SBP enhances clean lending limit for SME’s to Rs10 million

Karachi: The State Bank of Pakistan (SBP), in order to facilitate Small and Medium-sized Enterprise (SME) sector’s access to finance, on Friday, increased clean lending limit for SMEs to Rs10 million.

The banking regulator has made an amendment in Prudential Regulations for SME Financing and SME Regulation SME R-4 regarding Limit on Clean Facility been updated accordingly to enhance the clean lending limit for an SME borrower from Rs5 million to Rs10 million.

SBP’s SME, Housing and Sustainable Finance Department issued a circular in the regard advising heads of all banks and DFIs stringent compliance of the regulatory measures taken in light of National SME Policy 2021.

“Banks & DFIs can take clean exposure (facilities extended based on cashflows of an SME secured solely against personal guarantees) of up to Rs 10 million on an SME borrower,” the circular read and further clarified, “the clean exposure limit shall not include the clean consumer financing limits like Credit Card and Personal Loans, allowed to a sponsor of the said SME under Prudential Regulations for Consumer Financing”.

The central bank had already revised the definition of SMEs amending the respective regulations- Regulation SE R-1 and Regulation ME R-1. As per revised definition an enterprise having Annual Sales Turnover up to Rs150 million to be categorized as ‘Small Enterprise’ while enterprise with AST above Rs150 million to Rs800 million will fall in the category of ‘Medium Enterprise’.

The central bank advised Banks and DFIs to ensure circulation of the mentioned amendment among all their offices and branches for meticulous compliance in letter and spirit while non-compliance of Prudential Regulations will lead to punitive action under the relevant provisions of BCO, 1962.