SBP aligns regulatory framework with Shariah principles under Vision 2028

August 21, 2026 (MLN): The State Bank of Pakistan has introduced Shariah-compliant terminology alternatives across its existing regulations, instructions, and Foreign Exchange Manual, directing banks, microfinance banks, and development finance institutions to interpret conventional banking terms alongside their Islamic finance equivalents.

The central bank informed presidents and chief executives of all banks, MFBs, and DFIs in a circular notice that the move is part of SBP Vision 2028, aimed at aligning the existing regulatory framework with Shariah principles.

Under the changes, terms such as "interest" will be read as "return," "loan" as "loan/financing," "borrower" as "borrower/obligor," and "TFC" as "TFC/Sukuk," among 21 identified terms listed in Annexure-III.

SBP said these insertions will apply not only to the specific regulations and FE Manual chapters listed in Annexure-I and Annexure-II, but also to any other SBP regulations, instructions, and manual chapters not explicitly listed, to the extent they pertain to Islamic banking.

The regulations covered under Annexure-I span a wide range of areas including capital adequacy, consumer financing, agricultural credit, SME and housing finance, and payment systems, while Annexure-II lists 14 chapters of the Foreign Exchange Manual, covering forward exchange facilities, nostro accounts, remittances, exports, imports, and securities, among others.

SBP clarified that the changes are restricted only to the insertions and Shariah alternatives specified in Annexure-III, and that all other contents of the regulations, instructions, and manual will remain unchanged.

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