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Indian Lenders Ordered to Tighten Checks on Indirect Pakistani Funds

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Released on, Aug. 27 — August 27, 2025 at 6:10 AM

The Reserve Bank of India (RBI) has directed the nation’s financial institutions to enhance monitoring of funds that flow indirectly from Pakistan, as mentioned in a letter reviewed by Reuters highlighting a “significant threat” that this money could be utilized for purchasing weapons.

The direct transfer of money from Pakistan to India is mostly forbidden, with each transaction needing permission from the central bank.

The order, issued on August 6, comes following inquiries conducted by Indian authorities after the two adjacent nations were involved in a intense four-day armed clash in May.

It designated Pakistan as a “high-risk” country concerning arms funding and referenced Indian inquiries into arms finance without providing specifics on their conclusions.

As per an official from the government who has firsthand information about this issue, Indian investigators discovered that certain individuals from Pakistan transferred money into India through third-party nations. According to the source, who isn’t permitted to communicate with the press and chose anonymity, India’s financial systems face a significant threat of being exploited for financing weapons by Pakistan.

The central bank maintains broad policies aimed at preventing money laundering and the funding of weapons and terror activities, although directives specifically highlighting Pakistan are uncommon.

The Reserve Bank of India remained silent when approached by Reuters for a statement.

Zafar Masud, head of the Pakistan Banks Association, stated in a release that Pakistan’s “laws against money laundering and preventing terrorist funding are highly stringent and effective.”

The Reserve Bank of India’s communication to banks and non-banking financial institutions additionally mentioned cases where Pakistan has faced allegations of breaching international sanctions and regulations.

It was mentioned that a June 2025 report from the international anti-money laundering authority, the Financial Action Task Force, alleged that a Pakistani government-run organization, the National Development Complex, bypassed restrictions by bringing in goods related to missile production without proper disclosure.

The Ministry of Foreign Affairs of Pakistan did not provide a response to a query from Reuters.

The correspondence additionally identified North Korea as a “high-risk” region, referencing previous sanctions enacted by the UN Security Council against the nation.

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