The State Bank of Pakistan has directed all banks not to block, freeze or restrict customer accounts without clear legal authority, proper approval and thorough verification, in a move aimed at strengthening protections for account holders.

The directive follows instructions from the Islamabad High Court, which had expressed concern over the freezing of customer accounts without sufficient legal grounds. During the proceedings, Justice Arbab Muhammad Tahir had asked the central bank to put in place a clear internal framework to prevent arbitrary restrictions on bank accounts.

In its new guidelines, the State Bank said any decision by banks to freeze an account, restrict withdrawals or impose operational limitations must strictly comply with applicable laws and regulatory requirements.

Banks have also been instructed to ensure that they possess the necessary legal authority before taking any action against a customer’s account.

The central bank noted that some banks had imposed precautionary restrictions on customer accounts without adequate verification, causing unnecessary inconvenience to account holders.

Under the new framework, banks will be required to carry out proper due diligence and complete verification before placing any restriction on an account.

The SBP also advised banks to strengthen their internal systems and procedures to ensure compliance with the new instructions.

According to the central bank, the measures are intended to prevent wrongful freezing of accounts and reinforce public confidence in the banking system.