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STATE BANK OF PAKISTAN BANKING CONTROL DEPARTMENT CENTRAL DIRECTORATE KARACHI

BCD Circular No. 6
4^th February, 1992

All Commercial Banks

Dear Sirs,

PRUDENTIAL REGULATIONS FOR BANKS

Please refer to BCD Circular No. 1 dated the 7^TH January 1992. In pursuance of the meeting held with the bankers on the subject, following modification/clarifications are issued.

REGULATION - I.

LIMIT OF BANK’S EXPOSURE TO A SINGLE PERSON
1. The single person limit does not apply to facilities provided to banks.

2. In arriving at exposure per person weightage of 50% shall be given to –

(a) documentary credits opened by banks and

(b) guarantees/bonds other than repayment guarantees.

3. In arriving at per party exposure, 80% of (a) deposits of the party with the bank under lien and (b) face value of FIBs lodged by the party, as collateral shall be deducted.

REGULATION - II

LIMIT ON BANKS EXPOSURE AGAINST CONTINGENT LIABILITIES.
Following shall not constitute contingent liabilities for the purpose of this regulation.

(a) Bills for collection and

(b) forward foreign exchange contracts, weightage of 50% shall be given to bid/mobilization advance/performance bonds.

REGULATION – IV

LINKAGE BETWEEN BORROWERS EQUITY AND TOTAL BORROWING FROM BANKS.
The regulation shall not apply to loans not exceeding Rs. 500,000/- per borrower.

(a) Compliance with this regulation shall be judged on the basis of written statement filed by borrower.

TIME FRAME FOR ENFORCING REGULATIONS
(a) The regulations shall come into force w.e.f. 1^st July, 1992.

(b) Regularization of the existing position shall be completed by 30^th June 1993.

(c) The banks would however endeavor to undertake transactions in line with the prudential regulations with immediate effect wherever feasible. However, it will become mandatory 1^st July 1992. The process of regularization shall commence with immediate effect and completed as quickly as possible but not later that 30^th June, 1993.

Please acknowledge receipt.

Yours Faithfully,
(SAEED HAIDER BHATTI)
Senior Deputy Director

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