SBP Introduces Collateral and Eligibility Criteria for Monetary Policy Lending Operations

TheState Bank of Pakistan (SBP)has introduced enhanced collateral and eligibility criteria for improved monetary policy lending operations effective July 2025. In order to further strengthen risk mitigation measures for SBP’s Monetary Policy Lending Operations and Mudarabah Based Financing Facilities (OMOs and Standing Ceiling Facility), the following instructions are being issued: 2. Application of haircut on the market value of the security (market price) shall be as follows: Post haircut Price = Market Price of the security*(1 – Applicable Haircut) SBP will apply the following criteria for the purpose of extending financing under its Monetary Policy Lending Operations / Financing Facilities (OMO-Injections and Ceiling Facility): *The outstanding amount shall be capped and no incremental financing shall be extended. During this period for participation with limitation, SBP will assess whether the institution’s breach is temporary and resolvable depending upon the nature of the breach and the effectiveness of the recovery plan. In case the SBP determines that the breach is not temporary and resolvable, SBP will instantly suspend the facilities and advise the institution about its ineligibility. Institutions falling under any of the following criteria will be ineligible for participation in Lending Operations/ Financing Facilities under OMOs/Ceiling: In order to provide adequate time for the market to adjust to the revised requirements, the above instructions will be applicable from 02nd July 2025. All other instructions on the subject shall remain unchanged.