Circular Letter No. 13 of 2020
The Presidents/Chief Executive Officerss
REGULATORY RELIEF TO DAMPEN THE EFFECTS OF COVID -19 -
PRUDENTIAL REGULATIONS FOR CORPORATE / COMMERCIAL BANKING
Please refer to BPRD Circular No. 06 of 2014 and BPRD Circular No. 13 of 2016; whereby revised Prudential Regulations for Corporate / Commercial Banking (PRs) and subsequent amendments in Regulation R-8 of PRs were issued.
2. The coronavirus (COVID-19) has been evolving as a strain to the global economy including that of Pakistan. Therefore, to dampen the adverse effects of COVID-19 and to enable the banks/DFIs continue to fulfil their role in funding the real economy, following has been decided:
Para 3 (b) of Regulation R-4: Margin Requirements [Exposure against Shares of Listed Companies]
- The margin requirement [from 30 percent to 20 percent] and margin calls [from 30 percent to 10 percent] for exposure against shares of listed companies have been relaxed due to prevailing volatility in the Pakistan Stock Exchange. The Banks/DFIs shall, therefore, trigger the margin call if margin falls below 10 percent and shall ensure to restore the margin to 20 percent within a reasonable period but not exceeding thirty days.
Para 5(d) of Regulation R-6: Financing against Shares / TFCs / Sukuk:
- In order to relieve the stress on the corporate / commercial sector, the Banks/DFIs are permitted to take exposure on any person against the shares issued by its group companies, provided the tenor of the financing facilities do not exceed one year.
The aforesaid treatment, specified at 2 (i-ii) above, shall be available for a temporary period of six months from the date of issuance of this Circular Letter and shall stand expired thereafter.
Para 1 (a) of Regulation R-8 [Annexure-V] – Loans & Advances
- The criteria for classification of “Trade Bills” have been relaxed by six months. The Banks/DFIs shall classify the “Trade Bills” as “Loss” when the payment obligation is not repaid / adjusted within 365 days of the due date.
Para 3(a) of Regulation R-8 - Rescheduling / Restructuring of Financing Facilities
- Banks/DFIs, upon a written request of an obligor received before 30th June 2020, will defer repayment of principal loan amount by one year, provided that the obligor will continue to service the mark-up amount as per agreed terms & conditions. The banks/DFIs will convey their decision to an obligor within 15 working days after the receipt of the written request. In case, banks/DFIs decide to decline the request of the obligor, they will record reasons for this decision in their response to the obligor. A copy of their response to the obligor will be submitted to Director, Offsite Supervision and Enforcement Department (OSED), State Bank of Pakistan. The banks/DFIs will also submit the detail about deferments granted by them to their borrowers at the end of each week, as per attached format, to Director, OSED. The abovementioned deferment will not affect the credit history of the obligor and accordingly will not be reported in the eCIB as restructuring.
- The financing facilities of such obligors, which are unable to service the mark-up amount or need deferment exceeding one year, may be rescheduled / restructured upon their request. If the rescheduling / restructuring is done within 180 days of the loans being past due, such financing facilities will continue to be treated as regular and reported in the ECIB accordingly.
- The Banks/DFIs shall not classify the financing facilities of obligors which have requested for deferment [2(iv)] or rescheduling / restructuring [2(v)], unless the payment obligations are past due by 180 days. If the deferment or the rescheduling / restructuring is not executed successfully within the specified period of 180 days past due, such financing facilities will be classified as “Doubtful” as per prevailing instructions [Para 1(a) and (b) of Regulation R-8 of PRs].
- The regulatory instruction, w.r.t. treatment of accrued mark-up income of regular financing facilities which have been rescheduled / restructured more than once, prescribed vide BPRD Circular No. 13 of 2016, shall not be applicable on such financing facilities rescheduled / restructured under in Para 2 (iv-v) above.
The aforesaid instructions, except 2(iv), shall stand expired on March 31, 2021; and afterwards prevailing instructions on the subject shall be applicable.
Para 4 (c) of Regulation R-8: Impairment in Value of Securities
- Banks/DFIs may, if they so desire, recognize impairment loss, if any, resulting from the valuation of listed equity securities held as “Available for Sale” (AFS), in phased manner equally on quarterly basis during calendar year ending on 31-Dec-2020. However, early recognition of full impairment loss by Banks / DFIs is encouraged.
3. Moreover, the aforementioned treatment, specified at Para 2 (iii-vii) above, shall not be applicable on non-performing loans as of 31-Dec-2019.
4. All other instructions on the matter shall, however, remain unchanged.
5. Please acknowledge receipt.
Encl: Weekly Data Reporting Template
(Muhammad Akhtar Javed)