State Bank Sets New Caps on Bank Equity Stakes in Startups and Funds

The State Bank of Pakistan has revised limits on how much banks can invest in shares, startups, mutual funds, REITs and private equity, applying to all banks and DFIs.

NationPulse Desk

Oct 25, 2026 · 2:46 PM 2 min read

Key takeaways

SBP amended Regulation R-6 via Circular Letter No. 22 on October 23.

Banks' share investment in a single company is limited to the lower of 5% of Tier-I capital or 10% of the investee's paid-up shares.

Investment in any single startup cannot exceed the lower of 5% of Tier-I capital or Rs. 500 million.

For a single mutual fund, REIT or private equity fund, the cap is the lower of 5% of Tier-I capital or 20% of the fund's units.

Banks and DFIs must have an approved equity investment policy that includes an internal evaluation process.

The State Bank of Pakistan (SBP) has altered the amount of money banks may allocate to shares, startups, mutual funds, REITs and private equity funds. The central bank issued the change through BPRD Circular Letter No. 22 on October 23, amending Regulation R-6 of its Prudential Regulations for Corporate/Commercial Banking. The revised limits affect every bank and development finance institution (DFI).

New Investment Limits

When investing in the shares of any single company, a bank must keep its total stake below the lower of two thresholds: 5 percent of its Tier-I capital or 10 percent of the investee's paid-up shares.

The Tier-I capital figure will be taken from the bank's most recent half-yearly reviewed or annual audited financial statements.

For any individual startup, including fintech ventures, the ceiling is the lower of 5 percent of Tier-I capital or Rs. 500 million.

Regarding units of a 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.

Banks Need a Formal Policy

SBP also requires banks and DFIs to adopt an approved policy governing equity investments. The policy must contain an internal evaluation framework to assess each investment decision objectively.

This evaluation must take into account the bank's financial health, overall investment portfolio, risk appetite, expected return, expertise, business strategy and an exit plan.

Strategic investments and all types of mutual fund and private equity fund holdings will be counted toward these limits, except for National Investment Trust (NIT) units, which remain excluded until NIT is privatized.

SBP noted that all other related instructions stay unchanged. Earlier this year, the central bank granted local banks greater authority over foreign investment and dividend matters.

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