Banks can't freeze accounts sans legal grounds, rules IHC

Emphasised that financial institutions cannot deny citizens access to their funds without lawful authority

In a significant ruling aimed at protecting banking customers. the Islamabad High Court (IHC) has directed banks not to block or freeze citizens' bank accounts without a verified legal basis.

Justice Arbab Muhammad Tahir issued this order after hearing a case where a citizen challenged the unilateral blocking of his bank account by a private bank during an inquiry conducted by the National Cyber Crime Investigation Agency (NCCIA).

According to the six-page written judgment. the court imposed a fine of Rs300,000 on the private bank after it admitted blocking the customer's account without proper justification. It also ordered the bank to pay the litigation expenses incurred by the account holder in pursuing legal action against the unlawful restriction.

The court held that banks cannot block or freeze customers' accounts in the absence of a verified legal reason. It emphasized that financial institutions must act strictly within the bounds of the law. cannot deny citizens access to their funds without lawful authority.

In its judgment. the court also directed the State Bank of Pakistan (SBP) to take measures to prevent citizens from being adversely affected by unjustified account blockages in the future.

The court instructed the central bank to review the present case. consider issuing comprehensive guidelines to all banks operating in the country.

These guidelines should clearly define the circumstances under which an account may be restricted. ensure that customers are not deprived of access to their accounts without legal justification, it stated.

The court ordered that any precautionary guidelines issued by the SBP should explicitly state that individuals cannot be prevented from using their bank accounts unless there is a valid. legally supported reason for doing so.

Comments are moderated and generally will be posted if they are on-topic and not abusive.

For more information, please see ourComments FAQ