KARACHI, Nov 10: The State Bank of Pakistan (SBP) has relaxed newly-introduced Prudential Regulations, creating extra room for investment in the shares of public sector enterprises (PSEs) and autonomous bodies by certain development finance institutions. That the central bank has taken this measure on the very first day of the initial public offering of the shares of Oil and Gas Development Company Limited, also an autonomous body, makes it all the more important.

The central bank said in a press release that it had exempted the development finance institutions, which are not mobilizing funds through deposits/certificates of investment from general public, from the requirement of capping their total investment in equities.

The new Prudential Regulations that will become effective from January 2004, require all the banks and DFIs to keep their total investment in stocks at not more than 20 per cent of their own equity. The relaxation means that the DFIs that do not generate deposits or raise funds through certificates of investment will be able to keep their total investment at more than 20 per cent of their own equity. And their holding of stocks over and above 20 per cent of their equity will be equal to their investment in the shares of public sector enterprises and autonomous bodies.

The SBP press release, however, makes it clear that the DFIs that are mobilizing funds as deposits or through COIs from general public/individuals are required to contain their total investment in shares up to 35 per cent of their equity.

The press release further said that investment made by banks in the shares of PSEs and autonomous bodies, whether subscribed through initial public offerings or through purchases from the secondary market, shall not be counted towards the ceilings fixed for providing finances to the same.

The central bank allocates limits to each bank for providing financing facilities to PSEs and autonomous bodies. Now investment made by the banks in the shares of PSEs and autonomous bodies will be excluded, while calculating these limits.

A former chairman of Karachi Stock Exchange Yasin Lakhani said the SBP move to create more room for certain DFIs for making extra investment in stocks had come at a time when it would certainly result in over-subscription of the OGDCL shares. “OGDC may have to exercise green-shoe option,” he opined while talking to Dawn.

But Mr Lakhani was of the opinion that the banks and financial institutions should be left on their own to go for high-yielding lucrative scrips instead of giving them such concessions that encourage investment in public sector enterprises and autonomous bodies.

Monday was the first day of the IPO of 10.7 million shares of the oil and gas exploration giant. Each share has been priced at Rs32 inclusive of a premium of Rs22 per share. The offering will continue through Friday.