It has come to the notice of State Bank of Pakistan that banks are treating Standby Letter of Credit (SBLC) at par with Letter of Credit (LC).

2- It is clarified that Standby Letter of Credit due to its nature would be treated as Financial Guarantee. As such, 100% of SBLC amount would be taken as exposure, while calculating exposure limits, for the purpose of R-1 of Prudential Regulation.

3- All the existing exposures against SBLC, under breach are required to be reported to this Department within seven days from issue of this letter. Further, banks are required to regularize their exposure limits by December 31, 2007.

4- All other instructions on the subject remain unchanged.

5- Please acknowledge the receipt.