SBP Restricts Arbitrary Blocking of Customer Bank Accounts

The Islamabad High Court (IHC) has been informed that the State Bank of Pakistan (SBP) has directed all scheduled banks to refrain from blocking customer bank accounts unless such action is supported by lawful authority, approved by the competent authority, and undertaken following proper verification and due process.

The submission was made before the single-member bench of Justice Arbab Muhammad Tahir through a compliance report, confirming that banking institutions nationwide have been instructed to ensure that customer accounts are not frozen or restricted without a valid legal basis and the requisite administrative authorisation.

The compliance report was filed pursuant to directions issued by the Court during an earlier hearing, in which the SBP was instructed to establish an internal oversight mechanism and formulate comprehensive operational guidelines aimed at preventing arbitrary or unjustified restrictions on customers’ bank accounts.

In compliance with the Court’s directions, the State Bank of Pakistan issued revised regulatory instructions requiring all banks to strengthen internal controls and ensure that account holders are not subjected to financial loss, operational disruption, or unnecessary inconvenience resulting from precautionary, inadvertent, or arbitrary account restrictions lacking sufficient legal justification.

The central bank further clarified that any restriction, suspension, or blocking of a customer’s bank account may only be implemented after all applicable legal requirements have been fulfilled and the action has received prior approval from the competent authority in accordance with the relevant regulatory framework.

The revised directives are intended to reinforce due process, enhance customer protection, and promote greater consistency and legal compliance in the banking sector’s handling of account restrictions.