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BRD Circular No. 14
30th November, 1993

All Banks

Dear Sirs,

Please refer to
BRD Circular No. 15 dated the 29th August, 1992 containing up-dated version of consolidated Prudential Regulations.

2. The under noted prudential Regulation is issued with immediate effect:-


Each bank is mandated to institute such systems or procedures or take such steps as it deems fit to ensure that defaulters are not accommodated. Every bank is therefore required to obtain information about the total outstanding liabilities to banks and financial institution (from Credit Information Bureau of the State bank) of any applicant seeking financial accommodation involving a sum of Rs. 0.5 million or more before approving any lending. In case of those who are reportedly in default no fresh accommodation whether fund based or otherwise would be allowed unless rescheduling or restructuring of outstanding liabilities is done to the satisfaction of lending banks by the respective borrower. If in exceptional circumstances, a banks by the respective borrower. If in exceptional circumstances, a bank decides to provide such financing to any person, form or company who is reportedly a defaulter as per information supplied by the Credit Information Bureau or any other bank/DFI, it shall place on record circumstances or reasons necessitating grant of any accommodation in such cases. The State bank may as necessary undertake special inspection of such exception.

(i) * A person, whether natural or juridical, shall be deemed to be a defaulter if he (or his dependent family members or concerns owned or controlled by him or concerns in which he or his ** dependent family are ***major shareholders) has failed to pay off or liquidate any fiduciary obligation towards any banking company of a legitimate financial institution in Pakistan as was agreed upon or required under the terms and conditions of availment of the financing facility or to do or perform am act agreed to or undertaken in writing to be done or performed by him and such failure has continued for a period of 365 days from the date on which he was required to make the payment or to do or perform the act.

ii) ** Family members mean family members as defined in the Banking Companies Ordinance, 1962.

iii) *** Major shareholding in the context of explanation (I) above, would mean 10% or more holding in the shares of a particular enterprise by a person or his dependent family members or concerns owned or controlled by him or his dependent family members.

2. Any bank whose aggregate overdues position (including defaulters against Contingent Liabilities) hereafter would register persistent deterioration shall submit quarterly review of its infected portfolio to State Bank which should spell out the reasons for such deterioration, and remedial measures to address and reverse the trend. Failure to reverse the trend would lead to special inspection by the State Bank with a view to taking appropriate action.

3. The banks would scrupulously scrutinise professional management and staff placing and ensure that officers responsible for imprudent lending are dealt with seriously.

4. Banks will set out clear procedures and regulations for processing of leans. The banks would ensure strict adherence thereto. A copy of these regulations and procedures would be supplies to the State bank of Pakistan.

5. Any bank or financial institution, or its Chief Executive Officer (by whatever name called) or Director or any other Officer who is guilty of violating or disregarding the provisions of this Regulation shall render itself/himself liable for penalties and without prejudice to action as to penalties to other actions provided for under the Banking Companies Ordinance, 1962 as amended from time to time.

Yours faithfully,


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