The State Bank of Pakistan (SBP), in order to facilitate small and medium-sized enterprise (SME) sector's access to finance, has increased the clean lending limit to Rs10 million.
The banking regulator made an amendment to the Prudential Regulations for SME Financing and the SME Regulation R-4 regarding the limit on clean financing facility was updated accordingly to enhance the clean lending limit for SME borrowers from Rs5 million to Rs10 million.
The SBP's SME, Housing and Sustainable Finance Department issued a circular, advising heads of all banks and development finance institutions (DFIs) to comply strictly with the regulatory measures taken in light of the National SME Policy 2021.
"Banks and DFIs can take clean exposure (facilities extended based on cash flows of an SME secured solely against personal guarantees) of up to Rs10 million on an SME borrower," the circular read and clarified "the clean exposure limit shall not include the clean consumer financing limits like Credit Card and personal loans, allowed to an SME sponsor under Prudential Regulations for Consumer Financing," it said.
The central bank had already revised the definition of SMEs by amending the respective regulations – Regulation SE R-1 and Regulation ME R-1.
As per the revised definition, an enterprise having annual sales turnover up to Rs150 million will be categorised as a 'small enterprise' while an enterprise with annual sales turnover above Rs150 million to Rs800 million will fall in the category of a 'medium enterprise'.
The central bank advised banks and DFIs to ensure the circulation of the amendment among all their offices and branches for compliance in true letter and spirit while non-compliance with the Prudential Regulations would lead to punitive action under relevant provisions of the Banking Companies Ordinance, 1962.
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