History be taken by single party. Requirement of

History of SME bank

As a part of
financial sector reorganization program of government of Pakistan  in 1st January 2002 SME Bank Ltd
started its activities as a public limited company under the companies ordinance
1984 by combining Regional Development Finance Corporation (RDFC) and small
Business Finance Corporation (SBFC). The prime shareholder of SME bank is the
Government of Pakistan. Reason behind the formation of SME Bank Ltd was to
provide growth to Small and Medium enterprises sector in the country. And the
growth of the sector is possible only with specialized financial products and
services.

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SMALL ENERTPRISE

Following is the criteria for small
enterprises.

Number of employees

Number of employees in small enterprise should
be maximum 50 employees.

Turnover

Turnover of small enterprise should be Rs150
million.

Per party exposure
limit

In small enterprise loan of Rs 25 million can
be taken by single party.

Requirement of audited accounts

While giving loan to
small enterprise there is no condition of audit the financial statements if the
amount of loan is less than Rs15 million. If the amount of loan is more than Rs
15 million than it should be get audited by the practising chartered accountant
or Cost and management accountant.

Repayment capacity of borrower

Small enterprise usually have sale/purchase
books and records of cash received/paid through 
which bank can estimate their income to check repayment capacity of
borrower.

Collateral Valuation

Determination of value of security for
granting loan upto Rs5 million is either done by bank own evaluating staff or
by the evaluator approved by PBA and determination of  value of security for loan more than 5
million Rs is done by evaluator which is approved by PBA

Recovery of outstanding
dues

Bank can recover the outstanding dues from the
place rather than places at which they have authority.

General reserve
against Small enterprise finance

1% general reserve can be keep by bank against secured portfolio of small enterprise and 2 %
against unsecured portfolio of small enterprise.

 Classification of loans

For performing and
nonperforming loans assessment can be done subjectively whereas for program
base lending objective classification is done.

If borrower is paying interest on time in running
finance and bank is positive about him than it is not attract by subjective
classification rather it is attracted by objective classification.

Bank can take the
benefit of forced sale value of asset(FSV) of security which is taken while
providing loan according to the set guidelines.

Bank should check on
quarterly basis the amount of loan which is recovered.

External auditor will
verify the requirements for classification.

Rescheduling of loan

The bank reschedule the loan according to
their policy approved by the board of directors.

To avoid
classification rescheduling should not be done.

Rescheduling cannot
cause to make improvements in existing limits and ineligibility of borrower
form the fresh credit facilities.

The loan has been declassified by the bank if
the borrower eventually defaults

 

MEDIUM ENTERPRISE

Following is the criteria for medium
enterprise

Number of employees

Number of employees in case of medium
enterprise should be minimum 51 and maximum 250 employees.

Turnover

Turnover for medium enterprise should be Rs800
million

Repayment capacity of
borrower

On the basis of asset conversion cycle and
estimated future cash flows bank can check the repayment capacity of borrower

Per party exposure
limit

In medium enterprise loan of Rs 200 million
can be taken by a single party

Requirement of audited
accounts

While giving loan to medium enterprise there
is no condition of audit the financial statements if the amount of loan is less
than Rs10 million. If the amount of loan is more than Rs 10 million than it
should be get audited by the practising cost and management accountant.