The SBP issued a circular on Saturday, which says that it has been decided to withdraw, with immediate effect, the margin requirements conveyed to banks.
"Banks are, henceforth, free to fix or determine the margin requirements on facilities provided by them to their clients for Corporate, SME and Consumer Financing products, taking into account the risk profile of the borrower(s)," said the circular.
The circular further said: "Banks are aware that SBP has done away with the directed credit regime and at present they have been following their own lending policies duly approved by their respective Board of Directors."
Banks are encouraged to take lending decisions on the basis of the risk profile of the borrower(s) and accordingly secure their interests, said the circular.
However: (i) margin restrictions on shares/TFCs shall be governed as per existing instructions under Prudential Regulations for Corporate/Commercial Banking (R-6), for SMEs Financing (R-5), for Consumer Financing (R-6), and should be implemented in letter and spirit;
(ii) existing cash margin requirement of 100 percent on Caustic Soda (PCT heading 2815.1200) for opening Import Letter of Credit as advised by Federal Government and notified in terms of BPD Circular Letter No.5 dated 4th May, 2002, shall continue to remain applicable until further instructions.
It is also added that the relaxation given above is not applicable in case of items, import of which are banned by the Government. Banks have been advised not to open import letter of credit for these items in any case till such time as the lifting of ban on any such item is notified by the State Bank.
It may be added that SBP shall continue to exercise its powers for fixation/reinstatement of margin requirements on financing facilities being provided by banks for various purposes including Import Letter of Credit on a particular item(s), as and when required.