SBP Stops Banks From Blocking Accounts Without Legal Authority

The State Bank of Pakistan (SBP) has directed all banks not to block, freeze, or restrict customer accounts without clear legal authority, proper approval, and thorough verification, strengthening protections for account holders.

The directive follows instructions from the Islamabad High Court, which had raised concerns over banks freezing customer accounts without sufficient legal grounds. During the proceedings, Justice Arbab Muhammad Tahir directed the central bank to establish a clear internal framework to prevent arbitrary restrictions on bank accounts.

In its new guidelines, the SBP instructed banks that any decision to freeze an account, restrict withdrawals, or impose operational limitations must strictly comply with applicable laws and regulatory requirements.

Banks must also ensure they have the necessary legal authority before taking any action against a customer’s account.

The central bank noted that some banks have imposed precautionary restrictions on customer accounts without adequate verification, resulting in unnecessary inconvenience for account holders. Under the new framework, banks must conduct proper due diligence and complete verification before placing any restrictions on an account.

The SBP has also advised banks to strengthen their internal systems and procedures to ensure compliance with the new guidelines. The central bank said the measures are intended to prevent wrongful account freezes and reinforce public confidence in Pakistan’s banking system.