State Bank bars banks from freezing accounts without legal authority

ISLAMABAD: The State Bank of Pakistan (SBP) has instructed banks across the country not to freeze or restrict bank accounts without legal authority and proper approval, issuing fresh guidelines in compliance with an order of the Islamabad High Court (IHC).

According to the central bank’s directive, banks must ensure that any debit block, operational restriction or account freeze is imposed strictly in accordance with the law and only after obtaining authorisation from the competent authority.

The SBP emphasised that no action should be taken against a customer’s bank account unless there is clear legal authority and appropriate verification.

It also directed banks to establish internal mechanisms to ensure full compliance with the new instructions and prevent account holders from suffering unnecessary losses due to inadvertent or precautionary restrictions imposed without lawful authority.

The central bank said the internal controls should ensure that customers are not adversely affected by account blocks or freezes carried out in the absence of legal grounds or proper approval.

The move follows directions issued by the Islamabad High Court, which had barred banks from freezing accounts without legal authority or approval from the relevant competent authority.

Justice Arbab Muhammad Tahir had instructed the State Bank to formulate an internal mechanism and issue guidelines to commercial banks to ensure compliance with the court’s order.

The SBP has also submitted a compliance report to the Islamabad High Court detailing the implementation of the court’s directives.