BPRD
Circular Letter No. 29 of 2009 |
September 25, 2009 |
The
Presidents/Chief Executives
All Banks/DFIs
Dear
Sir/Madam,
Financing Facilities to Related Parties
It
has come to our notice that some banks are not observing
Section 24 of the Banking Companies Ordinance, 1962 while
granting financing facilities to their related parties.
The said Section of BCO, 1962 is reproduced hereunder
for reference:
QUOTE
24.
Restrictions on loans and advances-
(1) No banking company
shall-
(a) make any loans or advances against the security
of its own shares; or
(b)
grant unsecured loans or advances to, or make loans
and advances on the guarantee of, -
(i) any of its directors;
(ii)
any of the family members of any of its directors;
(iii)
any firm or private company in which the banking company
or any of the persons referred to in sub-clause (i)
or sub-clause (ii) is interested
as director, proprietor or partner; or
(iv)
any public limited company in which the banking company
or any of the persons as aforesaid is substantially
interested.
(2)
No banking company shall
make loans or advances to any of its directors or to
individuals, firms or companies in which it or any of
its directors is interested as partner, director or
guarantor, as the case may be, without the approval
of the majority of the directors of that banking company,
excluding the director concerned.
UNQUOTE
2.
The Banks/DFIs are, therefore,
advised to ensure meticulous compliance of aforesaid provisions
of BCO, 1962 while extending all types of financing facilities,
including consumer finance, to related parties and members
of their Board of Directors.
3. Please acknowledge receipt.
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Yours truly,
Sd/-
(SYED IRFAN ALI)
Director
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