National Bank of Pakistan (NBP) will start lending to small and medium enterprises (SMEs) in a big way as the State Bank of Pakistan (SBP) has provide an exemption of lending to SME sector.
Head of retail banking NBP, Amer Siddiqui said here on Wednesday that State Sank has allowed National Rank to take exposure to the SME sector to the extent of two times of the bank's equity, NBP has a total equity of Rs 30 billion, of which tier-one is approximately Rs 18 billion.
He said that NBP President Syed Ali Raza had approached SBP early this month requesting the Central Rank to raise lending amount to SME after the new Prudential Regulations for SMEs promulgated from January 1, 2004.
"The SBP in its reply of August 13, 2004, has agreed to our request and granted this permission", he added. He said that NBP has already lent Rs 18 billion to the SME sector.
Amer Siddiqui said NBP has earmarked a credit line of Rs 36 billion for SME sector in the next three years. "We will be now freely lending to SME sector which is the backbone of the industry as well as exports", he noted.
He pointed out that SBP has allowed NBP to exclude its exposure taken on SMEs under the government-directed schemes like self employment scheme and "yellow cab" scheme from total exposure while calculating the total exposure limit under Regulation R-7 of the Prudential Regulations for SMEs.
However, the Central Bank has asked NBP to take all possible efforts to reduce its huge stuck up SME exposure.
SBP further said that it will monitor NBP's recovery performance on periodical basis and asked the bank to submit a report on quarterly basis containing the update total exposure to the SME sector and the percentage of classified amount.
Amer Siddiqui said that SBP has provided this exemption keeping in view the credit risk profile of NBP, as well as its profitability.
To a question about the stuck up amount under self-employment and yellow cab schemes, he said that it is fully provided in our accounts.
However, he made it clear that NBP will vigorously pursue its recovery drive to recover stuck amount from defaulters.
Siddiqui said that "NBP Karsaz" is exclusively for SME sector, which included down stream industries in textile, auto, agro-based units, exporters and retailers.