Key Takeaways
- State Bank of Pakistan increased the financing limit to Rs10 billion from Rs3 billion.
- The change aims to support larger investment projects and working capital requirements.
- Banks and DFIs will now have greater flexibility in extending credit to unrated companies.
In a move to enhance access to bank financing for the private sector, the State Bank of Pakistan (SBP) has significantly raised the aggregate exposure limit for unrated large private sector borrowers. The new ceiling stands at Rs10 billion, up from the previous limit of Rs3 billion.
This decision was made following a review of the macroeconomic environment and feedback received from the banking industry. According to SBP, these changes will be incorporated into the Revised Instructions for Credit Risk (Standardised Approach) under the Basel-III framework, effective as of September 30, 2026.
The increase in the exposure limit is expected to provide greater financing flexibility to large private sector companies that do not possess external credit ratings. This move aims to support private sector investment and facilitate business expansion, thereby contributing to economic growth by easing financing constraints for eligible borrowers.
Banks and Development Finance Institutions (DFIs) will now have the ability to extend larger sums of money to unrated large private sector borrowers, enabling them to meet the financing needs of expanding businesses. However, all applicable prudential regulations, internal risk management policies, and credit assessment standards must still be adhered to.
Banking analysts believe that this move is expected to support private sector investment and contribute positively to economic growth by addressing the financing needs of larger companies without external ratings.
The SBP has stated that all other instructions related to credit risk will remain unchanged. This decision reflects a strategic effort to improve the financial health and competitiveness of the private sector in Pakistan.
