BANKING COMPANIES ORDINANCE, 1962
(LVII of 1962)
AND
THE BANKING COMPANIES RULES 1963
MADE UNDER
THE ORDINANCE
(As amended up to 31st May , 1997)

THE BANKING COMPANIES ORDINANCE, 1962
(LVII of 1962)
CONTENTS
Part - I
Preliminary
Sections: Pages
1. Short title, extent and commencement 1
2. Application of other laws not barred 2
3. Limited application of Ordinance to Co-operative Banks (Omitted) 2
3A. Limited application of Ordinance to certain financial institutions 2
4. Power to suspend operation of Ordinance 2
5. Definitions:
(a) “approved securities” 3
(b) “banking” 3
(c) “banking company” 4
(d) “branch” or “branch office” 4
(dd) “creditor” 4
(e) “company” 4
(ee) “debtor” 4
(f) “demand liabilities” 4
(ff) “family members” 4
(g) “gold” 5
(gg) “loans, advances and credit” 5
(h) “managing director” 5
(i) “prescribed” 5
(j) “private company” 5
(k) “registrar” 5
(l) “scheduled bank” 5
(m) “secured loans or advance” 5
(mm) “securities” 5
(n) “State Bank” 5
(o) “substantial interest” 6

Sections: Pages
6. Ordinance to override memorandum, articles, etc 6
Part –II
Business of Banking Companies
7. Forms of business in which banking companies may engage. 7
8. Use of the word ”Bank” or any of its derivatives. 10
9. Prohibition of trading. 10
10. Disposal of non-banking assets. 11
11. Prohibition of employment of managing agents and
restrictions on certain forms of employment. 11
12. Restric tions on removal of records and documents. 13
13. Requirement as to minimum paid-up capital and reserve. 13
14. Regulation of paid-up capital, subscribed capital and
authorised capital and voting rights of shareholders. 16
15. Election of new directors. 17
15A. Appointment of director by State Bank. 17
15B. Restriction on term of office of directors. 17
15C. Vacation of Office. 18
16. Restriction on commission, brokerage discount, etc.,
on sale of shares. 18
17. Prohibition of charge on un-paid capital. 18
18. Prohibition of floating charge on assets. 18
19. Restrictions as to payment of dividend. 19
20. Prohibition of common directors. 19
21. Reserve Fund. 20
22. Cash Reserve. 21
23. Restriction on the nature of subsidiary companies. 21
24. Restrictions on loans and advances. 22
25. Power of State Bank to control advances by banking companies. 23
25A. Power of State Bank to collect and furnish credit information. 24
25AA. Preparation of special reports. 26
25B. Recovery of certain dues of banking companies as arrears
of land revenue. 26

Sections: Pages
26. Power of Federal Government prohibit acceptance
of deposits by banking companies incorporated outside Pakistan. 26
26A. Deposits. 27
27. Licensing of banking companies. 28
27A. Prohibition of advertising for deposits and collection. 29
27B. Disruptive union activities. 30
28. Restrictions on opening of new, and transfer of existing
place of business. 30
29. Maintenance of liquid assets. 31
30. Assets in Pakistan. 32
31. Unclaimed deposits and articles of value. 32-33
32. Half-yearly returns and power to call for other returns
and information. 37
33. Power to publish inf ormation. 38
33A. Fidelity and secrecy. 38
33B. Guidelines by the State Bank. 39
34. Accounts and balance-sheet. 39
35. Audit. 40
36. Submission of returns. 41
37. Copies of Balance Sheets, and Accounts to be sent to Registrar. 41
38. Display of audited balance sheet by banking companies
Incorporated outside Pakistan. 41
39. Accounting provisions of this Ordinance not retrospective. 41
40. Inspection. 42
40A. Responsibility of State Bank. 43
41. Power of the State Bank to give directions. 42
41A. Power of the State Bank to remove directors or other
managerial persons from office. 44
41B. Power of the State Bank to supersede Board of Directors
of a banking company. 45
41C. Limitations. 46
41D. Prosecution of directors, Chief Executives or other Officers. 46
42. Further powers and functions of the State Bank. 46
43. Certain provisions of the Ordinance not to apply to
certain banking companies. 48

Sections: Pages
Part –IIA
Transaction of Banking Business Illegally
By Companies, etc.
43A. Power to call for certain information, etc. 48
43AA. Special provisions. 49
43B. Power to make declaration. 51
43C. Consequences of a declaration under section 43B. 51
43D. Deposit of cash and preservation of assets, etc. 52
43E. Statement of assets and liabilities to be submitted to State Bank. 53
43F. Consequential provisions for winding up, etc. 54
Part –III
Suspension of Business and winding up of
Banking Companies
44. High Court defined. 55
45. Restriction on stay order. 55
46. Restriction on compromise or arrangement between
banking companies and creditors. 56
47. Power of State Bank to apply to Federal Government
for suspension of business by a banking company and to
prepare scheme of reconstruction or amalgamation. 56
48. Procedure for amalgamation of banking companies. 63
49. Winding up by High Court. 64
50. Court Liquidator. 66
51. State Bank to be Official Liquidator. 66
52. Application of Companies Act to Liquidators. 67
53. Stay of Proceedings. 67
54. Preliminary report by official liquidator. 67
55. Notice to preferential claimants and secured and
unsecured creditors. 68
56. Power to dispense with meetings of creditors, etc. 68
57. Booked depositors’ credits to be deemed proved. 69

Sections: Pages
58. Preferential payments to depositors. 69
59. Restriction on voluntary winding up. 71
Part –IV
Special Provisions for Speedy Disposal of Winding up
Proceedings
60. Part IV to override other Laws. 72
61. Power of High Court to decide all claims in respect of
banking companies. 72
62. Transfer of pending proceedings. 72
63. Settlement of list of debtors. 73
64. Special provisions to make calls on contributories. 75
65. Documents of banking company to be evidence. 75
66. Public examination of directors and auditors. 75
67. Special provisions for assessing damages against delinquent
directors, etc. 77
68. Duty of directors and officers of banking company to
assist in the realisation of property. 78
69. Special provisions for punishing offences in relation to
banking companies being wound up. 78
70. Public examination of directors and auditors, etc.,
in respect of a banking company under scheme of arrangement. 79
71. Special provisions for banking companies working under
scheme of arrangement at the commencement of the Ordinance. 81
72. Appeals. 82
73. Special period of limitations. 82
74. State Bank to tender advice in winding up proceedings. 83
75. Power to inspect. 83
76. Power to call for returns and information. 83
77. District Magistrate to assist. official liquidator in taking
charge of property of banking company being wound up. 84
78. Enforcement of orders and decisions of High Court. 84
79. Power of High Court to make rules. 84
80. References to directors, etc., shall be construed as including
references to past directors, etc. 85

Sections: Pages
81. Part II not to apply to banking companies being wound up. 85
82. Validation of certain proceedings. 85
Part--IVA
Banking Mohtasib
82A. Appointment of Mohtasib. 85
82B. Terms and conditions of the Banking Mohtasib. 86
82C. Reference to Banking Mohtasib by Court. 88
82D. Procedure for making complaints. 88
82E. Recommendations for implementation 89
82F. Power to call for information. 90
82G. Report of Banking Mohtasib. 90
Part –V
Miscellaneous
83. Penalties. 91
83A. Dishonest removal of pledged goods. 94
84. Cognizance of offences, etc. 94
85. Application of fines. 95
86. Special provisions for private banking companies. 95
87. Restriction on acceptance of deposits withdrawable
by cheques. 95
88. Change of name by a banking company. 95
89. Alteration of memorandum of a banking company. 95
90. Certain claims for compensation barred. 95
91. Application of certain provisions to banking company
incorporated by special enactments of the Federal Legislature. 96
91A. Application of other laws barred. 96
91B. Removal of difficulties. 96
92. Power of Federal Government to make rules. 96
93. Power to exempt in certain cases. 97

Sections: Pages
93A. Exemption of Officers, etc., from liability. 97
93B. Exemption from requirement of licence. 97
93C. Exchange of information. 98
93D. Continuance of charge and priority. 98
94. Protection of action taken in good faith. 98
95. Repeals. (Omitted). 99
The First Schedule (Omitted) . 100
The Second Schedule-FORM A-Form of Balance Sheet. 101 - 103
Notes. 104
Form B—Form of Profit & Loss Account. 105
The Third Schedule-List of Debtors. 106
Declaration of approved securities-Notifications. 107
The Banking Companies Rules, 1963
Rules:
1. Short title, extent and commencement. 107
2. Interpretation. 107
3. Submissions of returns. 108
4. List of officers . 109
5. Deposits. 109
6. Withdrawals of deposits. 111
7. Changes in deposits. 111
8. Maturing of security deposits. 111
9. Interest on deposits. 111
10. Licensing of banking companies. 111
11. Opening of new places of business. 112
12. List of Offices. 112
13. Publication of approved currencies and securities. 112
14. Manner of publication of accounts and balance sheet. 113
15. List of debtors. 113
16. Power to exempt in certain cases. 113

Sections: Pages
17. Submissions of returns in various forms. 113
Form I- Certificate of Deposits by the State Bank. 114
Form II- Statement of cash reserve. 115
Form III- Statement of un-secured loans and advances. 116 - 117
Form IV- Form of application for a licence to commence
Banking business by a company incorporated
in Pakistan and desiring to commence banking
business. 118-120
Form V- Form of application for a licence to carry on banking
business by a company incorporated in Pakistan and in
existence on the commencement of the Ordinance. 121 -122
Form VI- Form of a pplication for a licence to commence/carry
on banking business in Pakistan by a banking company
incorporated outside Pakistan. 123-1125
Form VII- Form of application for permission to open a new
place of business or change the location of an existing
place of business. 126-130
Table A- Statement showing number of existing offices making
losses. 131
Table B- Statement showing number of offices in existence for
less than three years on the date of application. 132
Form VIII- Statement of offices in Pakistan. 133
Form IX- Statement of demand and time liabilities. 134-135
Form X- Statement of Assets and Liabilities – Monthly. 135-137
Form XI- Return of unclaimed deposits. 138
Form XII- Statement of Assets and Liabilities in Pakistan as at
the close of business on 30th June/31st December, 139 -140
Form XIII- List of debtors of a banking company ordered to
be wound up. 141

THE BANKING COMPANIES ORDINANCE, 1962
ORDINANCE No. LVII OF 1962
{7th June, 1962}
An ordinance to consolidate and amend the law relating to banking
companies.
Whereas it is expedient to consolidate and amend the law relating to banking
companies;
Now, therefore, in pursuance of the Proclamation of the seventh day of October,
1958, and in exercise of all powers enabling him in that behalf, the President is pleased to
make and promulgate the following Ordinance: –
Part I
PRELIMINARY
1. Short title, extent and commencement.— (1) This Ordinance may be called
the Banking Companies Ordinance, 1962.
(2) It extends to the whole of Pakistan.*
(3) It shall come into force at once.
_______________________________________________________________________
*The territories of Pakistan have been defined in Article 1, clause (2) of the Constitution of the Islamic Republic of
Pakistan and extended to A.J. & K (Extension of Land) Act, 1980.
The territories of Pakistan shall comprise:-
(a) The Provinces of Baluchistan, the North West Frontier, the Punbjab and Sind;
(b) The Islamabad Capital Territory, hereinafter referred to as the Federal Capital;
(c) The Federally Administered Tribal Areas; and
(d) Such states and territories as are or may be included in Pakistan, whether by accession or otherwise.
Ref: The Constitution (First Amendment) Act, 1974 (Act No. XXXIII of 1974). The Gazette of Pakistan, Extraordinary Part 1,
May 8, 1974.
The Ordinance and the rules, notification and orders made thereunder, as in force in N.W.F.P. before the 15th July, 1975, have
been applied to the Districts of Chitral, Dir., Swat and Malakand Protected Areas of the N.W.F.P. by Regulation No. III of 1975, Section 2
and the Schedule.
The Ordinance and the rules, notifications and orders made thereunder, have been applied to the whole of the Federally
Administered Tribal Areas or to the parts of those Areas to which they do not already apply, by Regulation No. l of 1975, Section 2 and the
Schedule.

