Corporate and commercial banks

R1

Exposure limit as a % of bank’s / DFI’s equity

Fund based Facility

 Single obligor 20% of bank’s equity.

 Obligor Group 25% of bank’s equity.

Total (Fund and Non Fund) Based Facility

 Single obligor 20% of bank’s equity.

 Obligor Group 25% of bank’s equity.

Related party Exposure Limits.

 7.5% for single related party and 15% for related group

 It exclude (Loans given to employees, FE-25 deposits by the bank with its own
branches/subsidiaries overseas, Bank’s/DFI’s investment in common shareholding of its
subsidiaries)

Large Exposure Limit: (means 10% or more of a bank’s equity).

 Aggregate amount not, at any point in time, exceed 50% of its total gross
advances and investments (excluding investment in government securities and
loans secured against GOP guarantees)

R2

Contingent liabilities shall not exceed 10 times of bank’s equity.

 Contingent liabilities does not constitute (Bills for collection, Letters of

credit/guarantee where the payment is guaranteed by the SBP/Federal
Government or banks/DFIs rated at least ‘A’ by a recognized rating agency , Non-
fund based exposure covered by cash / liquid assets, Claims other than those
related to provision of facilities (fund based or non-fund based) to the
banks’/DFIs’ constituents, where the probability of conversion of these claims
into liabilities are remote.

Derivatives:

 The banks/DFIs that are Authorized Derivative Dealers, shall restrict

their exposure to derivatives up to 5 times of their equity within
overall limit of contingent liabilities.

10% weightage to forward foreign exchange contracts.

weightage of 50% shall be given to bid/mobilization/ advance/performance bonds

R3
Bank ensure CIB report not old than 2 months.

In case of a borrower other than a public limited company or private company which is a subsidiary
of public company, financial statements audited by the Cost and Management accountant is equally
acceptable. However, if a borrower is a public limited company and aggregate exposure from all
Banks/DFIs exceeds Rs. 500 million, banks/DFIs should obtain the financial statements duly audited
by a firm of charted accountants which has received satisfactory rating under the Quality Control
Review (QCR) Program of the Institute of Chartered Accountants of Pakistan

R4

 provide clean financing facility up to Rs.2 M to a single borrower in aggregate

from all banks. Financing facilities granted without securities including those
granted against personal guarantees shall be deemed as clean.
 In case of clean placements with banks/DFIs in Pakistan, single obligor limits
given in R-1 shall be observed. However, for Banks/DFIs rated below ‘A-3’ (short
term) or ‘BBB’ (long term) clean exposure limit given above shall be applicable.
 Nostro balances shall be exempt from the above limits
 Total clean facilities should not exceed the amount bank’s equity.
 Margin Requirements against shares – minimum 30% of listed firms and 20%
against TFCs/Sukuks rated ‘BBB’ and above.
 cash margin requirement of 100% on Caustic Soda

R5

Joint inspection of Pledged Stocks:

The bank/DFI with the largest committed exposure (limit) shall act as the lead bank/DFI to
coordinate the quarterly joint inspection. Bank taking exposure on a customer against
pledge of stocks shall Inform all banks already financing that customer within 5 working
days of credit approval.

R6

• Acquisition of Shares / Mutual Funds / REITs:

a) Single Company Investment Limit (5% of its own paid-up capital or 10% of investee
company capital(no of Paid up shares) , whichever is lower

b) Shall not apply to the shares acquired due to the underwriting commitments [sold
off / off loaded within 18 months]

• Aggregate Investment

a) Limits for banks mobilizing funds 30% of their equity

b) Aggregate Investment for Islamic banks/DFIs not mobilizing funds, 35% of their
equity.
 c) Aggregate investment limit in REIT shall be 10% of bank’s equity.

 Within the above limits, Banks/DFIs may take maximum exposure in future
contracts up to 10% of their equity on aggregate basis.

Financing against Shares/TFCs/Sukuk, Banks not to take exposure on

a) Shares/TFCs/Sukuk issued by them.

a) Non-listed shares/non-rated TFCs or TFCs rated below ‘BBB’ not allowed. However,
they may make direct investment in non-listed TFCs.

R7

Guarantees:

1. Guarantees issued by banks be fully secured except in the cases mentioned at Annexure-IV
where it may be waived up to 50% by the banks/DFIs at their own discretion, provided that
they hold at least 20% of the guaranteed amount in the form of liquid security. The
guarantees shall be for a specific amount and expiry date and shall contain claim lodgment
date.

R8
  rescheduling/restructuring of non-performing loans shall not change the status of
classification of a loan/advance etc. unless the terms and conditions of
rescheduling & restructuring are fully met for a period of at least one year
(excluding grace period) from the date of such rescheduling/restructuring and at
least 10% of the total restructured loan amount (principal + mark-up), is recovered
in cash
 condition of one year retention period, will not apply if the borrower has repaid in
cash at least 35% of the total restructured loan
 unrealized mark-up on such loans shall not be taken to income account unless at
least 50% of the amount is realized in cash

R9

 Banks/DFIs shall ensure that total guarantees issued by an NBFC in favor of

banks/DFIs do not exceed 2.5 times of capital of the NBFC as per their latest
audited financial statements.
 Banks should not pay dividends on their shares unless and until they meet the
minimum capital requirement and capital adequacy ratio requirement.

