Circulars/Notifications - Banking Policy Department  
 BPD Circular No. 11
May 17, 2002  

The Chief Executives,

NBFIs

Dear Sirs,

RULES OF BUSINESS FOR NBFIs

 

Please refer to the Rules of Business for NBFIs as amended from time to time. 

It has been decided with immediate effect to substitute the existing Rule-9 of the Rules of Business for NBFIs with the following: 

9.       Limit on NBFI’s exposure to a single person-----(1)    The total exposure of an NBFI to any single person shall not at any point in time exceed 30% of the NBFI’s unimpaired capital and reserves (including revaluation reserves on account of fixed assets to the extent of 50% of their value) subject to the condition that the maximum outstanding against fund based financing facilities do not exceed 20% of the unimpaired capital and reserves. 

(2)     In arriving at per party exposure under this rule: 

A)   90% of the following shall be deducted;

(i)   certificates of  deposit / certificates of investment of the borrower with an NBFI under lien;

(ii)   face value of Federal Investment Bonds, Pakistan Investment Bonds, Treasury Bills and National Saving Scheme Securities, lodged by the party as collateral; and

(iii)  Pak. Rupee equivalent of face value of Special US Dollar Bonds converted at official rate, lodged by the borrower as collateral. 

B)   50% of repayment bank guarantees accepted as collaterals of unconditional nature and payable on demand by banks, rated at least ‘A’ or equivalent by a credit rating agency approved by the State Bank of Pakistan, shall be deducted. 

C)   Weightage of 50% shall be given to guarantees / bonds other than repayment guarantees 

D)   Loans and advances given to the Federal / Provincial Governments, or guaranteed by the Federal Government and cash margin retained by an NBFI against guarantees / bonds issued, shall be excluded. 

(3)   Revaluation reserves under sub-rule (1) above shall be the reserves created by revaluation of fixed assets of the NBFI. The assets must be prudently valued fully taking into account the possibility of price fluctuations and forced sale. Revaluation reserves reflecting the difference between the historical cost, book value and the market value will be eligible up to 50% of their assessed value subject to the condition that the reasonableness of the revalued amount is duly certified by the external auditors of the NBFI.  

Accordingly, the definition of equity for the purpose of Rules of Business for NBFIs as laid down under Part ‘A’ of these rules would stand modified as under:

‘Equity’ includes Share Capital and Reserves including revaluation reserves on account of fixed assets to the extent of 50% of their value. 

All other instructions on the subject shall, however, remain unchange

Please acknowledge receipt. 



Yours faithfully,
(SD/- Inayat Hussain)
Joint Director

BPD Circulars/ Circular Letters issued in 2003
       
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