2. Application of other laws not barred.- The provisions of this Ordinance shall be in
addition to, and not, save as hereinafter expressly provided, in derogation of, the Companies
Act, 1913 (VII of 1913), and any other law for the time being in force.
3A.@ Limited application of Ordinance to certain financial institutions._(1) The
provisions of sections 6,25A, 25AA, 29,31,32,33,40, 41,41A, 41B, 41C, 41D, 42, 83, 84, and
94 of this Ordinance shall, with such modifications as the State Bank may determined from
time to time in relation to activities which have implications for the monetary or credit
policies of the State Bank, apply to the Investment Corporation of Pakistan, the National
Investment Unit Trust, the Pakistan Industrial Credit and Investment Corporation, the House
Building Finance Corporation, the National Development Finance Corporation, the Bankers
Equity Limited, the Pak-Libya Holding Company Limited, the Pakistan Kuwait Investment
Company Limited, the Saudi-Pak Industrial and Agricultural Investment Company Limited,
the Small Business Finance Corporation, the Regional Development Finance Corporation,
Investment Finance Companies, Venture Capital Companies, Housing Finance Companies,
Corporations or Institutions which carry on one or more of the businesses enumerated in
section 7 of this Ordinance, save and except for leasing companies and modaraba companies,
as the Federal Government may from time to time, by notification in the Official Gazette,
specify in this behalf.
(2) All notifications issued by the Federal Government which are inconsistent
with the provisions of sub-section (1) including such notifications in respect of the National
Development Leasing Corporations, Leasing Companies and Modaraba Companies shall
stand rescinded with immediate effect.
4. Power to suspend operation of Ordinance .— (1) the * Federal Government, if
on a representation made by the State Bank in this behalf is satisfied that it is expedient so to
do, may by notification in the Official Gazette suspend for such period, not exceeding sixty
days, as may be specified in the notification, the operation of all or any of the provisions of
this Ordinance, either generally or in relation to any specified banking company.
== “Omitted” vide Sec, 48 of the Establishment of the Federal Bank for Co-operatives and Regulation of Co-operati ve Banking Act,
1977 (Act No. IX of 1977). The Gazette of Pakistan, Extra, Part I, Dated 9 -1- 1977 Page 108 (Effective date of amendment is 9-
10-1976).
@ Substituted vide Ordinance No. IX of 1977 dated 21 -1-1997.
* For the words “Central Government” wherever occurring the words “Federal Government” substituted vide Banking
Companies (Amendment) Act, 1972, (Act No. XXX of 1972). The Gazette of Pakistan, Extra, Oct. 16, 1972 Part 1, Page.
252.
= The Banking Companies (Amendment) Act, 1997 dated 31-5-1997.

(2) The Federal Government may, notification in the official Gazette, extend from
time to time, the period of any suspension under sub-section (1) for such period or periods,
not exceeding sixty days at any one time, as it thinks fit so however that the total period does
not exceed one year.
(3) A copy of any notification issued under this section shall be laid on the table
of the Federal Legislature—
(i) if it is in session, within three days of the issue of the notification;
and
(ii) if it is not in session, as soon as it meets after the issue of the
notification.
5. Definitions.— In this Ordinance, unless there is anything repugnant in
the subject or context,—
(a) “ approved securities” means the shares of the Bankers Equity
Limited or securities in which a trustee may invest money
under clause (a), clause (b), clause (bb), clause (c) or clause (d) of
section 20 of the Trust Act, 1882 (II of 1882), and for the purpose
of—
(i) sub-section (3) of section 13, includes such other securities as
the Federal Government may, by notification in the official
Gazette, declare to be approved securities for the purpose of
that subsection; and
(ii) sub-section (1) of section 29, includes such types of Pakistan
rupee obligations of the Federal Government or a Provincial
Government or of a Corporation wholly owned or controlled,
directly or indirectly, by the Federal Government or a
Provincial Government and guaranteed by the Federal
Government as the Federal Government may, by notification in
the official gazette, declare, to the extent determined from time
to time, to be approved securities for the purpose of that subsection;*
(b) “banking means the accepting, for the purpose of lending or
investment, of deposits of money from the public, repayable on
demand or otherwise, and withdrawable by cheque, draft, order or
otherwise;
*Clause (a) of section 5 substituted vide the Banking Companies (Third Amendment) Ordinance, 1980 (LVIII of 1980) Gazette
of Pakistan Extra, Part I dated 24 -12-1980. Pages 548 and 549. (Effective date is 24-12-1980).

(c) “banking company” means any company which transacts the business of
banking in Pakistan;
Explanation.— Any company which is engaged in the manufacture of goods or carries
on any trade and which accepts deposits of money from the merely for the
purpose of financing its business as such manufacturer or trader shall not be
deemed to transact the business of banking within the meaning of this clause;
(d) “branch” or “branch office”, in relation to a banking company, means any
branch or branch office, whether called a pay office or sub-pay office or by
any other name, at which deposits are received, cheques cashed or moneys
lent, and for the purposes of section 40 includes any place of business where
any other form of business referred to in sub-section (1) of section 7 is
transacted;
(dd) “creditor” includes persons from whom deposits have been received on the
basis of participation in profit and loss and a banking company or financial
institution from which financial accommodation or facility has been received
on the basis of participation in profit and loss, mark-up in price, hire-purchase,
lease, or otherwise;**
(e) “company” means any company which may be wound up under the
Companies Act, 1913 (VII of 1913);
(ee) “debtor” includes a person to whom, or a banking company or financial
institution to which, finance as defined in the Banking Tribunals Ordinance
1984, has been provided; =
(f) “demand liabilities” means liabilities which must be met on demand, and
“time liabilities” means liabilities which are not demand liabilities;
(ff) “family members” in relation to a person means his spouse, dependent lineal
ascendants and descendants and dependent brothers and sisters;*
________________________________________________________________________________________________________________
**— In section 5 new clauses (dd) and (ee) inserted, vide the Banking Companies
(Third Amendment) Ordinance, 1980 (LVIII of 1980). Gazette of Pakistan Extra, Part I dated 24-12-1980. Pages 548 and 549 (Effective
date is 24-12-1980)
= Original clause (ee) substituted vice the Banking and Financial Services (Amendment of Laws) Ordinance, 1984 (Ordinance
No. LVII of 1984) Gazette of Pakistan, Extra, Part I, dated December 31, 1984 Pages 681 to 695.
* Inserted Clause (ff) vide Banking Companies (Amendment) Act, 1972 (Act No. XXX of 1972). The Gazette of Pakistan, Extra,
Part I, Oct. 16, 1972 page 237.
(g) “gold” includes gold in the form of coin, whether legal tender or not, or in
the form of bullion or ingot, whether refined or not;
(gg) “ loans, advances, and credit” includes “finance” as defined in the Banking
Tribunals Ordinance, 1984;*
(h) “managing director”, in relation to a banking company, means a director who,
by virtue of an agreement with the banking company or of a resolution passed
by the banking company in general meeting or by its Board of Directors or, by
virtue of its memorandum or articles of association, is entrusted with the
management of the whole, or substantially the whole of the affairs of the
company, and includes a director occupying the position of a managing
director, by whatever name called;
(i) “prescribed” means prescribed by rules made under this Ordinance;
(j) “private company” has the same meaning as in the Companies Act, 1913 (VII
of 1913);
(k) “ registrar” has the same meaning as in the Companies Act, 1913 (VII of
1913);
(l) “scheduled bank” has the same meaning as in the State Bank of Pakistan Act,
1956 (XXXIII of 1956);
(m) “secured loan or advance” means a loan or advance made on the security of
assets the market value of which is not at any time less than the amount of
such loan or advance, and “unsecured loan or advance” means a loan or
advance not so secured, or that part of it which is not so secured;
(mm) “securities” includes securities as defined in the Capital Issues (Continuance
of Control) Act, 1947 (XXIX of 1947), =
(n) “State Bank” means the State Bank of Pakistan;**
________________________________________________________________________________________________________________
* Original clause (gg) substituted vide the Banking and Financial Services (Amendment of Laws) Ordinance, 1984 (Ordinance
No. LVII of 1984) Gazette of Pakistan, Extra, Part I, dated December 31, 1984 Pages 681 to 695.
** For the full stop at the end of clause (n) a semi colon substituted and thereafter a new clause (o) added vide Banking
Companies (Amendment) Act, 1972(Act No. XXX of 1972). The Gazette of Pakistan, Extra, Oct. 16, 1972 Part 1 Page 237. (Effective date
of amendments is 13-10-1972.)
15
(o) “substantial interest” in an undertaking shall be deemed to be possessed by a
person if he or any of his family members is the owner, director or officer of
or has control over the undertaking or if he or any of his family members
holds shares carrying not less than twenty per cent of the voting power in such
undertaking;
Explanation.— For the purpose of this clause,—
(i) “control” in relation to an undertaking, means the power to exercise a
controlling influence over the management or the policies of the undertaking,
and, in relation to shares, means the power to exercise a controlling influence
over the voting power attached to such shares;
(ii) “person” includes a Hindu undivided family, a firm, an association or body of
individuals, whether incorporated or not, a company and every other juridical
person; and
(iii) “undertaking” means any concern, institution, establishment or enterprise
engaged in the production, supply or distribution of goods, or in the provision
or control of any services relating to the provision of board, lodging, transport,
entertainment or amusement, or of facilities in connection with the supply of
electrical or other energy, or to the purveying of news, insurance or
investment.*
6. Ordinance to override memorandum, articles, etc.— Save as other-wise
expressly provided in this Ordinance,
(a) the provisions of this Ordinance shall have effect notwithstanding
anything to the contrary contained in the memorandum or articles of a
banking company, or in any agreement executed by it, or in any
resolution passed by the banking company in general meeting or by its
Board of Directors, whether the same be registered, executed or
passed, as the case may be, before or after the commencement of this
Ordinance; and
(b) any provision contained in the memorandum, articles, agreement or
resolution aforesaid shall, to the extent to which it is repugnant to the
provisions of this Ordinance, become or be void, as the case may be,
* Added Clause (o) vide Banking Companies (Amendment) Act, 1972. (Act No. XXX of 1972). The Gazette of Pakistan, Extra, Oct. 16,
1972 Part I Page. 237, (effective date of amendment is 13-10-1972).

