The State Bank of Pakistan amended Regulation R-6 of its Prudential Regulations for Corporate/Commercial Banking to set new investment limits for all banks and development finance institutions. BPRD Circular Letter No. 22 was issued on 23 October to formalise these changes.
Tier-I capital figures are to be derived from the most recent annual audited financial statements or half-yearly reviewed reports. A specific cap applies to any single startup, including those in the fintech sector, which must remain at the lower of Rs. 500 million or 5 percent of Tier-I capital.
For units in private equity funds, REITs, or mutual funds, the limit is set at the lower of 20 percent of the fund's units or 5 percent of Tier-I capital. Banks and development finance institutions are required to maintain an approved policy for equity investments.
This policy must incorporate an internal evaluation process to ensure each investment decision is assessed objectively. The evaluation process must weigh the bank's financial position, risk appetite, expected returns, expertise, business strategy, and a planned exit strategy.
Strategic investments and all types of private equity and mutual funds will be counted toward these limits. Units of the National Investment Trust are excluded from these restrictions until the trust is privatised.
The State Bank of Pakistan stated that all other existing instructions regarding this subject remain unchanged.
