Banking Companies Ordinance, 1962

The Banking Companies Ordinance, 1962 is the core law regulating how commercial banks operate in Pakistan, administered mainly by the State Bank of Pakistan (SBP). Its preamble describes it as consolidating and amending the law relating to banking companies, and Section 1 says it applies across the whole of Pakistan.

Part I sets out definitions (Section 5) and basic ground rules, including that the Ordinance overrides a bank's own memorandum and articles (Section 6). Part II governs the actual business of banking: what activities a bank may engage in (Section 7), a ban on trading in goods (Section 9), minimum paid-up capital and reserve requirements (Section 13), rules on share capital and voting rights (Section 14), restrictions on loans and advances (Section 24), reserve fund and cash reserve requirements (Sections 21-22), restrictions on dividends (Section 19) and on having common directors across competing banks (Section 20), and the licensing of banks (Section 27).

A later-added Part IIA (Sections 39A-39L) sets out a separate framework for Islamic banking, covering its scope, definitions, permitted business, the relationship between an Islamic bank and its customers, Shariah governance, and priority of payments to depositors.

Parts IIB and IIC give the State Bank supervisory and crisis powers: routine inspection (Section 40), power to issue directions (Section 41), power to remove directors or senior managers (Section 41A), power to supersede a bank's board (Section 41B), and a whole "resolution" regime for failing banks (Sections 42A-42I) covering resolution planning, triggers, powers, and even setting up a "bridge bank" or temporary public funding to stabilize a troubled bank.

Part III and Part IV deal with suspending business and winding up a bank through the High Court, including special expedited procedures and priority repayment to depositors (Section 58). Part IV-A creates the Banking Mohtasib (banking ombudsman) for handling customer complaints (Sections 82A-82G). Part V sets out penalties (Section 83); the Ordinance's Fourth Schedule lists specific penalty ranges tied to particular sections, for example fines of up to Rs 200,000 for a Section 25(3) contravention, up to Rs 5,000,000 for Section 83(1), and up to Rs 100,000,000 for Section 83(1A).

This is a 1962 law that has been amended repeatedly over more than six decades - its footnotes show numerous "Subs. by" and "Ins. by" amendments, and even the Fourth Schedule's penalty figures were last updated by Act No. XXIX of 2024. Given how often it has changed, anyone relying on a specific capital requirement, penalty amount, or procedural detail should confirm it against the current official text.