Circulars/Notifications - Banking Supervision Department  
 BSD Circular No.31
December 06, 2000  

All Commercial Banks,

Dear Sirs,

CONSOLIDATION AND STRENGTHENING OF FINANCIAL
INSTITUTIONS - DIRECTIVE UNDER BANKlNG
COMPANIES ORDINANCE, 1962

1. In order to facilitate the banks and financial institutions to strengthen their competitive ability both domestically and internationally, to help them become more cost effective by upgrading their technology and eliminating avoidable expenses, to build up their equity structure to the levels where the interests of depositors are adequately protected and to encourage the economies of scale and economies of scope in this sector, it has been decided to revise the minimum capital requirement for the banks. Accordingly, the banks are directed as follows:-

a) No banking company shall be permitted to undertake a full range of financial services unless and until it has a minimum paid up capital, net of losses, of Rupees one billion on or after 1st January 2003.

b) A banking company not meeting the minimum capital requirement as set hereinabove, shall ipso facto stand de-scheduled, and converted into a Non-scheduled bank (NSB) with effect from the dates as determined below:

i. On 1st January 2002 if it does not have a minimum paid-up capital, net of losses, of Rupees 750 million.

ii. On 1st January 2003 if it does not have a minimum paid-up capital, net of losses, of Rupees One billion.

c) Where a banking company so de-scheduled is short in meeting the minimum capital requirement of Rupees One billion by more than 25%, such Non-Scheduled Bank (NSB) shall not be eligible to collect deposits from the individuals including partnerships/sole proprietors, or provide any financial services to individuals including sole proprietors. Such NSBs shall only be permitted to operate in inter-bank market, make investments in government securities, and finance import/ export business within such limits as may be specified by the State Bank, on case to case basis.

d) Where a banking company so de-scheduled is short in meeting the minimum capital requirements of Rupees One billion by not more than 25 per cent, the State Bank on a request made to it in this behalf, may allow the banking company to continue accepting the deposits from their corporate/institutional depositors only upto the limit of total deposits mobilized by it as on 31st December, 2000 or total outstanding deposits as on 30th November 2000, which ever is lower, and provide such other support financial services as may be specifically allowed by the State Bank.

2. Where a bank or group of banks which meets the minimum capital requirements set up a subsidiary NSB, with the prior approval of the State Bank, for undertaking any one or set of specialized banking service to a specified segment of the market, the condition of minimum capital requirement shall not apply to such an affiliated Non-Scheduled Bank (NSB).

3. New banking licences specifying the range of banking activities shall be issued to all banking companies on the basis of paid-up capital to be raised by them by the due dates as stipulated in para 1 above.

4. The instructions regarding maintenance of capital and unencumbered general reserves for the purposes of the minimum capital requirements based on risk weighted assets and other instructions on the subject shall, however, remain unchanged.

Please acknowledge receipt.

Yours faithfully,
(KAZI ABDUL MUKTADIR)
Director

       
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