Governance

• Major shareholders must seek prior approval from SBP for acquiring 5% or more shares

• The Board should meet frequently (preferably monthly, but not less than quarterly) and the
individual directors should attend at least half of the meetings held in a financial year.

• No member of the Board of Directors of a bank/DFI holding 5% or more of the paid-up

capital shall be appointed in the bank/DFI in any capacity except as Chief Executive.

• maximum two members of BoD of a bank/DFI including its CEO can be the Executive
Directors.

• Chairman of the BoD may, if deemed necessary, appoint one advisor

• Banks/DFIs shall not

Enter into leasing, renting and sale/purchase of any kind with their directors, officers,
employees or such persons who either individually or in concert with family members
beneficially own 5% or more of the equity of the bank/DFI.

• The facilities to the persons holding 5% or more shall be extended at market terms (arms
length basis)

• Banks/DFIs should disclose in their annual audited accounts the total donation/contribution
made during the year along with names of donees, in excess of Rs 100,000/.

Operations
  Banks desirous of providing the facility of withdrawal through Authorized Merchant
Establishments at various Points of Sale (POS) may do so up to a maximum cash limit of
Rs.10,000/-
 Maintenance of assets
1. Every bank/DFI shall maintain in Pakistan not less than 80% of the assets created
by it against such time and demand liabilities.
2. Accordingly, assets held abroad by any bank/DFI shall not, at any point in time,
exceed 20% of its time and demand liabilities.
3. All other assets financed from sources other than time and demand liabilities shall
be held within Pakistan.
 The investing bank will not place in a single institution an amount exceeding 25% of
the total investable funds, available with the investing bank, under the FE-25 Deposit
Scheme.

Small and medium enterprise

SME

 For loan size of upto Rs 2 million, it will be at the discretion of the banks & DFIs to obtain
the insurance cover of the hypothecated stock/ other securities
 Banks & DFIs can take clean exposure (facilities secured solely against personal
guarantees) on an SME borrower up to Rs 5 million.--- clean exposure limit shall not
include the clean consumer financing limits (Credit Card and Personal Loans etc.)
allowed to sponsors of the said SME
 for clean facilities Rs. 5 million for SEs and MEs, all facilities over and above this limit
shall be appropriately secured as per satisfaction of the banks & DFIs.
 the cash margin requirement of 100% on Caustic Soda
 Delinquency reports (for 30, 60, 90, 180 & 365 days and above) on monthly basis.

SE

 Small Enterprise can avail exposure up to Rs 25 million from a single bank/ DFI or from all
banks & DFIs. Banks & DFIs are allowed to deduct the liquid assets
 Banks & DFIs are not required to obtain copy of audited accounts in case of lending to the
small enterprises for exposure upto Rs 15 million.
 lending to small enterprises above Rs 15 million, banks & DFIs shall obtain from the small
enterprises a copy of financial statements duly audited by a practicing Chartered Accountant
or a practicing Cost and Management Accountant -- banks & DFIs may waive the
requirement of obtaining audited copy of financial statements when the exposure net of
liquid assets does not exceed the limit of Rs 15 million.
 For valuation of securities against loans up to Rs 5 million, banks & DFIs at their own
discretion may either use the services of their own evaluating staff or the services of PBA
approved evaluator.
However, valuation of securities for loans above Rs 5 million shall be done only by an
evaluator on the approved panel of PBA.
 Banks & DFIs shall maintain general reserve equivalent to 1%(also called general provision)
of their unsecured SE portfolio. It is to be maintained for performing fund based.
 In order to calculate the general reserve, liquid securities held against banks’/ DFIs’
fund-based SE portfolio shall be netted.
 The rescheduling/ restructuring of non-performing loans shall not change the status of
classification of a loan/ advance etc. unless the following minimum conditions are met:
1. At least 10% of the outstanding loan amount is recovered in cash and terms and
conditions of rescheduling/ restructuring are fully met for a period of at least 6
months
2. shall not apply in case the borrower has repaid or adjusted in cash at least 35%
of the total restructured loan amount before the completion of 6 Months.
 Banks & DFIs shall not take more than 15 working days for the credit approval process (from
the date of receipt of complete information)
 SE provisioning – FSV same as for commercial banks
 At the time of classification, valuation shall not be more than 3 years old.

ME

 Medium Enterprise can avail financing (including leased assets) upto Rs 200 million from a
single bank/ DFI or from all banks & DFIs. Banks & DFIs are allowed to deduct the liquid
assets.
 banks & DFIs shall obtain a copy of financial statements duly audited by a practicing
Chartered Accountant, from the medium enterprise who is a limited company or where the
exposure of a bank/ DFI exceeds Rs 10 million
 financial statements duly audited by a practicing Cost and Management Accountant in case
of a borrower other than a public company or a private company, exposure net of liquid
assets does not exceed the limit of Rs 10 million.

 The rescheduling/ restructuring of non-performing loans shall not change the status of
classification of a loan/ advance etc. unless the following minimum conditions are met:
3. At least 10% of the outstanding loan amount is recovered in cash and terms and
conditions of rescheduling/ restructuring are fully met for a period of at least 1
year
4. shall not apply in case the borrower has repaid or adjusted in cash at least 35%
of the total restructured loan amount before the completion of 1 year.

 Banks & DFIs shall review, at least on a quarterly basis, the collectability of their loans
 nks & DFIs shall not take more than 25 working days for the credit approval process (from
the date of receipt of complete information)
 Ba