The State Bank of Pakistan (SBP) has allowed conventional banks to set up Islamic Banking Windows (IBWs) within conventional branches without prior approval, in order to expedite the conversion process toward a Shariah-compliant banking system.
Banks and microfinance banks 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 Islamic Banking Windows may be established for an interim period starting from the date of initiation of an individual branch’s conversion process until its final conversion, the circular stated.
During the branch conversion phase, banks and microfinance banks may offer Shariah-compliant products, including deposits and all types of financing, both funded and non-funded.
Banks and microfinance banks shall specify their plan for establishing IBWs at the time of seeking SBP’s permission for branch conversion under the annual branch conversion plan or through a separate request.
The banking regulator also waived the processing and annual fee for IBWs to be opened for the interim period as part of branch conversion.
The requirement to display the name of the IBW on the signboard of the conventional branch, occupying one-fourth of the board, has been relaxed to support banks and microfinance banks in opening IBWs. However, banks and microfinance banks shall ensure appropriate alternative arrangements at the branch entrance and display prominent signage within the branch premises indicating the availability of Islamic banking products and services through these windows.
To allow banks and microfinance banks to leverage technology for the effective segregation of conventional and Islamic funds, the requirement for real-time connectivity of IBWs with the nearest Islamic banking branch or hub has been revised to mandate connectivity with the controlling branch, hub, or centralized data center.
The existing instructions pertaining to IBWs of conventional banks shall also apply to microfinance banks for offering Islamic products and services through IBWs, the circular stated.
According to the State Bank of Pakistan, more than 7,508 branches and 347 Islamic Banking Windows are being operated by various banks in Pakistan.
