KARACHI: The State Bank of Pakistan (SBP) has revised equity investment limits for banks and Development Finance Institutions (DFIs), requiring them to cap their aggregate investment in the shares of any single company at the lower of 5 percent of their Tier-I Capital, or 10 percent of the investee company’s paid-up shares.
The SBP has announced to revised prudential regulations governing equity investments by banks and DFIs, introducing specific limits for investments in individual companies, start-ups, mutual funds, Real Estate Investment Trusts (REITs) and private equity funds.
Under the revised Regulation R-6 of the Prudential Regulations for Corporate or Commercial Banking, the aggregate investment of a bank or DFI in the shares of any single company must not exceed the lower of 5 percent of its Tier-I Capital, as reported in the preceding half-yearly reviewed or annual audited financial statements, or 10 percent of the investee company’s paid-up shares.
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For investments in start-ups, including fintech start-ups, the aggregate investment limit has been set at the lower of 5 percent of Tier-I Capital of the bank/DFI reported in preceding half-yearly reviewed/annual audited financial statements or Rs500 million. Meanwhile, investments in units of mutual funds, REITs and private equity funds must not exceed the 5 percent of Tier-I Capital of the bank/DFI reported in preceding half-yearly reviewed/annual audited financial statements or 20 percent of units of any Mutual Fund/REIT/Private Equity Fund.
The SBP has also directed banks and DFIs must have an approved policy incorporating therein an internal evaluation process for an objective analysis and assessment of their equity investment decisions, which must consider factors including, inter alia, financial standing of the bank/DFI, aggregate investment portfolio, risk appetite and expected return, level of expertise, business strategy including exit strategy etc.
Furthermore, exposure arising from strategic investments and investments in units of all forms of mutual funds and private equity funds will be included in the aggregate investment limits prescribed under the revised regulation. However, National Investment Trust (NIT) units will remain excluded from these limits until the trust’s privatisation.
The revisions amend paragraphs 1(A) and 1(B)(iv) of Regulation R-6, originally issued under BPRD Circular No. 06 of 2014 and subsequently amended through BPRD Circular Letter No. 07 of 2021 and BPRD Circular Letter No. 04 of 2022. According to SBP, all other existing instructions on the subject will remain unchanged.
Copyright Business Recorder, 2026
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