With
a view to protect the interest of foreign currency depositors
under FE 25 and also to ensure a prudent utilization of these
foreign currency deposits by banks and NBFIs concerned,
the following Prudential guidelines are issued with
immediate effect:-
“PRUDENTIAL
REGULATION - XXVIII a.
Banks/NBFIs shall not invest FE 25 deposits in foreign currency/local
currency denominated junk bonds, shares, hedge funds or other
such high risk / high return instruments. Neither, they shall
invest / place such deposits in fund management schemes of
other banks / NBFIs, whether in Pakistan or abroad.
b.
Banks / NBFIs will be free to decide the rate of return on
such deposits, provided the maximum rate of return offered
on such deposits does not exceed LIBOR applicable on the date
of determination of such return / profit. Accordingly, the
previous instructions issued under para B(2) of FE Circular
No. 25 dated June 20, 1998 stand modified to this extent.
c.
Banks/NBFIs shall be required to maintain the prescribed ratio
of Cash Reserve against FE 25 deposits in US Dollars.
d.
Per party lending/ placements against FE 25 deposits, whether
in Pakistan or abroad, shall not exceed twenty percent of
the equity (net of accumulated losses) of the banks / NBFIs
or the party / institution to whom the funds are being lent
or placed with, whichever is lower. Furthermore, compliance
with all other relevant Prudential Regulations / Rules of
Business for NBFIs shall be ensured.
e.
Banks/NBFIs shall be free to use FE 25 deposits for their
trade-related activities provided the exchange risks are adequately
covered and a square position is maintained.
f.
Foreign currency deposits mobilized under FE 25 scheme should
not at any point exceed twenty percent of the local currency
deposits of the banks / NBFIs at the close of business on
the last working day of the preceding quarter.”
All
Banks / NBFIs are advised to follow the above guidelines meticulously.
Please
acknowledge receipt.
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