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.