By Hamza Faisal
The State Bank of Pakistan (SBP) has revised the limits on how much banks and development finance institutions (DFIs) can invest in shares, startups, mutual funds, real estate investment trusts (REITs) and private equity funds. The changes come through an amendment to Regulation R-6 of the Prudential Regulations for Corporate and Commercial Banking, issued as BPRD Circular Letter No. 22 on October 23 and addressed to the presidents and chief executives of all banks and DFIs.
The revision builds on earlier amendments to the same regulation, including changes made in 2014, 2021 and 2022. It sets out, in one place, the maximum exposure a bank or DFI may take in a single company, a single startup or a single fund — and requires every institution to back those decisions with a formal, board-approved investment policy.
What the new limits are
For the shares of any single company, a bank or DFI's aggregate investment must stay within the lower of two limits: 5 percent of its Tier-I capital, as reported in its preceding half-yearly reviewed or annual audited financial statements, or 10 percent of the investee company's paid-up shares.
For any single startup, including fintech startups, the cap is the lower of 5 percent of Tier-I capital or Rs500 million. That startup ceiling is unchanged from the previous version of the rule — the revision does not create new headroom for a single startup bet, however large the investing bank.
For units of any single mutual fund, REIT or private equity fund, the limit is the lower of 5 percent of Tier-I capital or 20 percent of that fund's units. The 20 percent figure for REIT units is a rise from the 15 percent ceiling in the earlier rule, giving bank treasuries more room in listed property trusts.
Banks must now show their working
Alongside the caps, the SBP has directed banks and DFIs to maintain an approved policy for equity investments, including an internal evaluation process for assessing each decision objectively. That process must weigh the institution's financial standing, its aggregate investment portfolio, its risk appetite, expected return, level of expertise and business strategy — including an exit strategy.
Strategic investments, and investments in units of all types of mutual funds and private equity funds, will count towards the applicable aggregate investment limits. National Investment Trust (NIT) units remain excluded from those limits until NIT is privatised. The central bank said all other instructions on the subject remain unchanged.
What it means for startups and investors
For Pakistan's startup ecosystem, the practical message is discipline rather than a funding windfall. Banks can still back startups, including fintechs, but no single startup can absorb more than Rs500 million from one bank or DFI, and every such bet must now pass a documented evaluation covering risk, return and exit. Founders seeking bank capital should expect harder questions about financials and strategy before any cheque is written.
For investors, the wider REIT ceiling is the more market-moving change. Pakistan had 29 registered REIT schemes as of August, six of them trading on the Pakistan Stock Exchange, and PSX investor numbers more than doubled between March 2024 and September 2026. The circular itself does not force any bank to buy a single unit — valuations, availability, liquidity needs and each lender's risk appetite will decide how much fresh money actually flows into property trusts.
The decision now moves to treasury desks and bank boards, which must weigh the new ceilings against their own capital, portfolios and appetite for risk.
By Hamza Faisal
