It has been decided to substitute, with immediate effect, the existing Rule-10 (ii) of the NBFIs Rules of Business by the following:

1. No NBFI shall:

1. Provide unsecured facilities to 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 or shares of its associated companies. 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 Banks/NBFIs.

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

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

7. Hold shares in any company whether as pledgee, mortagagee, or absolute owner, of an amount exceeding thirty percent of the paid-up share capital of that company or thirty per cent its own paid-up share capital and reserves, whichever is less.

2. Facilities against the shares of listed companies shall be subject to minimum margin of 30% of its average market value of the preceding 12 months. The NBFIs are however, free to set higher margin requirements keeping in view other factors.

3. NBFIs shall obtain prior clearance from the State Bank for the purchase of shares of private banks/other NBFIs includingg Modaraba and Leasing Companies.

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

5. Please acknowledge receipt.

Encl: As above,