State Bank withdraws general provision requirements for MFBs loans secured against gold or cash collateral

Karachi: State Bank of Pakistan SBP has immediately withdrawn general provision requirements for loans extended by Microfinance Banks MFBs against gold or other cash collateral. In case of all other loans, SBP reduced general provision requirement for MFBs by 50 basis points.

It has been decided to withdraw general provision requirements wherein loans have been secured against gold or other cash collateral with appropriate margin,’ says SBP circular issued to all Microfinance Banks on September 16, 2011. Further, in case of all other loans, MFBs shall henceforth maintain general provision of 1% instead of existing requirement of 1.5%.

After this amendment in Prudential Regulation for MFBs pertaining to General Provisioning Requirements, the pressure on minimum capital requirement and capital adequacy ratio of MFBs will ease. Previously, MFBs could not take benefit of gold & cash collateral while meeting general provisioning requirement which was 1.5% for entire loan portfolio.

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