KARACHI – The State Bank of Pakistan (SBP) on Wednesday revised upward Statutory Liquidity Requirement (SLR) for the Islamic banks and Islamic banking branches.
The central bank under Section 36 of the SBP Act, 1956, and Section 29 of the Banking Companies Ordinance, 1962 made and notified changes in its earlier circulars, BSD Circulars No 26 of October 17, 2008 and No 13 of June 09, 2008, through issuing DMMD Circular No 1 of 2011.
To come into effect from April 1, the circular provides that the Islamic banks would have to maintain an SRL up to 14 percent (excluding CRR) of the total demand liabilities (including time deposits with tenors of less than one year). While the time liabilities, including time deposits with tenor of one year and above, would not require any SLR, it added.
The circular said the SLR could be maintained in the form of cash in hand, balance with National Bank of Pakistan in current account, balance with the SBP in current account and Un-encumbered Approved Securities as notified by the central bank from time to time. For the SLR purpose, the circular said, all holdings of the Government of Pakistan Ijara Sukuk (GIS) would be fully counted while the holdings of ‘SBP approved’ SLR eligible ‘Public Sector’ Sukuks would be counted up to seven percent of total time and demand liabilities.
“However, single issuer holding limit of five percent of total time and demand liabilities stands abolished. This will also be effective from April 01,” the circular said. All other instructions on the subject shall remain unchanged, it concluded. SBP relaxes “exposure” rules on L/C issuance: The State Bank of Pakistan (SBP), on Wednesday, relaxed its prudential rules for the banks and Development Financial Institutions (DFIs) in terms of credit rating exposure.
According to SBP Chief Spokesman Syed Wasimuddin, the central bank had made three categories under which banks and DFIs would be issuing Letter of Credits (L/C) to applicants having a minimum credit rating ranging from zero to “AA” and above. Earlier, banks and DFIs used to issue and accept the L/Cs to and from only those institutions having a minimum rating exposure of “AA” and above, he told Pakistan Today.
The State Bank, through issuing BPRD Circular No 03, exempted short and long-term bills purchased/discounted for the purpose of ‘exposure’ as given in Prudential Regulations for Agriculture Financing, Corporate/Commercial Banking and SMEs Financing. “Based on the feedback received from the banks and DFIs, it has been decided to exempt bills purchased/discounted for the purpose of ‘exposure’ mentioned at Serial No (i) of the definition of ‘exposure’,” the circular said.
The exemption has been granted on the short-term bills having less than one year maturity and involving aggregate amounts of $0.25 million and above on account of one person. No restriction has been placed on such bills in terms of minimum rating of the L/C issuing and accepting banks/DFIs assigned by standard and poor, Moody’s, Fitch-Ibca, Japan Credit Rating Agency (JCRA) or the credit rating agency on the approved panel of the State Bank.
Those bills, involving an aggregate amount of above $0.25 million, would require a minimum rating of “BBB” and above. Long-term bills, to be matured in over a year period, fall under the third category that has no specified limit for the aggregate amount and requires a minimum credit rating of “A” and above.
“Refer to the definition of ‘exposure’ given in Prudential Regulations for Agriculture Financing, Corporate/Commercial Banking and SMEs Financing,” the circular notified the banks and DFIs. All other instructions on the subject shall, however, remain unchanged, the circular concluded.