Part II
BUSINESS OF BANKING COMPANIES
7. Form of business in which banking companies may engage.—
(1) In addition to the business of banking, a banking company may engage in any one or
more of the following forms of business, namely:-
(a) The borrowing, raising, or taking up of money; the lending
or advancing of money either upon or without security; the
drawing, making, accepting, discounting, buying, selling,
collecting and dealing in bills of exchange, hundies, promissory
notes, coupons, drafts, bills of lading, railway receipts,
warrants, debentures, certificates, scrips (participation term
certificates, term finance certificates, musharika certificates,
modaraba certificates and such other instruments as may be
approved by the State Bank)*and other instruments, and
securities whether transferable or negotiable or not; the
granting and issuing of letters of credit, traveller’s cheques
and circular notes; the buying, selling and dealing in bullion
spices the buying and selling of foreign exchange including
foreign bank notes; the acquiring, holding, issuing on
commission, underwriting and dealing in stock, funds, shares,
debentures, debenture stock, bonds, obligations, securities
(participation term certificates, term finance certificates,
musharika certificates, modaraba certificates and such other
instruments as may be approved by the State Bank)* and
investment of all kinds; the purchasing and selling of bonds,
scrips or other forms of securities (participation terms
certificates, term finance certificates, musharika certificates,
modaraba certificates and such other instruments as may be
approved by the State Banks)* on behalf of constituents or
others, the negotiating of loans and advances; the receiving of
all kinds of bonds, scrips of valuables on deposit or for safe
custody or otherwise; “the providing of safe deposit vaults”: the
collecting and transmitting of money and securities;
(aa) the providing of finance as defined in the Banking Tribunals
Ordinance, 1984;**
*Inserted vide the Banking and Financial Services (Amendment of Laws) Ordinance 1984 (Ordinance No: LVII of 1984) Gazette
of Pakistan, Extra, Part I dated December 31, 1984 pages 681 to 695.
** New clause (aa) Inserted vide the Banking and Financial Services (Amendment of Laws) Ordinance, 1984 (Ordinance No.
LVII of 1984) Gazette of Pakistan, Extra, Part I, dat ed the December 31, 1984, Pages 681 to 695.

(b) acting agents for any Government or local authority or any
other person or persons; the carrying on of agency business of
any description including the clearing and forwarding of goods,
giving of receipts and discharges and otherwise acting as an
attorney on behalf of customers, but excluding the business of a
managing agent or treasurer of a company;
(bb) acting as “modaraba company” under the provision of the
Modaraba Companies and Modaraba (Floatation and Control)
Ordinance, 1980 (XXXI of 1980); 1
(c) contracting for public and private loans and negotiation and
issuing the same;
(d) the effecting, insuring, guaranteeing, underwriting,
participating in managing and carrying out of any issue public
or private, Government, municipal or other loans or of shares,
stock debentures, (debenture stock or other securities)* of any
company, corporation or association and the lending of money
for the purpose of any such issue;
(e) carrying on and transacting every kind of guarantee and
indemnity business;
(ee) purchase or acquisition in the normal course of its banking
business of any property, including commodities, patents,
designs, trade-marks and copyrights with or without buy-back
arrangements by the seller, or for sale in the form of hirepurchase
or on deferred payment basis with mark-up or for
leaning or licensing or for rush-sharing or for any other mode
of financing;**
(f) managing, selling and realising any property which may come
into the possession of the company in satisfaction or part
satisfaction of any of its claims;
(g) acquiring and holding and generally dealing with any property
or any right, title or interest in any such property which may
form security or part of the security for any loans or advances
or which may be connected with any such security;
1. Clause (bb) inserted vide the Banking Companies (Third Amendment) Ordinance, 1980 (LVIII of 1980). The Gazette of
Pakistan, Extra, Part I, dated 24-12-1980, Page 549 (Effective date is 24-12-1980).
*Substituted for the words “or debenture stock” vide the Banking Companies (Third Amendment) Ordinance, 1980 (LVIII of
1980) the Gazette of Pakistan, Extra, Part I date 24-12-1980. Page 549.
**Original clause (ee) substituted vide the Banking and Financial service s (Amendment of Laws) Ordinance, 1984 (Ordinance
No. LVII of 1984) Gazette of Pakistan, Extra, Part I dated December 31, 1984 Page 681 to 695.

for any loans or advances or which may be connected with any
such security;
(h) undertaking and executing trusts;
(i) undertaking the administration of estates as executor, trustee or
otherwise;
(j) establishing and supporting or aiding in the establishment and
support of associations, institutions, funds, trusts and
conveniences calculated to benefit employees or ex-employees
of the company or the dependents or connections of such
persons; granting pensions and allowances and making
payments towards insurance; subscribing to or guaranteeing
moneys for charitable or benevolent objects or for any
exhibition or for any public, general or useful object;
(k) the acquisition, construction, maintenance and alteration of any
building or works necessary or convenient for the purpose of
the company;
(l) selling, improving, managing, developing, exchanging, leasing,
mortgaging, disposing of or turning into account or otherwise
dealing with all or any part of the property and rights of the
company;
(m) acquiring and undertaking the whole or any part of the business
of any person or company, when such business is of a nature
enumerated or described in this sub-section;
(n) doing all such other things as are incidental or conducive to the
promotion or advancement of the business of the company;
(o) any other form of business which the Federal Government
may, by notification in the official Gazette, specify as a form of
business in which it is lawful for a banking company to engage.
(2) No banking company shall engage in any form of business other than
those referred to in sub-section (1).
8. Use of the word “Bank” or any of its derivatives - @@ Every company
carrying on the business of banking in Pakistan shall use the word “bank”, or any of its
derivatives as part of its name and no company other than a banking company shall use in its
name any word calculated to indicate that it is a banking company:
Provided that nothing in this section shall apply to-
(a) subsidiary of a banking company formed for one or more of the
purpose mentioned in sub-section (1) of Section 23 whose name
indicates that it is a subsidiary of that banking company; and
(b) any association of banks formed for the protection of their mutual
interests and registered under section 42 of the Companies Ordinance
1984(XLVII of 1984):#
*Provided further that the State Bank may, subject to such conditions, if any, as it
may deem fit, by notification in the Official Gazette, authorise a company not being a
banking company to use in its name the word ‘bank’ or any of its derivatives.
9. Prohibition of trading.—Except as authorised under section 7, no banking
company shall directly or indirectly deal in the buying or selling or bartering of goods or
engage in any trade or buy, sell or barter goods for others, otherwise than in connection with
bills of exchange received for collection or negotiation.
Explanation._ For the purpose of this section, “goods” means every kind of movable
property, other than actionable claims, stocks, shares, money, bullion and species, and all
instruments referred to in clause (a) of sub-section (1) of Section 7.@
@@ In section 8, for the words, After the expiry of two years from the commencement of this Ordinance “every company” the words
“Every company” substituted vide Federal Laws (Revision and Declaration) Ordinance, 1981 (Ordinance No. XXVII of 1981)
Gazette of Pakistan, Extra, Part I, July 8, 1981 Pages 345 – 475.
#. The words ’26 of Companies Act 1913’ was substituted by ‘42 of Companies Ordinance 1984’ and the words ‘Federal Govt. In
the proviso was substituted by the words ‘State Bank’ vide Ordinance No. IX of 1997 dated 21-1-1997.
* In section 8 for the full stop at the end of the proviso a colon has been substituted and thereafter a new proviso has been added
vide Banking Companies (Amendment) Act, 1975 (Act No. LXV of 1975). The Gazette of Pakistan, Extra, Part I, Sept. 1, 1975,
Page 491—(Effective date of amendment is 29-8-1975).
@ Section 9 substituted vide the Banking Companies (Third Amendment) Ordinance, 1980 (Ord. LVIII of 1980). The Gazette of
Pakistan Extra, Part I dated 24-12-1980, Page 549 – 550.
= In 2nd proviso the words “wholly or partly owned or controlled by it or by the State Bank” occurring after the word “a company”
and before “not being” omitted vide No. F. 2(2)89-Pub, Ord. III of 1989. The Gazette of Pakistan, Extra Part-I, dated 23-1-1989,
Page –27 to 33.
£ The Banking Companies (Amendment ) Act, 1997 dated 31-5-1997.

10. Disposal of non-banking assets.—Notwithstanding anything
contained in section 7, no banking company shall hold (except as may be permitted by
the State Bank from time to time or as is required)> for any period exceeding seven
years from the acquisition thereof or from the commencement of this Ordinance,
whichever is later or any extension of such period as in this section provided, and
such property shall be disposed of within such period or extended period, as the case
may be:
Provided that the banking company may, within the period of seven years as
aforesaid, deal or trade in any such property for the purpose of facilitating the disposal
thereof:
Provided further that the State Bank may in any particular case extend the
aforesaid period of seven years by such period not exceeding five years where it is
satisfied that such extension would be in the interests of the depositors of the banking
company.
Explanation.—For the purpose of this section property, a substantial portion
of which is in use by banking company for its own genuine requirements shall be
deemed to be property for its own use.
11. Prohibition of employment of managing agents and restrictions on
certain forms of employment.—(1) No banking company—
(a) shall employ or be managed by a managing agent; or
(b) shall employ or continue the employment of any person—
(i) who is, or at any time has been, adjudicated insolvent or has
suspended payment, or has compounded with his creditors, or
who is, or has been, convicted by a criminal court of an offence
involving moral turpitude; and
(ii) whose remuneration or part of whose remuneration takes the
form of commission or a share in the profits of the company:
Provided that nothing contained in sub-clause (ii) shall apply to
the payment by a banking company of—
________________________________________________________________________________________________________________
= Substituted for the words and comma occurring between the word “shall hold” and the words “for any period” in Section 10
vide the Banking and Financial Services (Amendment of Laws) Ordinance, 1984 (Ordinance No. LVII of 1984) Gazette of Pakistan, Extra,
Part I dated December 31, 1984 Pages 681 to 695.
21
(a) any bonus in pursuance of a settlement or award arrived
at or made under any law relating to industrial disputes
or in accordance with any scheme framed by such
banking company or in accordance with the usualpractice
prevailing in banking business; or
(b) any commission to any broker (including guarantee
broker), cashier-contractor, clearing and forwarding
agent, auctioneer or any other person, employed by the
banking company under a contract otherwise than as a
regular member of the staff of the company;
(c) shall be managed by any person—
(i) who is a director of any other company not
being a subsidiary company of the banking
company or a company registered under section
26 of the Companies Act, 1913 (VII of 1913),
except with the previous approval of the State
Bank; or
(ii) who is engaged in any other business or
vocation; or
(iii) who has a contract with the company for its
management for a period exceeding five years at
any one time:
Provide that any contract with the company for its management may be renewed or
extended for a further period not exceeding five years at a time if and so often as the directors
so decide:
Provided further that nothing in this clause shall apply to a director, other than the
managing director, of a banking company by reason only of his being such director.
(2) Where a person holding the office of a chairman or director or manager or
chief executive officer (by whatever name called) of a banking company is, or has been found
any tribunal or other authority (other than a criminal court) to have contravened the by
provision of any law and the State Bank is satisfied that the contravention is of such a nature
that the association of such person with the banking company is or will be detrimental to the
interest of the banking company or its depositors or otherwise undesirable, the State Bank
may

make an order that person shall cease to hold the office with effect from such date as may be
specified therein and thereupon, that office shall, with effect from the said date, become
vacant.
(3) Any order made under sub-section (2) in respect of any person may also
provide that he shall not, without the pervious permission of the State Bank in writing, in any
way, directly or indirectly, be concerned with, or take part in the management of, the banking
company or any other banking company for such period not exceeding five years as may be
specified in the order.
(4) No order under sub-section (2) shall be made in respect of any person unless
he has been given an opportunity of making a representation to the State Bank against the
proposed order:
Provided that it shall not be necessary to give any such opportunity if, in the opinion
of the State Bank, any delay would be detrimental to the interests of the banking company or
its depositors.
(5) Any decision or order of the State Bank made under this section shall be final
for all purposes.
12. Restrictions on removal of records and documents.— No banking company
shall remove from Pakistan to a place outside Pakistan any of its records and documents
relating to its business at is branches, whether they are functioning or not, without the prior
permission in writing of the State Bank.
Explanation.— In this section the term “records” means ledgers day books, cash
books, accounts books and all other books used in the business of a banking company and the
term “documents” means vouchers, cheques, bills, pay orders, securities for advances and any
other documents supporting entries in the books of, or claims by or against, a banking
company.
** 13. Requirement as to minimum paid-up capital and reserves.— (1) No
banking company incorporated in Pakistan shall—
(a) commence business unless it has such minimum paid-up capital as may be
determined by the State Bank; or
** Section 13 substituted vide Banking Companies (Amendment) Act, 1972 (Act No. XXX of 1972)
The Gazette of Pakistan Extra, Part I of 16th October, 1972-Page 238. (Effective date of amendment is 13-10-1972).

