The Presidents / Chief Executives
All Banks/DFls

Dear Sirs/Madam,

MINIMUM CAPITAL REQUIREMENTS FOR BANKS/DFIs

1. Please refer to BSD Circular No. 6 dated October 28, 2005 on the captioned subject, wherein enhanced minimum capital requirements (MCR) were communicated to the banks and DFIs.

2. All banks and DFIs who, at present, are anticipating shortfall in MCR compliance for the coming year-ends (viz. December 2007 and onward) are required to develop realistic plans accordingly on annual basis to meet the prescribed MCR. A copy of such plan, duly approved by their Board of Directors, should reach Banking Surveillance Department by 30th April of every year (i.e. upto 2009). The plan to meet the threshold of Rs. 4 billion by 31st December 2007 may be submitted by 30th April 2007 positively.

3. Failure of the banks/DFIs to meet the prescribed MCR of Rs. 4 billion by December 2007 will automatically invoke penal provisions. These include:

• Imposition of restrictions on bank’s business, including restrictions on acceptance of deposits and lending as may be deemed fit by the State Bank.
• Descheduling of the bank, thereby converting it into a non-scheduled bank.
• Cancellation of the banking license if the State Bank believes that the bank is not in a position to meet the minimum paid up capital requirement.

Please acknowledge receipt.