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STATE BANK OF PAKISTAN NBFIs REGULATIONS AND SUPERVISION DEPARTMENT CENTRAL DIRECTOTATE KARACHI

NBFIs Circular No. 29
11^th October, 1994

Chief Executives of All NBFIs

CREATION AND BUILDING UP OF RESERVES

Please refer to rule 3 on the above subject notified vide NBFIs Circular No. 1 dated the 5^th December, 1991.

2. A question has arisen as to whether the reserve created in terms of rule 3 can be utilized for issuing a stock dividend at a later date. It is clarified that the words stock Dividends shall be treated as appropriation for the purpose relate to sub-rule (b) of rule 3 only, and not to rule 3 as a whole. In other words one the reserves are equal to the paid-u capital, not less than 5% of after tax profits would be required to be credited to the reserve fund, which may also be used for stock dividends. Since such stock dividends would increase the paid-up capital, the NBFI would be required to transfer further amounts to the reserves in order to comply with sub-rule (a).

3. Please acknowledge receipt.

Yours faithfully,

(YASMEEN AHMAD ZAI)
Joint Director

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