The Presidents / Chief Executives
All Banks / DFIs
All External Auditors Appointed by the Banks / DFIs

Dear Sirs / Madam,

Compliance of Prudential Regulations on
Classification / Provisioning

   Please refer to BSD Circular No. 07 dated the 12th October, 2007 on the subject “Amendments in Prudential Regulations - Provisions for Loans and Advances” in terms of which the benefit of FSV has been withdrawn against all NPLs (except against Housing Finance) for calculating provisioning requirement with effect from December 31, 2007.

2) All banks / DFIs are hereby advised to ensure strict compliance of the above referred circular during the course of preparation of the financial statements for the year ending 31st December, 2007 and onwards. External auditors of banks / DFIs are also advised under Section 35 of the Banking Companies Ordinance, 1962 to ensure while issuing their opinion on the financial statements as of 31st December, 2007 and onwards that banks / DFIs have made full provisions as per requirements of the Prudential Regulations as amended vide BSD Circular No. 7 of 12th October, 2007.

3) Any violation of instructions on the subject will attract punitive action under relevant provisions of the Banking Companies Ordinance, 1962.

     Please acknowledge receipt.