The State Bank of Pakistan (SBP) has increased the clean lending limit for Small and Medium-sized Enterprises (SMEs) to Rs10 million, aiming to facilitate their access to finance.
The banking regulator has amended the Prudential Regulations for SME Financing, specifically SME Regulation R-4, to raise the clean lending limit for an SME borrower from Rs5 million to Rs10 million.
The SBP’s SME, Housing, and Sustainable Finance Department issued a circular on Friday, advising the heads of all banks and Development Finance Institutions (DFIs) to ensure strict compliance with these regulatory measures, which are in line with the National SME Policy 2021.
“Banks and DFIs can take clean exposure (facilities extended based on the cash flows of an SME and secured solely against personal guarantees) of up to Rs10 million for an SME borrower,” the circular stated. It further clarified that “the clean exposure limit does not include clean consumer financing limits such as Credit Cards 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 by amending the respective regulations—Regulation SE R-1 and Regulation ME R-1. According to the revised definition, an enterprise with an Annual Sales Turnover (AST) of up to Rs150 million is categorized as a ‘Small Enterprise,’ while an enterprise with an AST between Rs150 million and Rs800 million falls under the ‘Medium Enterprise’ category.
The SBP also instructed banks and DFIs to circulate the mentioned amendments to all their offices and branches to ensure meticulous compliance. Non-compliance with the Prudential Regulations will result in punitive action under the relevant provisions of the Banking Companies Ordinance (BCO), 1962.
