Obtain SBP’s No Objection Certificate (NOC)

Upon successful evaluation of the license application, SBP issues a No Objection Certificate (NOC) to proceed with:

• Capital injection

• Infrastructure setup

• Staff recruitment

• Technology deployment

• Branch development

The NOC is not a license, but a conditional permission to complete pre-licensing formalities.

Step 6: Complete Pre-Licensing Requirements

After receiving SBP’s NOC, the company must:

• Deposit full paid-up capital

• Submit bank confirmation to SBP

• Recruit Qualified CEO, CFO, and Compliance Officer

• Finalize Shariah Board (in case of Islamic bank)

• Acquire or lease physical premises for head office

• Implement Core Banking System (CBS)

• Install data security, AML/KYC systems, and IT governance protocols

• Appoint statutory external auditors from SBP-approved panel

Once these requirements are met, submit a readiness report to SBP for final inspection.

Step 7: SBP Inspection and Grant of License

The SBP conducts a pre-licensing inspection to verify:

• Adequacy of infrastructure and IT system

• Staff readiness and internal policies

• AML/CFT protocols

• Risk management framework

• Branch and customer service preparedness

• Compliance with licensing conditions

If the inspection is successful, SBP issues a Banking License under Section 27 of the Banking Companies Ordinance, 1962.

The bank’s name is then added to the Schedule of the SBP, giving it status as a Scheduled Bank eligible to carry out full banking operations.

Step 8: Commence Operations and Open to Public

After receiving the license:

• Publicly announce the launch of banking operations

• Start accepting deposits, opening accounts, and issuing loans

• Establish digital platforms and mobile banking apps

• Implement internal controls, audit systems, and reporting functions

• Begin submitting regulatory returns to SBP and SECP as required

SBP may conduct post-launch inspections within 6–12 months to verify operational compliance.

Step 9: Ongoing Compliance and Supervision

Banking companies must comply with extensive ongoing obligations including:

Non-compliance can lead to fines, license suspension, or intervention under the SBP’s supervisory framework.

Taxation of Banking Companies

Banks in Pakistan are taxed under a special regime:

• Corporate Tax Rate (2025): 39% (flat)

• Minimum Tax and Alternate Corporate Tax (ACT): ACT applies where regular tax falls below 17% of accounting income

• Sales Tax on Services: Applicable on fee-based income at 13–16% (based on province)

• Withholding Tax: On interest, salaries, vendor payments, and foreign transactions

• FED: 16% in ICT (Islamabad) where provincial sales tax does not apply

Banks also act as major withholding agents for FBR and provincial authorities.

Differences Between Commercial, Islamic, and Digital Banks

Common Challenges in Licensing Process

• Raising minimum paid-up capital

• Meeting Fit & Proper Criteria for sponsors

• Developing advanced IT infrastructure

• Satisfying SBP’s risk and compliance standards

• Recruiting qualified management

• Lengthy evaluation process (6–18 months)

To overcome these, most promoters engage legal and regulatory consultants, financial advisors, and technology solution providers.

Opportunities in Pakistan’s Banking Sector

The following areas offer strong business potential:

• Branchless banking and financial inclusion

• Islamic finance and Sukuk investment

• Digital banking and fintech partnerships

• SME lending and agri-finance

• Green banking and ESG-based products

• Diaspora banking through Roshan Digital Accounts

The SBP’s ongoing reforms and digitalization roadmap further support new entrants in the market.

Conclusion

Registering a banking company in Pakistan is a high-investment, high-regulation process that requires rigorous compliance with SBP’s licensing criteria, capital requirements, operational readiness, and corporate governance frameworks. From feasibility assessment and SECP incorporation to SBP licensing, infrastructure deployment, and regulatory inspections, each step is critical for ensuring long-term viability and legal authorization. With a growing economy, increased financial inclusion targets, and digital transformation, Pakistan offers a promising environment for well-capitalized and professionally managed banking institutions.