Banking & Finance

SBP to cut CAR by 1%, Banks to lend additional Rs 760 billion

News Desk
Karachi: State Bank of Pakistan (SBP) and commercial banks have agreed to reduce Capital Adequacy Ratio (CAR) by 1 per cent to lend additional Rs 760 billion in advances.

Sources told that State Bank of Pakistan management held a meeting with Chief Executive Officers (CEOs) of Banks to consider regulatory relief for borrowers, possibility of giving markup relief, Banking operations and foreign exchange position.
Different decisions were taken.

1. CCB in CAR will be reduced by 1% due to which the banks can lend additional 760 billion rupees in advances

2. Limit for retail exposure will be increased from 120 million to 180 million, due to this risk Weightage will be reduced there giving relief in CAR.

3. Margin on share financing has been reduced from 30% to 10%. Banks will make a margin call at 20% and will allow thirty days to the Borrower to make up the margin.

4. Companies will be allowed to borrow against listed shares of their group companies. This window will be open for 6 months.

5. Trade bills which are currently classified as loss after 6 months will now be classified as loss after 12 months

6. Banks will be allowed to restructure their loans within 180 DPD. If the bank is considering to restructure the loan then it will not classify it as SS after 90 days. Both profit and principal can be restructured.

7. If the borrower asks to defer the principal payment, the bank will defer the same for a period Up to one year. if the bank declines borrower request it well be required to do it in writing under information to SBP.

8. The interest rate reduction should be passed on to the borrowers with effect from April 01, 2020,  by repricing the loans. Islamic banks should also find out specific structures to do this.

9. Parallel run of IFRS 9 has been deferred till July / August 2020

10: Banks ask to give relief on MDR, which Sbp agreed to consider.

Governor asked the banks to consider giving markup relief to their borrowers. Banks gave few options but It was agreed that PBA will revert to state bank on this.
Banking operations

Banks are allowed to operate with reduced number of branches. However at least 50% branches must be opened. More branches can be opened at the discretion of the Bank. Banks should properly communicate about this to the customer. The banking timing will be 10:00 a.m. to 4:00 p.m. and on Friday from 10:00 a.m. to 1:00 p.m. Saturday and Sunday will be off.

Bank’s call centre and ADC services must be up and running under all Circumstances
Foreign exchange position

SBP briefed on foreign exchange position of the country and told that foreign outflows from portfolio investment are limited, however new investment have stopped due to global situation . SBP is keeping an eye and the exchange position is currently comfortable.

On an inquiry from a bank about the possibility of giving some relaxation to exporters on forward contract settlement due to delay in realisation of export proceeds, SBP was of the view that the contract is between banks and the customer and the customer must honour its commitment

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