Thursday, May 23, 2013

Revised Prudential Regulations for Small and Medium Enterprise (SME) Financing

SBP has issued IH&SMEFD Circular No. 08 of 2013 in which they have issued revised PRs for Small & Medium Enterprises. Before this SBP issued separate Prudential Regulations (PRs) for SMEs in 2003 which has now further been revised with the following structure:

1. General Prudential Regulations that apply on both Small and Medium Enterprises
2. Specific Prudential Regulations for Small Enterprise Financing
3. Specific Prudential Regulations for Medium Enterprise Financing

Revised PRs are applicable with immediate effect for the fresh financing facilities. However, since the banks/DFIs need to segregate their existing SME portfolio according to the new definitions and revised classification criteria, Banks/DFIs are allowed a maximum implementation period upto September 30, 2013 for their existing portfolio. 

Revised Regulations (R-1) specifically require banks to prepare a comprehensive SME specific Credit Policy duly approved by BoDs. Risk Management Department is also requested to update existing policies, guidelines and procedures (including TAT as per SE R-10) to the effect and accordingly its approval from concerned quarters.

In these PRs they have provided different definition of Small Enterprises and for Medium Enterprises. This is because banks were probably much focusing on the medium level enterprises and small enterprises which are more in number and have much more need of bank credit, were being neglected. 

This seems a good step, as this shows that SBP is constantly working on their strategy of bringing credit for small businesses which play a very vital role in the development of economy. 

Why you took comprehensive test ?

Few Days back I got a call from Marketing Department of IBP in which they asked me that why you took comprehensive test for Charter Banker ? What was your motivation behind that? My answer was simple, "The tag of Chartered Banker".

Question comes in mind, why I need that ? Is that worth spending efforts, time and money? would it pay me back something ? Is that really necessary for my banking career? My Answer would be yes ! Although its new in Pakistan but this standard for banking qualification might earn repute in the coming days and it might be helpful for you in getting a good job or for showing off on your CV or Business card. But currently it seems that people don't care much about this certification. IBP has to develop and market it into a brand so people who are earning this charter should feel proud of it and get some reward from their organization.

However, another motivation behind this comprehensive test was that I would be able to review all the books once again before I go to AIBP exam in the coming winter. As this is very important to refresh your knowledge which fades away in your busy office routine.

The guide hinted that the response of comprehensive test would be pleasent ! So, hope for the best and get ready to show off your Charter of Certified Banker !

Good Luck !



Islamic Banks restrained by SBP to give special deposit rates

Islamic banks were providing special deposit rates to their customer
by foregoing their own share of profit. This practice was adopted by
the banks to compete in the highly challenging Enviornment of banking.
However, objecting this practice, SBP has barred the Scheduled Islamic
Banks to distribute profits with special premiums.
SBP has issued circular No.3 dated Nov 19, 2012 in this regard with
subject "Instructions for Profit & Loss Distribution and Pool
Management or Islamic Banking institutions "

Some Islamic Bankers are of the view that this step was done to curb
the high growth in deposits of Islamic Banks.


However, SBP has taken a stance that this step would bring more
transparency, disclosure & standardization to the Islamic Banking
System.