(b) carry on business unless [the aggregate of its paid-up capital and
unencumbered general reserves is]* of such minimum value within such
period as may be generally determined by the State Bank from time to time,
subject to a maximum of ten per cent of the total demand and time liabilities
of the banking company at any time:
Explanation.— In this section and in sections 22 and 29, ‘liabilities’ shall not
include the paid-up capital or the reserves or any credit balance in the profit
and loss account of the banking company or the amount of any loan taken
from the State Bank or the amount received as loan in Pakistan currency by
the banking company from the Federal Government, whether out of a foreign
currency loan contracted by the Government or otherwise, or the amount of
foreign currency loans obtained by the banking company directly from any
foreign agency: =
Provided that the minimum value so determined shall not, by the end
of December, [1985] (1), be less than [seven and a half per cent] (2) of the total
demand and time liabilities of a banking company as at the close of the last
working day in December, 1972.
(2) Without prejudice to the provisions of section 83, the Sate Bank may, by order
in writing, require any banking company which has failed to comply with the provisions of
clause (b) of sub-section (1), within the period determined under that clause to deposit with
the State Bank such amount on such terms and conditions as the State Bank may determine;
and every banking company which is so required shall be bound to comply with the order:
Provided that the amount of the deposit so required shall not exceed the amount by
which the aggregate of the time and demand liabilities of the banking company exceeds the
amount of such liabilities computed on the basis of [the aggregate value of its paid-up capital
and unencumbered general reserves] @ determined under clause (b) of sub-section (1).
* Substituted for the words “it has paid up capital” vide Banking Companies (Amendment) Ordinance, 1978 (Ordinance No. III
of 1978). The Gazette of Pakistan Extra, Part I, dated Jan, 5. 1978 Page 9.
= After sub-section (1) in section 13 Explanation added vide Banking Companies (Amendment) Ordinance, 1984 (Ordinance No.
XXXIV of 1984)—Gazette of Pakistan Extra, Part I , dated 2-8-1984, Pages 139-40
(1) Substituted for the figure “1980” (2) Substituted for the words “five per cent” vide Banking Companies (Amendment)
Ordinance, 1980 (XLVI of 1980). The Gazette of Pakistan, Extra, Part I, dated 18th Sep., 1980 Page 467.
@ Substituted for the words “minimum paid up capital” vide Banking Companies (Amendment) Ordinance, 1978 (III of 1978).
The Gazette of Pakistan, Extra, Part I, dated 5th January, 1978. Page 9.

(3) No banking company incorporated outside Pakistan shall commence or carry
on business in Pakistan unless the aggregate value of its paid-up capital and reserves in
Pakistan at the close of any day is not less than fifty lakhs= of rupees or an amount
representing seven and a half per cent= of its total demand and time liabilities in Pakistan as at
the close of the last working day of the previous calendar year, whichever is higher:
Provided that no such banking company shall be deemed to have complied with the
provisions of this sub-section unless it deposits and keeps deposited with the State Bank an
amount not less than what is required to be maintained under this sub-section, in any one or
more of the following forms, namely:—
(i) interest-free deposit in cash in Pakistan rupees;
(ii) interest-free deposit in a freely convertible approved foreign exchange
within the meaning of the STATE BANK OF PAKSTAN ACT, 1956
(XXXIII of 1956), specified by the STATE BANK in respect of such
banking company; and
(iii) deposit of un-encumbered approved securities: @@.
Provided further that a deposit no made with the State Bank shall be by transfer of
funds banking company from outside Pakistan or in the form of assets acquired by the
banking company out of remittable profits made by it from deposits in Pakistan.
(4) Any amount deposited and kept deposited with the State Bank under the
proviso to sub-section (3) by any banking company incorporated outside Pakistan shall, in the
event of the company ceasing for any reason to carry on banking business in Pakistan, be an
asset of the company on which the claims of all the creditors of the company in Pakistan shall
be a first charges.
(5) The State Bank may, if it thinks fit, extend the period referred to in subsection
(1) or sub-section (3) either generally or in any particular case.
(6) If any dispute arises in computing the aggregate value of the paid-up
capital [and unencumbered general reserves]* of any banking company, a determination
thereof by the State Bank shall be final.
= Substituted for the words “twenty” and for the words “five per cent” vide Banking Companies Second Amendment) Ordinance
1978 (XXXVIII of 1978). The Gazette of Pakistan Extra, Part I dated 25th June, 1978. Page 135.
@@ First proviso to sub-section (3) substituted vide the Banking Companies (Amendment) Ordinance, 1980 (XLVI of 1980).
The Gazette of Pakistan Extra, Part I dated 18th Sept. 1980, page 467.
* Inserted after the word “capital” the words and unencumbered general reserve” vide Banking Companies (Amendment)
(Ordinance No. 111 of 1978) The Gazette of Pakistan Extra Part I dated January 5, 1978- Page 9.

(7) For the purposes of this section, “value” means the real or exchangeable value
or, if the real or exchangeable value exceeds the nominal value, the nominal value.
14. Regulation of paid-up capital, subscribed capital and authorized capital
and voting rights of share-holders.— (1) No banking company incorporated in Pakistan
shall carry on business in Pakistan unless it satisfies the following conditions, namely:-
(i) that the subscribed capital of the company is not less than one half of
the authorized capital and paid-up capital is not less than one half of
the subscribed capital and that if the capital is increased it complies
with the conditions prescribed in this clause within such period not
exceeding two years as the State Bank may allow;
(ii) that the capital of the company consists of ordinary shares
only;
(iii) that, subject to the provisions contained in clause (iv), the voting rights
of any one shareholder are strictly proportionate to the contribution
made by him to the paid-up capital of the company;
(iv) that the voting rights of any one shareholder, except those of the
Federal Government or a Provincial Government do not exceed five
per cent of the total voting rights of all the shareholders.
(2) Notwithstanding anything contained in any law for the time being in force or
in any contract or instrument no suit or other proceeding shall be maintained against any
person registered as the holder of a share in a banking company on the ground that the title to
the said share vests in a person other than the registered holder:
Provided that nothing contained in this sub-section shall bar a suit or other
Proceeding—
(a) by a transferee of the share on the ground that he has obtained from the
registered holder a transfer of the share in accordance with any law
relating to such transfer; or
(b) on behalf of a minor or a lunatic on the ground that the registered
holder holds the share on behalf of the minor or lunatic.

(3) Every chairman, managing director or chief executive officer by
whatever name called of a banking company shall furnish to the State Bank through that
banking company returns containing full particulars of the extent and value of his holding of
shares, whether directly or indirectly, in the banking company and of any change in the extent
of such holding or any variation in the rights attaching thereto and such other information
relating to those shares as the State Bank may, by order, require and in such form and at such
time as may be specified in the order.
15. Election of new directors.—(1) The State Bank may, by order, require any
banking company to call a general meeting of the shareholders of the company within such
time, not less than two months from the date of the order, as may be specified therein or
within such further time as the State Bank may allow in this behalf, to elect in accordance
with the voting rights permissible under this Ordinance fresh directors, and the banking
company shall be bound to comply with the order.
(2) Every director elected under sub-section (1) shall hold office until the date up
to which his predecessor would have held office, if the election had not been held.
(3) Any election duly held under this section shall not be called in question in any
court.
15A. Appointment of director by the State Bank.—Notwithstanding anything
contained in the Companies Act, 1913 (VII of 1913), or in the memorandum or articles of
association of any banking company, the State Bank may appoint not more than one person to
be a director of a banking company, whether or not he holds any qualification shares.*
15B. Restriction on term of office of directors.—(1) A director of a banking
company, not being its chief executive, by whatever name called, or a director nominated
under section 15A, shall not hold office for more than six consecutive years.
Explanation.—In computing the period of six consecutive years for the purpose of
this sub-section, any break of less than three years in the continuity of office shall be
disregarded.
(2) A director of a banking company vacating office in pursuance of sub-section
(1) shall not be eligible for re-election as a director of that banking company unless a period
of three years has elapsed since the date on which he so vacated his office:
___________________________________________________________________________
* Section 15A, 15B and 15C inserted vide Bank Companies (Amendment) Act 1972 (Act No. XXX of 1972). The Gazette of
Pakistan , Extra, Part I dated October 16, 1972 Page 239 (Effective date of amendment is 13-10-1972).
27
Provided that a director who has to so vacate his office may continue in his office for
a period of not more than six months from the commencement of the Banking Companies
(Amendment) Act, 1972, or until a new director is elected or co-opted in his place whichever
is earlier.
15C. Vacation of Office.—A director of a banking company shall vacate his office
if in relation to the banking company he has failed to pay any advance or loan or any
instalment thereof or interest thereon or any amount due on any guarantee, or to do or
perform any act agreed to or undertaken in writing to be done or performed by him, and such
failure continues for a period of one month after notice in writing has been served on him by
the banking company calling upon him to make the payment or to do or perform the act.
16. Restriction on commission, brokerage, discount, etc. on sale of shares.—
Notwithstanding anything to the contrary in sections 105 and 105A of the Companies Act,
1913 (VII of 1913), no banking company shall pay out directly or indirectly by way of
commission, brokerage, discount or remuneration in any form in respect of any shares issued
by it, any amount exceeding in the aggregate two and one-half per cent of the paid-up value
of the said shares.
17. Prohibition of charge on unpaid capital.— No banking company shall
create any charge upon any unpaid capital of the company and such charge, if created, shall
be invalid.
18. Prohibition of floating charge on assets.—(1) Notwithstanding anything
contained in section 7 no banking company shall create a floating charge on the undertaking
or any property of the company or any part thereof, unless the creation of such floating
charge is certified in writing by the State Bank as not being detrimental to the interest of the
depositors of such company.
(2) Any such charge created without obtaining the certificate of the State Bank
shall be invalid.
(3) Any banking company aggrieved by the refusal of a certificate under subsection
(1) may, within ninety days from the date on which such refusal is communicated to
it, appeal to the Federal Government.
(4) The decision of the Government where an appeal has been preferred to it
under sub-section (3) or of the State Bank where no such appeal has been preferred shall be
final.

