All Commercial Banks/DFIs
Dear Sirs/Madam,
COLLATED INSTRUCTIONS ON MARGIN
RESTRICTIONS
Please refer to BPD Circular No.02 dated 17th January, 2003
containing updated instructions on the captioned subject.
2.
Banks are aware that SBP has done away with the directed
credit regime and at present they have been following their
own lending policies duly approved by their respective Board
of Directors. Banks are encouraged to take lending decisions
on the basis of the risk profile of the borrower(s) and
accordingly secure their interests.
3.
Accordingly, it has been decided to withdraw, with immediate
effect, the margin requirements conveyed to banks vide our
Circular referred to above. Banks are, henceforth, free
to fix/determine the margin requirements on facilities provided
by them to their clients for Corporate, SME and Consumer
Financing products, taking into account the risk profile
of the borrower(s).
4.
However: (i) margin restrictions on shares/TFCs shall be
governed as per existing instructions under Prudential Regulations
for Corporate/Commercial Banking (R-6), for SMEs Financing
(R-5), for Consumer Financing (R-6), and should be implemented
in letter and spirit; (ii) existing cash margin requirement
of 100% on Caustic Soda (PCT heading 2815.1200) for opening
Import Letter of Credit as advised by Federal Government
and notified in terms of BPD Circular Letter No.5 dated
4th May, 2002, shall continue to remain applicable until
further instructions. It is also added that the relaxation
given in para 3 above is not applicable in case of items,
import of which are banned by the Government. Banks are
advised not to open import letter of credit for these items
in any case till such time the lifting of ban on any such
item is notified by the State Bank.
5.
It may be added that SBP shall continue to exercise its
powers for fixation/reinstatement of margin requirements
on financing facilities being provided by banks for various
purposes including Import Letter of Credit on a particular
item(s), as and when required.
Please
acknowledge receipt.