refer to BSD Circular No. 07 dated April 15, 2009 wherein
the minimum paid-up capital (net of losses) requirement
(MCR) of Rs. 10 billion and Capital Adequacy Ratio (CAR)
of 10% were prescribed.
With a view to encourage the conventional banks to upscale
their Islamic banking operations by establishing Islamic
banking subsidiaries, the initial paid-up capital requirement
has been revised to Rs.6 billion. However, the intending
Islamic banking subsidiary shall be required to raise
its paid-up capital (net of losses) upto Rs.10 billion
within a period of 5 years from the date of commencement
of its operations. In this regard, the bank will have
to submit a capital plan/ projection for meeting the MCR
of Rs.10 billion duly approved by the Board of Directors
of the parent company at the time of applying for banking
license to SBP. Subsequently, these projections will be
endorsed by the subsidiary’s board.
During the transitory period of five (5) years, the Islamic
banking subsidiary shall maintain the following variable
CAR requirement depending on the MCR level held:
per CAR applicable under Basel-III rules
No cash dividend shall be paid till such time the subsidiary
meets the MCR of Rs. 10 billion and prescribed CAR requirements.
In addition to the above, the parent bank shall meet the
minimum applicable CAR, on consolidated as well as on
The above instructions will replace the MCR and CAR requirements
prescribed in Para 3 (vi) of Annexure-II to IBD Circular
No. 2 of April 29, 2004. All other instructions on the
subject shall remain the same.
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