19. Restrictions as to payment of dividend.—(1) No banking company shall pay
any dividend on its shares until all its capitalised expense (including preliminary expenses,
organisation expenses, share-selling commission, brokerage, amounts of losses incurred and
any other item of expenditure not represented by tangible assets) have been completely
written off.
(2) Notwithstanding anything to the contrary contained in sub-section (1) or in the
Companies Act, 1913 (VII of 1913), a banking company may pay dividends on its shares
without writing off—
(i) the depreciation, if any, in the value of its investment in approved
securities in any case where such depreciation has not actually been
capitalised or otherwise accounted for as a loss;
(ii) the depreciation, if any, in the value of its investments in shares,
debentures or bonds (others than approved securities) in any case
where adequate provision for such depreciation has been made to the
satisfaction of the auditor of the banking company;
(iii) the bad debts, if any, in any case where adequate provision for such
debts had been made to the satisfaction of the auditor of the banking
company.
20. Prohibition of common directors.—(1) Except with the permission of the
State Bank, no banking company incorporated in Pakistan shall have as a director any person
who is a director—
(i) of any other banking company; or
(ii) of companies which among themselves are entitled to exercise voting
rights in excess of twenty per cent of the total voting rights of all the
shareholders of the banking company.
*(IA) No banking company incorporated in Pakistan shall
have as a director any person who is—
(a) a Federal Minister, a Minister of State or a Provincial Minister; or**
(b) a person in the service of Pakistan who is not appointed or nominated
by Government as a director by virtue of his office.
* New sub-section (IA) inserted vide Banking Companies (Amendment)Act, 1972, (Act No. XXX of 1972- The Gazette of
Pakistan , Extra, Part I dated October 16, 1972. Page 240 (Effective date of amendment is 13-10-1972).
** Clause (a) substituted by Federal Adaptation of laws Order, 1975 (P.O. 4 of 1975) Article 2 Schedule Gazette of Pakistan
Extra, Part I, 1-8-1975( Effective date of Amendment is 14 -8-1973).

(2) If immediately before the commencement of this Ordinance any person
holding office as a director of a banking company is also a director of companies which
among themselves are entitled to exercise voting rights in excess of twenty per cent of the
total voting rights of all the shareholders of the banking company he shall, within such period
from such commencement as the State Bank may specify in this behalf—
(a) either resign his office as a director of the banking company; or
(b) choose such number of companies as among themselves are not
entitled to exercise voting rights in excess of twenty per cent of
the total voting rights of all the shareholder of the banking
companies as companies in which he wishes to continue to
hold the office of a director and resign his office as a director in
the other companies.
21. Reserve Fund.—(1) Every banking company incorporated in Pakistan
shall create a reserve fund to which shall be credited—
(a) if the amount in such fund together with the amount in the
share premium account is less than the paid-up capital of the
banking company, a sum equivalent to not less than twenty per
cent of the balance of profit of each year as disclosed in the
profit and loss account prepared under section 34 and before
any dividend is declared; and
(b) if the amount in such fund together with the amount in the
share premium account is equal to or exceeds the paid-up
capital of the banking company, a sum equivalent to not less
than ten per cent of the balance of profit disclosed as aforesaid
and before any dividend is declared.*
(2) Where a banking company appropriates any sum or sums from the
reserve fund or the share premium account, it shall, within twenty-one days from the date of
such appropriation, report the fact to the State Bank explaining the circumstances relating to
such appropriation:
Provided that the State Bank may, in any particular case, extend the said
period of twenty-one days by such period as it thinks fit or condone any delay in the making
of such report.
* Substituted for sub-section (1) vide the Banking Companies (Amendment) Act, 1972(Act No. XXX of 1972). The Gazette of
Pakistan , Extra, Part I, dated 16 -10-1972 page 240.

22. Cash Reserve.— Every banking company, not being a schedule bank, shall
maintain by way of cash reserve in cash with itself, or in current account opened with the
State Bank or its agent or partly in cash with itself and partly in such account or accounts a
sum equivalent to at least two per cent of its time liabilities in Pakistan and five per cent of
its demand liabilities in Pakistan and shall submit to the State Bank before the fifteenth day of
every month a return showing the amount so held on Thursday* of each week of the
preceding month with particulars of its time and demand liabilities in Pakistan on each such
Thursday* or if any such Thursday* is a public holiday under the Negotiable Instruments
Act, 1881 (XXVI of 1881), at the close of business on the preceding working day.
23. Restriction on the nature of subsidiary companies.—(1) A banking
company shall not form any subsidiary company except a subsidiary company formed for one
or more of the following purposes, namely:—
(a) the undertaking and executing of trusts,
(b) the undertaking of the administration of estates as executor, trustee or
otherwise,
(bb) the carrying on of business of modaraba under the provisions of the
Modaraba Companies and Modaraba (Floatation and Control)
Ordinance 1980 (XXXXI of 1980). 1
(c) the providing of safe deposit vaults,
* Substituted for the word “Friday” and shall be deemed to have been so substituted on the first day of July 1977—vide Banking
Companies (Amendment) Ordinance 1978. (Ordinance No. III of 1978) The Gazette of Pakistan, Extra Part I dated Jan. 5, 1978 Page. 9.
Omitted vide Banking Companies (Amendment) Ordinance, 1984 (Ordinance No. XXXIV of 1984) Gazette of Pakistan Extra,
Part I, dated 2-8-1984 Pages 139-140
@ Added vide Banking Companies (Amendment) Ordinance, 1981 (Ordinance No. XVII of 1981) The Gazette of Pakistan
Extra, Part I May 11, 1981 Page. 91.
(1) In sub-section (1) of section 23, new clause (bb) inserted vide The Banking Companies (Third Amendm ent) Ordinance, 1980
(Ord. LVIII of 1980). The Gazette of Pakistan, Extra. Part I, dated 24-12-1980. Page. 550.

(d.) with the previous permission in writing of the State Bank, the carrying
on of the business of banking exclusively outside Pakistan
(dd) the conduct of any from of business permitted by section 7; or=
(e) such other purposes as are incidental to the business of banking.
(2) Save as provided in sub-section (1), no banking company shall hold shares in
any company whether as pledgee, mortgagee or absolute owner, of an amount exceeding
thirty per cent of the paid-up share capital of that company or thirty per cent of its own paidup
share capital and reserves, whichever is less:
Provided that any banking company which is on the date of commencement of this
Ordinance holding any shares in contravention of the provisions of this sub-section shall not
be liable to any penalty therefore if it reports the matter without delay, to the State Bank and
if it brings its holding of shares into conformity with the said provision within such period,
not exceeding two years, as the State Bank may think fit to allow.
(3) Save as provided in sub-section (1) and notwithstanding anything contained in
sub-section (2), a banking company shall not, after the expiry of one year from the date of
commencement of this Ordinance hold shares, whether as pledgee, mortgagee or absolute
owner, in any company in the management of which any managing director or manager of the
banking company is in any manner concerned or interested.
24. Restrictions on loans and advance.—(1) No banking company shall—
(a) make any loans or advances against the security of its own shares; or
(b) grant unsecured loans or advances to, or make loans and advances on
the guarantee of .—
(i) any of its directors;
(ii) any of the family members of any of its directors;
(iii) any firm or private company in which the banking company or any of
the persons referred to in sub-clause (i) or sub-clause (ii) is interested
as director, proprietor or partner; or
= The word “or at the end of clause (d) omitted vide Banking and Financial Services (Amendment in Laws) Ordinance, 1984
(Ordinance No. LVII of 1984) Gazette of Pakistan, Extra. Part I, dated December 31, 1984 Pages 681 to 695.
(iv) any public limited company in which the banking company or any of
the persons as aforesaid is substantially interested.
(2) No banking company shall make loans or advances to any of its directors or to
individuals, firms or companies in which it or any of its directors is interested as partner,
director or guarantor, as the case may be, without the approval of the majority of the directors
of that banking company, excluding the director concerned. *
25. Power of State Bank to control advances by banking companies.—
(1)Whenever the State Bank is satisfied that it is necessary or expedient in the public interest
so to do, it may determine the policy in relation to advances to be followed by banking
companies generally or by any banking company in particular, and, when the policy has been
so determined, all banking companies or the banking company concerned, as the case may
be, shall be bound to follow the policy as so determined.
(2) Without prejudice to the generality of the power conferred by sub-section (1),
the State Bank may give directions to banking companies either generally or to any banking
company or group of banking companies in particular.—
(a) as to the credit ceilings to be maintained, credit targets to be
achieved for different purposes, sectors and regions, the purposes
for which advances may or may not be made, the margins to be
maintained in respect of advances, the rates of interest, charges or
mark-up to be applied on advances and the maximum or minimum
profit sharing ratios; and
(b) prohibiting the giving of loans, advances and credit to any
borrower or group of borrowers on the basis of interest, either for a
specific purpose or for any purpose whatsoever; and each banking
company shall be bound to comply with any direction so given.**
(3) If any default is made by a banking company in complying with the policy
determined under sub-section (1) or direction given under sub-section (2), every director and
other officer of the banking company and every other person who is knowingly a party to
such
* Substituted vide Banking Companies (Amendment) Act, 1972, (Act No. XXX of 1972)—The Gazette of Pakistan, Extra, Part I,
dated October 16, 1972-Page 241.
**For Sub -section (2) of section 25, substituted vide, The Banking Companies (Third Amendment) Ordinance, 1980. The
Gazette of Pakistan Extra, Part I, dated 24-12-1990 Page 550.

