SBP New Measures Will Control Consumer Financing
According to regulations, the maximum tenure of the auto finance facility has been reduced from 7 years to 5 years
Revising Prudential Regulations (PRs), State Bank of Pakistan (SBP) is taking measures to control import and demand growth in consumer financing.
According to regulations, the maximum tenure of the auto finance facility has been reduced from 7 years to 5 years.
In the latest development, new as well as used imported vehicles will not be eligible for auto financing from banks.
The decision will help to moderate demand growth in the economy, leading to slower import growth and thus supporting the balance of payments. The changes in the PRs effectively prohibit financing for imported vehicles.
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It also tightened regulatory requirements for financing of domestically manufactured/ assembled vehicles of more than 1,000 cc engine capacity and other consumer finance facilities like personal loans and credit cards.
The maximum debt-burden ratio, allowed to a borrower, has been decreased from 50% to 40%.
Moreover, overall auto financing limits availed by one person from all banks/DFIs, in aggregate, will not exceed Rs 3,000,000, at any point in time.
Whereas, minimum down payment for auto financing has been increased from 15% to 30%.
These new regulations do not apply to locally manufactured or assembled vehicles of up to 1,000 cc engine capacity.
State Bank made another move to curb the free movement of the dollar and asked banks to submit information about $500,000 worth of imports.
Earlier banks have to submit information up to $1 million worth of imports and they have to submit a report about imports arriving in 5 days instead of 2 days.
