The Chief Executives,
All Banks/DFIs
Dear
Sirs/Madam,
Prudential
Regulations For Corporate/Commercial Banking
Please
refer to the Prudential Regulations for Corporate and Commercial
Banking issued vide BPD circular No 35 dated 28th October
2003.
2.
With a view to facilitate NBFCs to obtain funds from banks/DFIs
and financing from multilateral agencies on the guarantee
of banks/DFIs as well as to enable banks/DFIs to underwrite
the debt instruments issued by NBFCs, It has been decided
to make the following amendments in Prudential Regulations
R-5 and R-9. Besides in order to eliminate confusion, following
clarifications in Prudential Regulation R-6 are also being
issued.
Regulation
R-5
LINKAGE BETWEEN FIANNCIAL INDICATORS OF THE BORROWER AND
TOTAL EXPOSURE FROM FINANCIAL INSTITUTIONS
Para
1: In case of Non Banking Finance Companies (NBFCs), the
total exposure (i.e. fund based and/or non-fund based) availed
by any NBFC from financial institutions shall not exceed
10 times of its equity, without the restriction of fund
based exposure to be 4 times as in the case of other types
of borrowers.
Para
4: The regulation shall not apply in cases where exposure
is taken on Units/Projects revived as a consequence of settlement
under CRISU, CIRC and the SBP Circular NO 29 dated 15th
October 2002, for a period of five years from the date of
such settlement.
Regulation
R-9
ASSUMING OBLIGATION ON BEHALF OF NBFCs
Para
1: Banks/DFIs may underwrite TFCs, Commercial Papers and
other debt instruments issued by NBFCs, and issue guarantees
in favor of multilateral agencies for providing credit to
NBFCs, provided the banks/DFIs’ such exposure should
remain within the per party exposure limit as prescribed
in Regulation R-1
3.
The following clarifications may also be noted regarding
R-6 on acquisition of shares/TFCs and financing against
them:
(a)
Para 1A (c) prohibits exposure by banks/DFIs against the
security of unlisted TFCs, but does not prohibit them from
making direct investment in unlisted TFCs.
(b) For the purpose of Para1B, shares will also include
units of all forms of Mutual Funds but will exclude NIT
Units.
