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REGULATION-I
LIMIT ON BANK’S EXPOSURE TO A SINGLE PERSON
The total outstanding
financing facilities by a banking company to any single person shall not at any point of
time exceed 30 percent of the bank’s unimpaired capital and reserves subject to the
condition that the maximum outstanding against fund based financing facilities do not
exceed 20% of the unimpaired capital and reserves. In the case of branches of foreign
banks operating in Pakistan, the maximum exposure limit of 30% shall be calculated on the
basis of their assigned capital maintained under Section 13(3) of the Banking Companies
Ordinance, 1962 free of all losses and provisions, provided that maximum exposure on the
basis of fund-based facilities shall be 20% of the capital maintained under Section 13(3)
of the Banking Companies Ordinance, 1962, or Rs. 12 million whichever is higher.
2. No banking company shall:
(a) make any loans or advances against the security of its own share; or
(b) grant unsecured loans or advances to, or make loans and advances on the guarantee of:
(i) any of its directors;
(ii) any of the family members of any of its directors;
(iii) any firm or private company in which the banking company or any of the persons
referred to in (i) or (ii) is interested as director, proprietor or partner; or
(iv) any public limited company in which the banking company or any of the persons as
aforesaid is substantially interested; and
(v) its Chief Executive and its shareholders holding 5(five) percent or more of the share
capital of the bank, including their spouses, parents, and children or to firms and
companies in which they are interested as partners, directors or shareholders holding
5(five) percent or more of the share capital of that concern.
(c) Make loans or advances to any of its directors or to individuals, firms or companies
in which it or any of its directors is interested as partner, director or guarantor, as
the case may be, its Chief Executive and its shareholders holding 5(five) percent or more
of the share capital of the bank, including their spouses, parents, and children or to
firms and companies in which they are interested as partners, directors or shareholders
holding 5(five) percent or more of the share capital of that concern without the approval
of the majority of the directors of that banking company excluding the director concerned.
3. The term ‘person’ shall include any individual,
association or body of individuals, firm, or company whether incorporated or not and any
other juridical person.
4. For the purposes of paras 1&2 above accommodation shall mean and
include:-
(a) any form of loans and advances or credit facilities including bills purchased and
discounted;
(b) any loans and advances or bills purchased or discounted extended to another person on
the guarantee of the person;
(c) subscription to or investment in shares. Participation term Certificates, Term Finance
Certificates or any other commercial paper by whatever name called (at book value) issued
or guaranteed by the persons;
(d) any financing obligation undertaken on behalf of the person under a letter of credit
including a stand-by letter of credit, or similar instrument;
(e) loan repayment guarantees issued on behalf of the person;
(f) any obligations undertaken on behalf of the person under any other guarantees;
(g) acceptance/endorsements made on account;
(h) any other liability assumed on behalf of the client to advance funds pursuant to a
contractual commitment;
(i) In arriving at exposure per person weightage of 505 shall be given to:-
(i) documentary credits opened by banks; and
(ii) guarantees/bonds other than repayment guarantees.
(j) In arriving at per party exposure, 90% of;
(i) deposits of the party with the bank under lien; and
(ii) face value of FIBs lodged by the party as collateral shall be deducted.
BUT SHALL NOT INCLUDE:
(i) Loans and advantages given to the Federal or Provincial Governments or any of
their agencies under the commodity operations programme of the Government.
(ii) Loans and advances (including bills purchased and discounted) given to
Federal/Provincial Government or guaranteed by the Federal Government.
(iii) Pre-shipment/post-shipment credit provided to finance exports of goods covered by
letters of credit/firm contracts.
(iv) Letters of credit established for the import of plant and machinery.
(v) Obligations under Letters of credit and letters of guarantee to the extent of the cash
margin retained by the bank.
(vi) Letters of credit which do not create any obligation on the part of the bank to make
payments on account of imports.
(vii) The single person limit does not apply to facilities provided to banks.