default shall, by order of the State Bank, be liable to a penalty of an amount which may
extend to #twenty thousand rupees and, where the default is a continuing one, of a further
amount which may extend to one thousand #rupees for every day after the first during which
the default continues.
(4) Without prejudice to the provisions of sub-section (3), the State Bank may, for
the purposes of securing implementation of any special credit schemes or monetary policy or
observance of credit ceilings by a banking company, by order in writing require banking
companies generally, or any banking company in particular, to make special deposits with it
for such amount and on such terms and conditions as may be laid down by the State Bank in
this behalf. *
(5) The amount deposited with the State Bank under sub-section (4) or any part
thereof may, at the discretion of the State Bank, be released by it to the banking company
which deposited it as and when the State Bank deems fit either unconditionally or on such
terms and subject to such conditions as the State Bank may, by order in writing, determine
from time to time.
(6) Any penalty imposed under sub-section (3) shall be payable on demand made
by the State Bank and, in the event of refusal or failure by the director, officer or other person
concerned to pay on such demand, shall be recoverable as arrear of land revenue. **
25A. Power of the State Bank to collect and furnish credit information. -(1) Every
banking company shall furnish to the State Bank credit information in such manner as the
State Bank may specify, and the State Bank may, either of its own motion or at the request of
any banking company, make such information available to any banking company on
payment, of such fee as the State Bank may fix from time to time:
Provided that, while making such information available to a banking company, the
State Bank shall not disclose the names of the banking companies which supplied such
information to the State Bank:
Provided further that, a banking company which proposes to enter into any financial
arrangement which is in excess of the limit laid down in this behalf by the State Bank from
time to time shall, before entering into such financial arrangement, obtain credit information
on the borrower from the State Bank.
# In sub-section (3) of section 25 for the words “two” and five hundred” the words “ twenty” and “one thousand” substituted vide
Ordinance No. IX of 1997 dated 21-1-1997.
U The Banking Companies (Amendment) Act, 1997 dated 31-1-1997.
* Substituted vide Banking Companies (Amendment) Act 1972 (Act No. XXX of 1972) –The Gazette of Pakistan, Extra Part I
dated Oct. 16, 1972 Page. 241
** Substituted for the original Section 25 vide Banking Companies (Amendment) Ordinance, 1971 (Ordinance No. VII of 1971)
The Gazette of Pakistan, Extra, Part I dated March 15, 1971 Page. 290. (Effective date of amendment is 15-3-1971.
(2) Any credit information furnished by the State Bank to a banking company under
sub-section (1) shall be treated as confidential and shall not, except for the purposes of this
section or with the prior permission of the State Bank, be published or otherwise disclosed.
(3) No court, tribunal or other authority, including an officer of Government shall
require the State Bank or any banking company to disclose any information furnished to, or
supplied by, the State Bank under this section.
Explanation.—For the purpose of this section,--
(a) “borrower” means any person to whom any credit limit has been
sanctioned by any banking company, whether availed of or not, and
includes—
(i) in the case of a company or corporation, its subsidiaries;
(ii)in the case of a Hindu undivided family, any member thereof or any
firm in which such member is a partner;
(iii) in the case of a firm, any partner thereof or any other firm in which
such partner is a partner; and
(iv) in the case of an individual, any firm in which such individual is a
partner; and
(b) “credit infor mation” means any information relating to—
(i) the amounts and the nature of loans or advances or other credit
facilities, including bills purchased or discounted, letters of credit
and guarantees, indemnities and other engagements extended by a
banking company to any borrower or class of borrowers;
(ii) the nature of security taken from any borrower for credit facilities
granted to him;
(iii) the guarantees, indemnities or other engagements furnished to a
banking company by any of its customers; and
(iv)operations or accounts in respect of loans, advances and other
credit facilities referred to in this clause.*
___________________________________________________________________________
*Inserted, Sections 25A & 25B after Section 25 vide Banking Companies (Amendment) Act 1972 (Act No. XXX of 1972)- The
Gazette of Pakistan Extra, Part I, dated Oct. 16, 1972 Page. 241.
35
25AA. @ Preparation of special reports.—The State Bank shall prepare, and submit
to the Federal Government, a special report every year on cases of write off of loans, mark-up
and other dues, or financial relief through rescheduling and restructuring of loans and
subsidised loans provided by the banking companies, in which established banking practices
or authorised procedures have been departed from with a view to causing wrongful loss to the
bank or conferring wrongful loss to the bank or conferred wrongful gain on any constituent.
If the matters raised in the report relate to public interest, the Federal Government may
submit the report, or such part of it as relates to public interest, to Parliament or to the
Standing Committee of a House of Parliament dealing with Finance.
25B.£ Recovery of certain dues of banking companies as arrears of land
revenue.-Loans and advances made by a banking company for agricultural and other
purposes “and any other** amounts decreed by any court in favour of a banking company or
a financial institution specified in section 3A” $ shall be recoverable as an arrear of land
revenue as if the banking company were a local authority for the purposes of Section 5 of the
Revenue Recovery Act, 1890 (1 of 1890):
Provided that no sum shall be so recoverable unless the banking company has, by
notice in writing, informed the debtor, not less than fifteen days before proceeding to have it
so recovered, that he may repay by such instalment as may be fixed in the notice and that
action to have the debt recovered as an arrear of land revenue will be taken if he fails to pay
any instalment on or before the due date.*
26. ££ Power of State Bank to prohibit acceptance of deposits by banking
companies incorporated outside Pakistan.-The State Bank may, by notification in the
Official Gazette, order that any banking company or any class of banking companies
incorporated outside Pakistan shall from a date to be specified in the notification-
(1) discontinue to accept any interest bearing deposits or accept such deposits
only upon such terms and under such conditions as may be specified in the
notification:
Provided that no such notification shall be made earlier than three years after
the commencement of this Ordinance and the date specified in the notification
___________________________________________________________________________
* Inserted Sections 25A and 25B after Section 25 vide Banking Companies (Amendment) Act, 1972 (Act No. XXX of 1972) The
Gazette of Pakistan. Part I Extra, dated Oct.16 ,1972—Page 241.
@ Inserted vide, The Gazette of Pakistan, Extra Part -I dated 30-6-1990, Page -29, (Ord. III of 1989).
$ Inserted vide Banking Companies (Amendment) Ordinance No. XXIX of 1993, dated 5-10-1993.
£ The words “and other” inserted after the word ‘agricultural’ vide Ordinance No, IX of 1997 dated 21-1-1997.
££ The words “Federal Government” was substituted by the words “State Bank” and for the word “all” before the words Banking
Companies incorporated outside Pakistan, the words “any class of” substituted vide Ordinance No, IX of 1997 dated 21-1-1997.
= The Banking Companies (Amendment) Act ,1997 dated 31-5-1997.

shall not be earlier than six months after the date of the notification; or
(2) discontinue to accept any deposits or accept deposits only upon such terms and
under such conditions as may be specified in the notification:
Provided that no such notification shall be made earlier than three
years after the commencement of this Ordinance and the date specified in the
notification shall not be earlier than one year from the date of the notification.
**26A. Deposits.—(1) Deposits of money ma y be accepted by a banking company on
the following basis:-
(i) on participation in profit and loss of the banking company;
(ii) free of interest or return in any form, and
(iii) until such time as the Federal Government determines and notifies by
publication in the official Gazette, that the domestic operations of the banking
companies have become free of interest, effective on and from the first of July,
1985.@
(2.) Every banking company receiving deposits on the basis of participation in
profit and loss shall maintain separate account in respect thereof as also of
investments made, finances provided out of the amount of such deposits, cash
reserves and liquid assets maintained there against and all income and
expenditure relating thereto.
(3) Deposits received on the basis of participation in profit and loss shall be
invested or employed, at the absolute discretion of the banking company, only
in transactions or business the return on which does not accrue to the banking
company by way of interest.
(4) A person depos iting money with a banking company on the basis of
participation in profit and loss shall be entitled, subject to such general
directions as the State Bank may give from time to time in the interest of
monetary stability, to receive periodically such share
@ No. SRO. 658(I)/85 in the Gazette of Pakistan, Extra, Part-II, dated 3-7-1985, Page 1217.
** A new section 26A inserted vide the Banking Companies (Third Amendment) Ordinance, 1980 (Ord. LVIII of 1980). The
Gazette of Pakistan Extra. Part-I, dated 24-12-80, Page 550.

of the profit of the banking company arising out of such transactions as
may be determined by it and, in the event of loss incurred by the banking
company, shall be liable to bear proportionate loss.*
27. Licensing of banking companies.—(1) No individual or association or
body of individuals, not being a company, shall carry on banking business in Pakistan
and, save as hereinafter provided, no company shall carry on banking business in
Pakistan unless it holds a licence issued in that behalf by the State Bank; and any such
licence may be issued subject to such conditions as the State Bank may think fit to
impose.
(2) Every banking company in existence on the commencement of this
Ordinance, before the expiry of six months from such commencement, and every
other company before commencing banking business in Pakistan, shall apply in
writing to the State Bank for a licence under this section:
Provided that nothing in sub-section (1) shall be deemed to prohibit a banking
company in existence on the commencement of this Ordinance from carrying on
banking business until it is granted a licence in pursuance of this section or is by
notice in writing informed by the State Bank that a licence cannot be granted to it:
Provided further that the State Bank shall not give a notice as aforesaid to a
banking company in existence on the commencement of this Ordinance before the
expiry of the period of two years in the case of banking companies incorporated in
Pakistan and of six months in the case of banking companies incorporated outside
Pakistan referred to in sub-section (1) of section 13 or of such further period as the
State Bank may under the proviso to that sub-section think fit to allow.
(3) Before granting any licence under this section, the State Bank may
require to be satisfied by an inspection of the books of the company or otherwise that
all or any of the following conditions are fulfilled, namely:-
(a) that the company is or will be in a position to pay its present or
future depositors in full as their claims accrue;
(b) that the affairs of the company are not being or are not likely to be
conducted in a manner detrimental to the interests of its present or
future depositors;
(c) that in the case of a company incorporated outside Pakistan, the
Government or law of the country in
* Substituted for sub-section (1) vide Banking Companies (Amendment) Ordinance, 1979 (Ordinance No. LVI of 1979). The
Gazette of Pakistan, Extra, Part I, dated Oct. 8, 1979—Page 499.
which it is incorporated provides the same facilities to banking
companies registered in Pakistan as the Government or law of Pakistan
grants to banking companies incorporated outside Pakistan and that the
company complies with all the provisions of this Ordinance applicable
to banking companies incorporated outside Pakistan.
(4) The State Bank may cancel a licence granted to a banking company under this
section,—
(i) if the company ceases to carry on banking business in Pakistan; or
(ii) if the company at any time fails to comply with any of the conditions
imposed upon it under sub-section (1); or
(iii) if at any time, any of the conditions referred to in sub-section (3)
ceases to be fulfilled:
Provided that before cancelling a licence under clause (ii) or clause (iii) of this subsection
on the ground that the banking company has failed to comply with or has failed or
ceased to fulfil any of the conditions referred to therein, the State Bank, unless it is of opinion
that the delay will be prejudicial to the interest of the company’s depositors or the public,
shall grant to the company on such terms as it may specify, an opportunity of taking the
necessary steps for complying with or fulfilling such condition.
(5) £ Any banking company aggrieved by the decision of the State Bank cancelling
a licence under this section may, within thirty days from the date on which such decision is
communicated to it apply for review to the Central Board of the State Bank.
(6) ££ The decision of the State Bank subject to the result of review under subsection
(5), if any, shall be final.
@ 27A.—Prohibition of advertising for deposits and collection.—
Notwithstanding anything contained in any other law for the time being in force, no
company, firm or person, not being a banking company or a corporation or authority
established by the Federal Government or a company duly authorised in this behalf by the
Controller of Capital Issues or the Corporate law Authority or the Registrar
£ The words “appeal to the Federal Government” were substituted by the words “apply for revision to the Central Board of the
State Bank” vide Ordinance No. IX of 1997 dated 21-1-1997.
££ Sub-Section 6 was substituted vide Ordinance No. IX of 1997 dated 21-1-1997.
@ Substituted vide, The Gazette of Pakistan, Extra Part -I, dated 30-6-1990, Page 29 to 30.
= The Banking Companies (Amendment) Act,1997 dated 31-5-1997.

