KARACHI: Amending the Prudential Regulations for SME Financing, the State Bank of Pakistan (SBP) has announced to increase the clean lending limit for SMEs by 100 percent to ease access to finance.
With a view to further facilitate SMEs access to finance State Bank increased clean lending for SMEs. Now the SMEs can avail up to Rs 10 million financing against personal guarantees.
Accordingly, the SBP has made amendments in the Regulation SME R-4 of Prudential Regulations for SME Financing to enhance the clean exposure limit.
Embrace SME financing as core business, SBP asks banks
As per previous regulation of SME R-4, Banks & DFIs can take clean exposure, a facility secured solely against personal guarantees, on an SME borrower up to Rs 5 million and before taking clean exposure, banks & DFIs were required to obtain a declaration from the SME to ensure that the accumulated clean exposure on an SME does not exceed the prescribed limit mentioned above.
Now as per amendment in the SME R-4 titled “Limit on Clean Facility”, Banks & DFIs can take clean exposure, facilities extended based on cash flows of an SME secured solely against personal guarantees, of up to Rs 10 million on an SME borrower. As per revised SME R-4 Para, the clean exposure limit will not include the clean consumer financing limits (Credit Card and Personal Loans etc.) allowed to a sponsor of the said SME under Prudential Regulations for Consumer Financing“.
In addition, SBP has advised the Banks and DFIs to ensure circulation of this amendment among all their offices and 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.
It may be mentioned here that aimed to enhance the financing to SME sector, SBP has already asked all the banks and DFIs for preparation of a comprehensive SME Specific Credit Policy duly approved by their Board of Directors. The Credit Policy must specially mention to Small Enterprises (SE) financing keeping in view their specific characteristics and business conditions.
SBP, as a part of its Vision 2028, has decided to double SME financing to Rs 1.1 trillion over the next five years, with Rs 100 billion to be added to the SMEs’ outstanding portfolio by the end of June 2025.
Copyright Business Recorder, 2024
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