Please refer to the State Bank’s letter No. BPD(PU-33)682-22(ii)/2004/12355 dated the 28th September, 2004 and other instructions issued from time to time on the above subject.

2. In order to ensure continued stake / ownership of sponsors / major shareholders in the banks, they were required to deposit their shares in a Blocked Account with Central Depository Company of Pakistan (CDC). It has, however, come to the notice of the State Bank of Pakistan (SBP) that sponsor shareholders of certain banks have either not fully deposited their sponsor shares or have not deposited their subsequent bonus / right shares in the (CDC) or have availed financing from financial institutions against the pledge of their sponsor shares. This has been viewed seriously by the SBP.

3. With a view to facilitate the banks and their sponsor shareholders and to ensure compliance of the SBP instructions, it has been decided to issue the following consolidated and revised instructions on the subject:

i) All sponsor shares and subsequent right and bonus shares, including those deposited with SBP Banking Services Corporation(BSC), shall be deposited in a blocked account with CDC. The procedure for deposit of sponsor shares in the CDC blocked account is provided in enclosed Annexure-A.

ii) No withdrawal of the sponsor shares from the blocked account would be allowed without prior written permission of SBP.

iii) Blocked account should be opened by the sponsor shareholders of banks exclusively for deposit of the sponsor shares and subsequent right and bonus shares issued thereon.

iv) Charges for opening and operating of the blocked account with CDC will be borne by the sponsor shareholders.

4. For the purpose of these instructions, the “sponsor shares” and “sponsor shareholders” shall have the following meanings:

i) Sponsor Shares mean 5% or more paid-up shares of a bank, acquired by a person(s) individually or in concert with his family members (including his spouse, lineal ascendants and descendents and dependent brothers and sisters), group companies, subsidiaries, and affiliates/associates. Such acquisition of shareholding will include all the shares acquired by aforesaid person(s) including, interalia, through (a) as original subscriber / promoter of the bank; (b) subsequent right / bonus issues; (c) market based acquisition deal; (d) reconstruction/restructuring of a bank carried out by SBP; (e) strategic sale through privatization (f) amalgamation of banking companies; or (g) any other mode of acquisition. All shares acquired by common shareholders, who are also sponsor shareholders, of amalgamating banking companies in amalgamation transaction shall be considered Sponsor Shares.

ii) Sponsor Shareholders mean all those shareholders of a bank holding sponsor shares. The members of the Board of Directors of a bank holding sponsor shares will be considered Sponsor Directors.

5. These instructions shall not be applicable to the shareholding of Federal and provincial governments in banks.

6. The above instructions have been issued in exercise of the powers conferred on SBP under the Banking Companies Ordinance, 1962. All the banks are advised to ensure meticulous compliance of these instructions. Banks which are already in compliance of these instructions shall confirm the same in writing to SBP through their Company Secretary.

7. The above instructions shall supersede BPRD Circular Letters No. 44 dated 26th August 1997, No. 1 dated 3rd January 1998 and No. 11 dated 21st April 2000 and letters No. BPRD(RU-28)/682-22(ii)/15315/2001 dated 24th October 2001 & BPD(PU-33)682-22(ii)/2004/12355 dated 28th September 2004.

Please acknowledge receipt.

Encl: As above