Circulars/Notifications / Infrastructure, Housing & SME Finance Department  

 IH&SMEFD Circular No. 09 of 2017
December 22, 2017

The Presidents/Chief Executives
All Banks/DFIs

Dear Sir / Madam,

Prudential Regulations for Small and Medium Enterprises' Financing

Please refer to IH&SMEFD Circular No. 02 dated May 06, 2016 on the above subject.

  1. With a view to further facilitate promotion of SME financing by providing enabling regulatory environment, Prudential Regulations (PRs) for SME Financing have been further revised. A summary of these amendments is given below:

    1. Regulation SME R-1: SME Specific Credit Policy

      1. For small enterprises (SEs) and medium enterprises (MEs) financing, condition of obtaining insurance for financing upto Rs 2 million has been made optional.
      2. Program-based products (including those of Islamic banking) are now allowed to be approved by Chief Executive Officer (CEO)/ President/ MD of the bank/ DFI on the recommendation of the concerned committee.
      3. Further, banks and DFIs are encouraged to promote and adopt program based financing.

    2. Regulation SME R-2: Borrowers Basic Fact Sheet and e-CIB Report
      Banks and DFIs must adopt standardized and simplified loan application forms to be circulated by PBA for SE and ME borrowers. Accordingly, the condition of obtaining Borrower’s Basic Fact Sheet (BBFS) from prospective SME borrowers has been abolished. However, requirement of obtaining e-CIB Report will remain unchanged.

    3. Regulation SME R-9: General Measures
      Banks and DFIs are advised to establish SME banking research & development divisions.

    4. Regulation SE R-7: General Reserve against Small Enterprise Finance
      The requirement of maintaining general reserve of 1% against secured SE portfolio has been abolished while general reserve to be maintained against unsecured SE portfolio has been reduced from 2% to 1%.

    5. Regulation SE R-10: Minimizing Turn-Around-Time
      Time period required for credit approval process has been reduced from 30 working days to 15 working days (from the date of receipt of complete information).

    6. Regulation ME R-6: Minimizing Turn-Around-Time
      Banks/ DFIs shall not take more than 25 working days for the credit approval process (from the date of receipt of complete information). In this respect, the following minimum points shall also be considered:

      1. The pre-approval requirements and post-approval requirements (security/collateral documentation etc.) shall be advised preferably in one go.
      2. The facility shall be disbursed only after security documentation is completed by the customer.

  2. The above changes in regulations are applicable with immediate effect. Banks and DFIs are advised to ensure circulation of these regulations among all their offices/ branches for meticulous compliance in letter and spirit. Non-compliance of Prudential Regulations will lead to punitive action under the relevant provisions of BCO, 1962.

Yours sincerely,


(Ghulam Muhammad)


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