The State Bank of Pakistan has tightened how much banks and development finance institutions (DFIs) may put into equities and alternative funds. The SBP bank investment limits revision, set out in BPRD Circular Letter No. 22 of October 23, amends Regulation R-6 of the Prudential Regulations for Corporate/Commercial Banking and applies to all banks and DFIs.
In plain terms, the central bank is capping exposure to individual companies, startups, mutual funds, real estate investment trusts (REITs) and private equity funds so that no single bet grows too large relative to a bank’s strongest capital base.
Caps on shares, startups and funds
For shares of any single company, a bank’s total investment must remain within the lower of two ceilings: 5 percent of its Tier-I capital, or 10 percent of the paid-up shares of the company being bought. Tier-I capital—the core cushion of a bank’s own funds—will be taken from the latest half-yearly reviewed or annual audited financial statements.
For any single startup, including fintech startups, the ceiling is the lower of 5 percent of Tier-I capital or Rs500 million. For units of any one mutual fund, REIT or private equity fund, the limit is the lower of 5 percent of Tier-I capital or 20 percent of that fund’s units.
Strategic investments, and holdings in mutual funds and private equity funds of all kinds, count toward these ceilings. The SBP bank investment limits revision therefore folds both day-to-day portfolio stakes and longer-term strategic equity into the same arithmetic.
Formal equity policy now required
Banks and DFIs must also maintain an approved policy for equity investments. That policy has to include an internal evaluation process so each decision can be judged objectively against the institution’s financial standing, overall portfolio, risk appetite, expected return, expertise and business strategy, including a clear exit plan.
The circular does not rewrite every earlier instruction on the subject. The SBP said all other related directions remain unchanged. Separately, earlier this year the central bank had given local banks more room to manage foreign investment and dividends—an earlier step on overseas capital flows, distinct from this domestic equity-cap update.
What sits outside the new ceilings
Units of the National Investment Trust (NIT) are excluded from the new caps until NIT is privatised. Beyond that carve-out, the framework is meant to apply evenly across banks and DFIs when they take equity-style exposure through shares, startups or fund units.
For depositors and borrowers, the immediate news is regulatory rather than a change to published interest rates or fees. The practical effect is that lenders must size and document equity bets more tightly against Tier-I capital before committing large sums to any one company, startup or fund.
Aasan alfaaz mein
State Bank ne banks ke liye shares, startups aur funds mein paisa lagane ki nayi hadain laga di hain. Ek startup mein bank ab zyada se zyada Rs500 million ya apne Tier-I capital ka 5 percent—jo kam ho—laga sakta hai. Banks ko pehle se clear policy bhi rakhni hogi ke invest kab aur kitna karen. Aam account holders ke liye seedha naya charge nahi; yeh rules banks ko ek jagah zyada risk lene se rokne ke liye hain.
