LAHORE, May 18: The directors of public and private limited companies are not required to give personal guarantees for obtaining loans from banks, the central bank has informed the businessmen.
In its response to certain issues raised by the president of the Lahore Chamber of Commerce, the central bank sought to clarify that it does not require banks to obtain personal guarantees from directors of the public limited companies in view of their limited liability.
Similarly, the central bank does not require directors of the private limited companies to give personal guarantees under its prudential regulations for corporate financing.
However, the central bank says, the directors of private limited companies are required to give their personal guarantees under SMEs prudential regulations in view of overall leniency under the prudential regulations for SME financing.
“I wonder as to why banks have been forcing directors of limited companies to give personal guarantees despite clear-cut instructions to the contrary from the central bank?,” Tanveer Sheikh, a spokesman for the All-Pakistan Textile Association, a recently formed group of spinners, wonders.
“Its like forcing businessmen to take a risk which no business owner in the world is required to take on. On the one hand, we speak of promoting a culture of entrepreneurship and on the other hand businessmen are required to furnish personal guarantees.”
He said in a statement on Friday the spinning industry was in the crisis due to the myopic vision of the economic managers.
He said spinning had not been the recipient of any subsidy from the government, as it had exclusively been reserved for the value-added sector. Further, time and again spinners have reiterated that they want a level-playing field so that they can compete with their international competitors.