Co-operative Societies, shall solicit or invite deposits of money from the public through
advertisements in the public media or by postal circulars, handbills, displays in public places
or by any other means, or collect or receive any deposits of money in pursuance thereof.
Explanation.—For the purposes of this section, “deposits of money” shall be deemed
to include money called, invited or collected for the purpose, or declared object, of
investment or borrowing in any business carried on, or proposed to be carried on, by the
company, firm or person by whom, or on whose behalf, such money is called, invited,
collected or received irrespective or the nature of the relationship, arrangement or terms
offered or provided by such company, firm or person to the person making the investment,
deposits of money or payment or of the basis or understanding or which the money is so
called, invited, collected or received.
*27B. Disruptive union activities.— (1) No officer or member of a trade union in a
banking company shall use any bank facilities including a car or telephone to promote trade
union activities, or carry weapons into bank premises unless so authorized by the
management, or carry on trade union activities during office hours, or subject bank officials
to physical harassment or abuse and nor shall he be a person who is not an employee of the
banking company in question.
(2) Any person violating any of new, and transfer of sub-section (1) shall be guilty
of an offence punishable with imprisonment of either description which may extend to three
years, or with fine, or with both.
28. Restrictions on opening of new, and transfer of existing place of
business.—(1) No banking company shall open a new place of business in any part of
Pakistan or change, otherwise than within the same city, town or village the location of an
existing place of business situated in any part of Pakistan and no banking company
incorporated in Pakistan shall open a new place of business outside Pakistan or change,
otherwise than within the same city, town or village in any country or area outside Pakistan,
the location of an existing place of business situated in that country area without first
obtaining the prior permission in writing of the State Bank.
(2) Nothing in this section shall apply to the opening for a period not exceeding
one month of a temporary place of business within a city, town or village or the environs
thereof within which the banking company already has a place of business, for the purpose of
affording banking facilities to the public on the occasion of an exhibition, a conference or a
mela or any other like occasion:
Provided intimation of such opening is given to the State Bank within one week of the
date of opening.
* The Banking Companies (Amendment )Act 1997 dated 31-5-1997.

Explanation.—For the purpose of this section—
(a) “place of business” includes any sub-office, pay-office, sub-pay office and
any place of business at which deposits are received, cheques cashed or
moneys lent;
(b) “new place of business” includes a place of business which is reopened
after being temporarily closed.
(3) The State Bank may, before giving the permission referred to in sub-section
(1) of this section to any banking company, require to be satisfied by an inspection under
section 40 or otherwise regarding such aspects of the company’s affairs as the State Bank
may deem necessary.
29. Maintenance of liquid assets.-(1) Every banking company “and every
financial institution specified in section 3A” $ shall maintain in Pakistan in cash, gold or
unencumbered approved securities valued at a price not exceeding “the lower of the cost or” $
the current market price an amount which shall not at the close of business on any day be less
than “such percentage” $ of the total of its time and demand liabilities in Pakistan, as may be
notified by the State Bank from time to time. £
Provided that the State Bank may separately specify for banking companies or
financial institutions the applicable percentage either in general or in relation to any class of
banking companies or any class of financial institutions or to any bank or financial inst itution
in particular.
Explanation.—For the purpose of this section, “unencumbered approved securities”
of a banking company “or financial institution” $ shall include its approved securities lodged
with another institution for an advance or any other credit arrangement to the extent to which
such securities have not been drawn against or availed of ‘and the liabilities shall not include
the paid up capital or the reserves or any credit balance in the profit and loss account of the
Banking company or, as the case may be, the financial institution or any such liabilities as
may be notified by the State Bank for the purposes of this section’ .$
(2) In computing the amount provided for in sub-section (1), any deposit required
under the proviso to sub-section (3) of section 13 to be made with the State Bank by a
banking company incorporated outside Pakistan and any balances maintained in Pakistan by a
banking company in current account with the State Bank or its agent or both, {or in profit and
loss sharing term deposit account with the State Bank,}** including in the case of a
scheduled bank the balance required
*BCD Circular No.13 dated 16th August 1973, Notification No.S.R.O. 1205 (1) 73 dt.15th August 1973— The Gazette of Pakistan,
Extra, Part II August 16, 1973—Page 1748.
**Acolon substituted by the Banking Companies (Amendment) Act, 1965 (7 of 1965). In sub-section (1) for the full stop. Effective
date of amendment is 31-7-1965.
**Inserted vide the Banking Companies (Third Amendment) Ordinance; 1980. (Ord. LVIII of 1980) The Gazette of Pakistan Extra,
Part 1, dt. 24-12-80. Page. 551.
$ Inserted / Substituted vide Banking Companies (Amendment) Ordinance No. XXIX of 1993, dated 5-10-93.
£ The words “as may be notified by the State Bank from time to time.” added vide Ordinance No. LIV of 1995
dated 13-5-1995.

to be so maintained under sub-section (1) of section 36 of the State Bank of Pakistan Act,
1956 (XXXIII of 1956), shall be deemed to be cash maintained.
(3) Every banking company shall, before the close of the month succeeding the
month to which the return relates, furnish to the State Bank a monthly return in the prescribed
form and manner showing particulars of the company’s assets maintained in accordance with
this section and its time and demand liabilities in Pakistan at the close of business on each
Thursday= during the month, or if any Thursday= is a public holiday under the Negotiable
Instruments Act, 1881 (XXVI of 1881), at the close of business on the preceding working
day.
30. Assets in Pakistan.— (1) At the close of business on any day the assets in
Pakistan of every banking company shall not be less in value than an amount representing
such percentage of its time and demand liabilities in Pakistan as may be prescribed by the
State Bank from time to time provided that the percentage so prescribed shall not exceed
eighty five per cent.
(2) Every banking company shall, before the close of the month succeeding
that to which the return relates, furnish to the State Bank, in the prescribed form and manner
a monthly return showing particulars of the company’s assets maintained in accordance with
this section and its time and demand liabilities in Pakistan at the close of business in every
Thursday* or if any Thursday* is a public holiday under the Negotiable Instruments Act,
1881 (XXVI of 1881), at the close of business, on the preceding working day.
(3) For the purposes of this section—
(a) “assets in Pakistan” shall be deemed to include export bills drawn in, and
import bills drawn on and payable in Pakistan and expressed in such
currencies as the State Bank may from time to time approve in this behalf and
also such securities as the State Bank may approve in this behalf
notwithstanding that all or any of the said bills or securities are held outside
Pakistan, but shall exclude such assets as in the opinion of the State Bank
cannot properly be regarded as assets;
(b) “liabilities in Pakistan” shall not include the paid-up capital or the reserves or
any credit balance in the profit and loss acc ount of the banking company.
___________________________________________________________________________
= Substituted for the word “Friday” and shall be deemed to have been so substituted on the first day of July 1977— vide Banking
Companies (Amendment) Ordinance, 1978 (Ordinance No. III of 1978). The Gazette of Pakistan Extra, Part I, dt. Jan. 5, 1978 Page. 9
*Substituted vide Banking Companies (Amendment) Ordinance 1978. (Ordinance No. III of 1978) The Gazette of Pakistan,
Extra, January 5, 1978 Part I page. 9.— Effective date of substitution is 1st July 1977.
31. Unclaimed deposits and articles of value.—(1) Where—
(a) a debt payable in Pakistan currency is owing by a banking company by reason
of a deposit, not being a deposit in the name of a minor or a Government or a
court of law, at a branch of the banking company in Pakistan in respect of
which no transaction has taken place and no statement of account has been
requested or acknowledged by the creditor during a period of ten years
reckoned—
(i) in the case of a deposit made for a fixed period, from the day on
which the fixed period terminated, and
(ii) in the case of any other deposit, from the day on which the last
transaction took place or a statement of account was last requested or
acknowledged by the creditor, whichever is later; or
(b) a dividend, bonus, profit or other sum of money whatsoever which has
become due on a deposit and remained unpaid or unacknowledged by the
creditor for period of ten years reckoned from the da te on which the
dividend, bonus, profit or other sum of money, as the case may be, became
due and payable; or
(c) a cheques, draft or bill of exchange including an instrument drawn by one
branch of the banking company upon another such branch payable in
Pakistan currency has been issued, certified or accepted by a banking
company at a branch of the banking company in Pakistan and no payment
has been made in respect thereof for a period of ten years from the date of
issue, certification or acceptance; or
(d) a security share, goods or any valuable article, hereinafter collectively and
individually called article, lying in safe custody with a banking company
has not been inspected or acknowledged by the person who deposited the
article with the banking company for a period of ten years from the day on
which it was last inspected or acknowledged by such person;

the banking company shall give forthwith a three months’ notice in writing by registered post
acknowledgement due to the creditor or the beneficiary of the cheque, draft or bill of
exchange or the person in whose name the article stands in the books of the banking company
on his address last made known by him to the banking company, and if on the expiry of the
three months’ period no acknowledgement or reply is received from the addressee, the
banking company shall pay or deliver, as the case may be, to the State Bank an amount equal
to the amount, owing by the banking company in respect of the debt or to the amount that
would be owing if the instrument had been presented for payment, including interest, if any,
or the article, in accordance with the terms of the debt or instrument or of the arrangement
under which the article is lying in the safe custody of the banking company, an payment or
delivery accordingly shall discharge the banking company from all liabilities in respect of the
debt

or instrument or to the amount that would be owing if the instrument had been presented for
payment, including interest, if any or the article, in accordance with the terms of the debt or
instrument or of the banking company, and payment or delivery accordingly shall discharge
the banking company from all liabilities in respect of the debt or instrument or article, as the
case may be.
(2) A notice required to be given by sub-section (1)—
(a) may, in the case of a firm or a Hindu undivided family be addressed to any
member of the firm or the manager or any adult male member of the
family and, in the case of any other association of persons, to the principal
officer the reof;
(b) may be given to a duly authorised agent of the person whom it is required
to be given or, where he has died, to his legal representative or where he
has been declared an insolvent, to his assignee, provided the banking
company has had notice of appointment of the agent or of the death or
insolvency of the person to whom it is required to be given;
(c) shall, in the case of joint creditor or more than one beneficiaries of a
cheque, draft or bill of exchange or article standing in the names of more
than one person, be deemed to be sufficient notice to all such persons if
given to any one of them; and
(d) shall, notwithstanding the fact that it is miscarried or the addressee is dead
or insane or has become insolvent or the envelope or wrapper is returned
with the postal endorsement “addressee is untraceable” or any other like
endorsement, be deemed to have been served on the fifteenth day
following the day on which the envelope or wrapper in which it is
contained is posted, if it is properly addressed, prepaid and posted,
provided the banking company has had no notice of the death, insanity or
insolvency of the person to whom it is required to be given.
(3) A certificate in writing under the signature of an employee of the banking
company whose duty it is to address, prepay and post letters on behalf of the banking
company to the effect that the envelope or wrapper containing a notice required to be given
by sub-section (1) was addressed, prepaid and posted shall be conclusive evidence of its
having been so addressed, prepaid and posted.

