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BANKING POLICY AND REGULATION DEPARTMENT
BPRD Circular No. 8
All Scheduled Banks
PRUDENTIAL REGULATIONS FOR BANKS
Please refer to BCD Circular No. 15 dated August 29,
1992 as amended from time to time.
The following amendments are made in the existing Prudential Regulations with immediate
effect:-
PRUDENTIAL REGUALTION-II
Para-1 of the above regulation may be replaced as under:--
Contingent liabilities of a bank shall not exceed at any point of time 10 times of its
paid up capital and general reserves (free of
losses). In case of branches of foreign banks operating in Pakistan, capital will mean
capital maintained under Section 13(3) of
the Banking Companies Ordinance, 1962. Following shall not constitute contingent
liabilities for the purpose of this
regulations:--
a) Bills for collection.
b) Forward foreign exchange contract, weightage of 50% shall be given to bid/mobilisation
advance/performance bonds.
c) Obligations under Letters of Credit and Letters of Guarantee to the extent of cash
margin retained by the bank, and;
d) Letters of Credit/Guarantee issued on behalf of the Federal/Provincial Government and
established through State Bank of
Pakistan provided payment is guaranteed.
PRUDENTIAL REGULATION-III
The following new Para may be added after the words "clean facilities granted to
finance the export of commodities eligible
under Export Finance Scheme shall be exempt from the per party limit on clean
facilities.":--
Financing covered by Export Credit Guarantee Insurance Scheme may also be excluded from
per party limit of Rs 100,000/-
on clean facilities.
PRUDENTIAL REGULATION-IV
Para 3 (a) of Regulation-IV may be substituted by the following:--
3(a) Banks shall strictly observe the regulation when sanctioning fresh/additional credit
facilities. Following relaxation is hereby
granted upto 30-06-1999 for renewing existing facilities:--
Total accommodation availed by a borrower from banks/financial institutions may exceed 10
times of the capital and reserves
(free of losses) of the borrower provided the borrower injects additional equity during
the extended period.
PRUDENTIAL REGULATION-V
The above regulation may be substituted by the following:--
Banks shall ensure that:
(a) Current asset to current liability ratio of the borrower does not fall below the
minimum indicated hereunder:--
i) upto 30-0601998 0.9:1
ii) As from 30-06-1999 1:1
Current maturities of long-term debt not yet due for payment may be excluded form the
current liabilities for the purpose of
calculating these ratios. Lease rental receivable within the next twelve months as
disclosed in the notes to the annual audited
accounts shall be treated as current assets for the purpose of calculating these ratios.
(b) Fresh/additional accommodation in the form of long-term debts shall be provided on the
basis of a debt equity ratio not
exceeding 60:40 provided the differential between required and existing ratio is made good
during the extended period i.e. upto
30th June, 1999. Provided further that where a different debt equity ratio has been laid
down by the Government the ratio laid
down by Government shall apply.
(c) Loans to individual borrowers not exceeding Rs 500,000/- per borrower shall be exempt
form the application of this
regulation.
PRUDENTIAL REGUALTION-X
A new Para-4 may be added at the end of regulation as under:-
4. Banks are advised to obtain clearance form the State Bank of Pakistan before fixing any
charges (relating to exports) other
than these mentioned in this regulation.
PRUDENTIAL REGULATION-XXII
Para 1 & 2 of the above regulation may be substituted as under:--
1. The non-reconciliation of Pak/Inter-Bank Accounts and non-settlement of Suspense
Account entries for long periods have
the potential of posing serious risks to banks. With a view to guard against these risk
inherent in neglecting timely settlement of
entries booked in the Inter-Branch Accounts 9by whatever name called) and the Suspense
Accounts, it is hereby directed as
follows:--
i) All the entries outstanding in the Inter-Branch Accounts and/or Suspense Account as on
31st March, 1997 shall be
reconciled and cleared at the earliest but not later than 30th June, 198.
ii) entries booked in the Pak/Inter-Branch Accounts and/or Suspense Account on or after
1st April, 1997 must be
reconciled/cleared and taken to the proper head of account within a maximum period of 30
days from the date entry is made in
the above-mentioned accounts.
2. Entries made in Suspense Account on account of tax at source, advance tax paid, tax
recoverable, advance expense on new
branches, advance rent paid, legal expenses, mark-up/service charge recoverable, Qarze
Hasna for marriage, and forward
cover fee, may be classified as "Other Assets" and the above instructions shall
not be applicable to the foregoing items.
Besides, entries relating to frauds and forgeries, cash theft and looted, payments against
equity, scrips/debt instruments and
contributory payments of capital nature to be capitalised at a later stage shall also be
excluded from the purview of the said
regulation. The exclusion of entries relating to frauds and forgeries, cash theft and
looted will, however, be subject to the
condition that the same are cleared immediately on receipt of insurance claims.
Please acknowledge receipt.
Yours faithfully
(MANSUR-UR-REHMAN KHAN)
DIRECTOR
