The
Presidents / CEOs of
All Microfinance Banks
Dear
Sirs / Madam,
AMEMDMENTS
IN PRUDENTIAL REGULATION Nos. 12 AND 14
FOR MICROFINANCE BANKS (MFBs)
Please
refer to BSD Circular No. 18 dated October 14, 2002 regarding
Prudential Regulations for Micro Finance Banks (MFBs).
2. In order to bring the existing classification/provisioning/write-off
criteria for Micro Loans in line with international best
practices, while keeping in view the local conditions and
the evolving phase of MFB industry in Pakistan, certain
amendments have been made in the existing PR. Nos. 12 and
14 for MFBs to ensure soundness and stability of the Microfinance
banking industry. This will result in the following changes
in the existing criteria for classification, provisioning
and write-off:-
i) Elimination of OAEM category.
ii) Revision of aging criteria whereby now the loans /advances
overdue by 30 days or more (but less than 90 days) will
be classified as Substandard, 90 days or more (but less
than 180 days) as Doubtful and 180 days or more as Loss.
iii) Provisioning requirement for substandard category has
been increased to 25 percent.
iv) MFBs shall maintain a Watch List of all accounts delinquent
by 5 – 29 days.
v) The MFB/MFI shall maintain a General Provision equivalent
to 1.50% of the net outstanding advances (advances net of
specific provisions).
vi) All Non-Performing Loans (NPLs) shall be written off,
one month after the loan is classified as “Loss”,
this shall, however, not extinguish the MFBs’ right
of recovery of such written-off loans.
vii) Classification and provisioning shall be made at the
end of every month.
The revised criteria as per the attachment to this circular
shall come into force with immediate effect.
4.
All other instructions on the subject shall, however, remain
unchanged.
5.
Please acknowledge receipt.
Encl:
Revised PR. Nos. 12 and 14