PESHAWAR, March 12: The Bank of Khyber (BoK) will soon start Islamic banking operations in NWFP, according to official sources.

“A decision in this regard has been taken to begin with the Islamic banking operations within the ambit of BoK,” said a senior officer of the bank.

The bank would shortly establish a separate branch at Peshawar, which would exclusively deal in Islamic banking. The decision to open a separate branch has been taken in line with an advice by State Bank Governor Dr Ishrat Hussain, the sources said.

The BoK would be the second bank in the country which would start Islamic banking operations in NWFP.

Earlier, the MMA-led NWFP government invited the Al-Meezan Bank — an Islamic bank — to open its branches in the Frontier province.

As a result of a series of meetings, held at Karachi and Peshawar between the provincial finance minister and management of Al-Meezan Bank, the latter has indicated to open a branch at Peshawar to introduce Islamic banking.

Taking a hint from the MMA government’s interest in introducing Islamic banking in the province, the BoK recently initiated exercises to explore the possibilities of entering into this mode of banking.

Apart from holding meetings with the senior SBP officers, including the SBP Governor, the NWFP government through the BoK recently arranged a seminar at Karachi.

“The government has in principle decided to go for establishing a separate branch to begin with the Riba-free banking system in the province,” said the senior banker, adding that initially the BoK would provide Rs500 million capital from its own resources to start the Islamic banking.