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KARACHI: Amending the Prudential Regulations for SME Financing, the State Bank of Pakistan (SBP) has allowed banks and DFIs to use credit information reports of private credit bureaus licensed by the SBP aimed at further facilitating SME financing by providing enabling regulatory environment. In order to facilitate banks and DFIs for SME financing, the SBP Monday announced amendment to Prudential Regulations for SME Financing. As per the amendment, Regulation SME R-2 of Electronic Credit Information Bureau (e-CIB) Report, while considering any credit proposal (including renewal, enhancement and rescheduling/ restructuring), banks & DFIs shall obtain e-CIB report on their prospective borrower(s) from Electronic Credit Information Bureau (e-CIB) of State Bank of Pakistan or any Credit Information Bureau licensed and regulated by the SBP. Banks & DFIs shall give due weightage to the credit report relating to the borrower(s) and concerned group. However, they can take exposure on defaulters keeping in view their risk management policies and criteria, provided they properly record reasons and justifications in the approval form.

Regulation SE R-9 of Restructuring/Rescheduling of Loans/Advances said that while reporting to the Credit Information Bureau (e-CIB) of State Bank of Pakistan or any Credit Information Bureau licensed and regulated by SBP, such loans/advances may be shown as ‘rescheduled/ restructured’ instead of ‘default’.

Regulation ME R-5 on Classification and Provisioning for Assets Rescheduling/ Restructuring, the banks & DFIs will ensure that Rescheduling is not done simply to avoid classification. While reporting to the Credit Information Bureau (e-CIB) of State Bank of Pakistan or any Credit Information Bureau licensed and regulated by the SBP, such loans/advances may be shown as ‘rescheduled/ restructured’ instead of ‘default’.

According to SBP, these changes in regulations are applicable with immediate effect. Banks and DFIs are advised to ensure circulation of these regulations among all their offices/branches for meticulous compliance in letter and spirit. Non-compliance of Prudential Regulations will lead to punitive action under the relevant provisions of BCO, 1962.

Copyright Business Recorder, 2021