Circulars/Notifications - Banking Supervision Department  
 BPRD Circular No. 34
October 20, 1999  

All Banks

Dear Sirs,

PRUDENTIAL REGULATION-VI-REVIEW OF INSTRUCTION ON
FINANCING FACILITIES AGAINST SHARES

It has been decided to substitute, with immediate effect, the existing Prudential Regulation No. VI by the following:

1. No bank shall:

    1. Provide unsecured credit of finance subscription towards floatation of share capital of public limited companies.

    2. Allow financing facilities, whether fund based or non-fund based, against the shares of companies not listed on the Stock Exchange.

    3. Provide loans and advances to any public limited company against the security of its own shares. The existing lending against such shares shall be regularized within 180 days of the date of issue of this Circular.

    4. Provide financing against ‘sponsor director’s shares’ (issued in their own name or in the name of their family members) of private banks.

    5. Provide financing to any one person (whether singly or together with other family members of companies owned and controlled by him or his family members) against shares (other than sponsor shares) of any commercial bank in excess of 5% of paid up capital.

    6. Allow financing facilities, whither fund based or non-fund based, against the shares of companies which are not in the Central Depository System.

2. Facilities against he shares of listed companies shall be subject to minimum margin of 50% of its average market value of the preceding 12 months. The banks are however, free to set higher margin requirements keeping in view other factors.

    1. Banks shall continue to obtain prior clearance from the State Bank for the purchase of shares of NBIs including Modaraba and Leasing Companies.

    2. Each bank shall furnish a statement on half yearly basis showing finance provided by them against pledge of shares latest by 20th January and 20th July for each preceding half-year (as per enclosed format).

    3. The above Regulations is enforced with immediate effect.

    4. Please acknowledge receipt.

Encl: As above.



Yours faithfully,
(Kazi Abdul Muktadir)
Director

       
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