Central bank triples exposure threshold under Basel III framework to improve financing access for eligible private sector borrowers.
KARACHI: The State Bank of Pakistan (SBP) has increased the aggregate borrowing limit for unrated large private sector companies from Rs3 billion to Rs10 billion, providing greater financing flexibility to businesses in response to evolving macroeconomic conditions.
In a circular issued on August 4, 2026, the central bank informed all banks and Development Finance Institutions (DFIs) that the revised limit will come into effect from September 30, 2026.
Exposure limit increased
According to the SBP, the decision follows an assessment of the changing macroeconomic environment and feedback received from the banking industry.
Under the revised instructions, the aggregate exposure limit for unrated large private sector borrowers across all banks and DFIs has been raised from Rs3 billion to Rs10 billion.
The higher threshold will enable banks and DFIs to extend larger credit facilities to eligible unrated corporate borrowers without attracting a higher regulatory risk weight, thereby improving access to financing for businesses.
Basel III framework updated
The central bank said the revised exposure limit will be incorporated into the Revised Instructions for Credit Risk (Standardised Approach) under the Basel III framework, which were issued through BPRD Circular No. 3 dated September 24, 2025.
These revised credit risk instructions are currently being implemented by banks and DFIs under a parallel-run arrangement before their full adoption.
Existing prudential rules remain unchanged
The SBP clarified that all other prudential and regulatory requirements relating to the risk weighting of unrated large corporate borrowers will remain unchanged.
The latest circular makes reference to the following regulatory instruments:
• BSD Circular No. 8 dated June 27, 2006
• BPRD Circular Letter No. 2 dated January 9, 2015
• BPRD Circular No. 3 dated September 24, 2025
Apart from the revised exposure threshold, the existing framework governing credit risk for unrated corporate borrowers will continue to apply.
Boost for private sector financing
The increase in the aggregate borrowing limit is expected to improve access to bank credit for large private sector companies that do not possess external credit ratings.
By allowing banks to extend larger financing facilities while remaining compliant with Basel III capital requirements, the measure is expected to support business expansion, investment and private sector credit growth.
The decision also reflects the SBP’s efforts to align prudential regulations with evolving economic conditions while maintaining the overall integrity of the country’s credit risk management framework.