(4) As soon as an amount is paid by a banking company to the State Bank under
sub-section (1), it shall cease to bear interest [or rank for a share of profit or loss]*
notwithstanding anything to the contrary contained in the terms of the debt or instrument or
any law for the time being in force.
(5) Where any banking company has paid an amount or delivered an article to the
State Bank under sub-section (1), the banking company shall preserve and continue to
preserve all signature cards and signing authorities and other documents relating to the debt
or instrument or article, as the case may be, until it is informed by the State Bank in writing
that they need not be preserved any longer.
(6) Nothing in the Limitation Act, 1908 (IX of 1908), or in any other law for the
time being in force shall affect the liability of a banking company toward the State Bank
under sub-section (1).
(7) Every banking company shall, within thirty days after the close of each
calendar year, submit to the State Bank a return in the prescribed form and manner of all
unclaimed amounts and articles remaining unpaid or undelivered, as the case may be, in the
books of the banking company, after the expiry of ten years as reckoned unde r sub-section
(1).
(8) The State Bank shall publish in the Gazette of Pakistan and not less than two
newspapers once each quarter for a period of one year a list of the amounts and articles
received by the State Bank under sub-section (1) and not claimed by any person:
Provided that it shall not be necessary to include in a list so published such amounts
and articles of such value as the Federal Government may from time to time determine.
(9) Any banking company which has paid any amount or delivered any article to
the State Bank in accordance with sub-section (1) may, within thirty days from the date of
such payment or delivery, as the case may be, submit to the State Bank its claim as regards
lien, counter-claim or right of set-off in relation to the amount so paid or article so delivered.
(10) Any person who claims to be entitled to any money or article paid or delivered
to the State Bank under sub-section (1) may submit his claim to the State Bank.
*Inserted vide the Banking Companies (Third Amendment) Ordinance, 1980 (Ord. LVIII of 1980).
The Gazette of Pakistan Extra, Part I dt. 24-12-80 Page 551.

(11) Subject to sub-sections (9), (12) and (14), the State Bank may pass such order
on a claim submitted to it under sub-section (9) or sub section (10) as it may deem fit, and,
where the State Bank makes any payment or delivers any article to any person submitting a
claim under sub-section (10) a receipt given by him shall be a good discharge to the State
Bank.
(12) If any action involving a dispute about the ownership of any amount or article
paid or delivered to the State Bank under sub-section (1) is pending in any court before the
expiry of one year following the year in which the amount or article is so paid or delivered to
the State Bank and the State Bank receives an intimation from the court or otherwise about
such dispute, it shall retain the amount or article in the custody and dispose of it in
accordance with the decision of the court.
(13) Subject to sub-sections (9), (12) and (14), any amount or article in respect of
which no claim is preferred or about the disposal of which no information is received from
any person before the expiry of one year following the year in which the amount or article is
received by the State Bank shall, on the expiry of the said period of the said period of one
year, cease to be climbable and shall, become the absolute property of and vest.—
(a) in the Government of the Province in the territory of which the debt or
instrument was payable or , as the case may be the article was to be
delivered, and
(b) in the Federal Government in any other case.
(14) Notwithstanding anything contained in sub-section (1) about the giving of a
notice by a banking company to any creditor or beneficiary of any cheque, draft or in subsection
(8) about the publication by the State Bank of the list of unclaimed amounts or
articles, the procedure to be followed and the manner of disposal of debts, instruments and
articles in a case where the person concerned is not for the time being residing in Pakistan
shall be such as may be determined by the Federal Government from time to time.
(15) Any decision of the State Bank under sub-section (11) about the acceptance,
satisfaction or otherwise of the lien, right of set-off or counter-claim of a banking company
or, as the case may be, the entitlement of any person to any money or article received by the
State Bank under sub-section (1) shall be final and shall not, except as provided in subsection
(16), be called in question in any manner by or before any court, tribunal or other
authority.

(16) Any person aggrieved by a decision of the State Bank under sub-section (11)
may, within one month from the date of the decision, prefer an appeal to such officer of the
State Bank superior in rank to the officer by whom the decision appealed against was given
as may be authorisd in this behalf by the Governor or the State Bank.
(17) For the purpose of adjudicating and determining any claim under sub-section
(9) or sub-section (10) or deciding any appeal under sub-section (16) the State Bank shall
follow such procedure as may be prescribed and shall have the same powers as are vested in a
court under the Code of Civil Procedure, 1908 (Act V of 1908), when trying a suit in respect
of the following matters, namely:-
(a) enforcing the attendance of any person and examining him on oath;
(b) compelling the production of documents and materials objects; and
(c) issuing commissions for the examination of witnesses.
(18) Any proceeding before the State Bank under this section shall be deemed to
be a “judicial proceeding” within the meaning of section 228 of the Pakistan Penal Code (
Act XLV of 1860), and the State Bank shall, for the purposes of any such proceeding, be
deemed to be a “Civil Court” within the meaning of section 480 of the Code of Criminal
Procedure, 1898(Act V of 1898).
(19) No court fee shall be payable for filing, exhibiting or recording any document
in, or obtaining any document from, the State Bank in any proceeding under this section.*
32. Half-yearly returns and power to call for other returns and information.-
(1) Every banking company shall, before the close of the month succeeding the half-year to
which the return relates submit to the State Bank a half -yearly return in the prescribed form
and manner showing its assets and liabilities in Pakistan as they stood at the close of business
on the thirtieth day of June in the first half and the thirty-first day of December in the second
half of the year.
(2) The State Bank may, at any time, by notice in writing, require banking companies
generally, or any banking company in particular to furnish it within the time specified therein
or such further time as the State Bank may allow, with any statement or information relating
to the business or affairs of such banking company or companies (including any business or
affairs with which such banking
* Substituted vide Banking Companies (Amendment) Act, 1972 (Act No. XXX of 1972). The Gazette of Pakistan Extra Part I
dated October 16.1972___Page 243.

company or companies is or are concerned) and, without prejudice to the generality of
the foregoing power, may call for information, at such intervals as the State Bank may deem
necessary, regarding the investment of banking companies and the classification of their
advances in respect of industry, commerce and agriculture.
33. Power to publish information.— The State Bank, if it considers it in the
public interest so to do, may publish any information obtained by it under this Ordinance in
such consolidated form as it thinks fit.
*33A.Fidelity and secrecy.—(1) Subject to sub-section (4), every bank and financial
institution shall, except as otherwise required by law, observe the practices and usage
customary among bankers and, in particular, shall not divulge any information relating to the
affairs of its customers except in circumstances in which it is , in accordance with law,
practice and usage customary among bankers, necessary or appropriate for a bank to divulge
such information.
(2) Every president, chairman, member of the Board, administrator, auditor,
advise, officer or other employee of any bank and financial institution shall, before entering
upon his office, make a declaration of fidelity and secrecy in such form as may be prescribed.
(3) Notwithstanding anything contained in sub-section (1) and (2), every balance
sheet and profit and loss account statement prepared by a bank and financial institution shall
include statements prepared in such form and manner as the State Bank may specify in
respect of written off loans or any other financial relief of five hundred thousand repress or
above allowed to a person as well as the provision, if any, made for bad or doubtful debts.
(4) The State Bank of Pakistan may, if satisfied that it is necessary so to do at the
time of holding general elections under any law relating thereto, publish a list of persons to
whom any loans, advances or credits were extended by a bank or financial institution, either
in their own names or in the manes of their spouses or dependents or of their business
concerns (if mainly owned and managed by them)which were due and payable and had not
been paid back for more than one year from the due date, or whose loans were unjustifiably
written off in violation of banking practices, rules or regulations on or after such date as may
be determined by the Government:
Provided the before publishing the name of any person in any such list he shall be
given prior notice and, if he so requests, an opportunity of hearing.
* The Banking Companies (Amendment) Act 1997 dated 31-5-1997.

*33B Guidelines by the State Bank.—The Bank may at any time either on the
request of any one or more banking companies or the Federal Government or suo motu, lay
down general guidelines for facilitating recovery of bad or doubtful loans, advances or
finance by giving incentives to borrowers or customers to make repayments within a
specified time frame by making adjustments or remissions in relation to interest or mark-up
or part of the principal amount in cases in which all full recovery is not possible by reason of
inadequacy of security or as part of a general scheme for there habilitation of sick units.
34. Accounts and balance-sheet.—(1) At the expiration of each calendar year
every banking company incorporated in Pakistan, in respect of all business transacted by it,
and every banking company incorporated outside Pakistan, in respect of all business transact
through its branches in Pakistan, shall prepare with reference to that year a balance -sheet and
profit and loss account as on the last working day of the year in the forms set out in the
Second Schedule or as near thereto as circumstances admit.
(2) The balance sheet and profit and loss account shall be signed.—
(a) in the case of a banking company incorporated in Pakistan, by the manager or
the principal officer of the company and where there are more than three
directors of the company, by at least three of those directors, or where there
are not more than three directors, by all the directors, and
(b) in the case of a banking company incorporated outside Pakistan by the
manager or agent of the principal office of the company in Pakistan and by
another officer next in seniority to the manager or agent.
(3) Notwithstanding that the balance sheet of a banking company is under subsection
(1) required to be prepared in a form other than the form marked ‘F’ in the Third
Schedule to the Companies Act, 1913 (VII of 1913), the requirements of that Act relating to
the balance sheet and profit and loss account of a company shall, in so far as they are not
inconsistent with this Ordinance, apply to the balance-sheet of profit and loss account, as the
case may be, of a banking company.
* The Banking Companies (Amendment) Act 1997 dated 31 -5-1997.

(4) The State Bank may, after giving not less than fifteen days notice of its
intention so to do, form time to time by a notification in the official Gazette, amend the forms
set out in the Second Schedule.*
35. Audit.—(1) The balance sheet and profit and loss account prepared in accordance
with section 34 shall be audited by a person who is duly qualified, under the Chartered
Accountants Ordinance, 1961 (X of 1961), or any other law for the time being in force, to be
an auditor of companies and is borne on the panel of auditors maintained by the State Bank
for the purposes of audit of banking companies.
(2) An auditor shall hold office for a period of three years and shall not be
removed from office before the expiry of that period except with the prior approval of the
State Bank.
(3) The State Bank may, from time to time, lay down guidelines for the audit of
banking companies and the auditors shall be bound to follow those guidelines.
(4) Subject to the provisions of sub-section (2), the auditor shall have the powers
of, exercise the functions vested in, and discharge the duties and be subject to the liabilities
and penalties imposed on, auditors of companies by section 145 of the Companies Act, 1913
(VII of 1913).
(5) In addition to the matters which, under the aforesaid Act and the guidelines
laid down by the State Bank under sub-section (3), the auditor is required to state in his
report, he shall also state—
(a) whether or not the information and explanations required by him have
been found to be satisfactory;
(b) whether or not the transactions of the banking company which have
come to his notice have been with in the powers of the banking
company;
(c) whether or not the returns received from branch offices of the banking
company have been found adequate for the purposes of his audit;
(d) whether the profit and loss account shows a true balance of profit and
loss for the period covered by such account; and
*Substituted vide the Banking Companies (Third Amendment) Ordinance, 1980 (Ord. LVIII of 1980).
The Gazette of Pakistan Extra, Part I, dt. 24-12-1980. Page. 551.

(e) any other matter which he considers should be brought to the notice of the
shareholders of the banking company.*
36. Submission of returns.— The accounts and balance-sheet referred to in section
34 together with the auditor’s report as passed in the Annual General Meeting shall be
furnished as returns to the State Bank within three months of the close of the period to which
they relate:
Provided that the State Bank may in special circumstances extend the said period of
three months for the furnishing of such returns by a further period not exceeding three
months.
37. Copies of Balance Sheet and Accounts to be sent to Registrar.— Where a
banking company in any year furnishes its balance sheet and accounts in accordance with the
provisions of section 36 it may, or when it is a private company, shall, at the same time send
to the registrar three copies of such balance sheet and accounts and of the auditor’s report,
and where such copies are so sent, it shall not be necessaey for the