SBP Sets Startup Investment Limit for Banks at Rs500 Million

The State Bank of Pakistan (SBP) has introduced a startup investment limit for banks and development finance institutions, capping exposure to a single startup, including fintechs, at the lower of 5% of Tier-I capital or Rs500 million.

Startup Investment Limit and Other Rules

The central bank issued BPRD Circular Letter No. 22 on October 23, amending Regulation R-6 of its Prudential Regulations for Corporate/Commercial Banking. Limits are calculated on Tier-I capital from the latest half-yearly reviewed or annual audited financial statements.

Other limits under the amended rules:

• Shares of a single company: the lower of 5% of Tier-I capital or 10% of the investee’s paid-up shares.
• Units of a single mutual fund, REIT or private equity fund: the lower of 5% of Tier-I capital or 20% of the fund’s units.

Banks must also adopt an approved equity investment policy with an internal evaluation process covering financial standing, portfolio, risk appetite, expected returns, expertise and strategy, including an exit plan. Strategic investments and mutual or private equity fund holdings count toward the limits, while National Investment Trust (NIT) units are excluded until NIT is privatised. SBP said all other instructions remain unchanged.

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