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SBP relaxes loan terms for households, businesses as coronavirus dents economy

Aizbah KhanWeb Editor

27th Mar, 2020. 12:22 am
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State Bank of Pakistan

State Bank of Pakistan (SBP) announced to relax loans for households and businesses in light of the ongoing coronavirus pandemic which is expected to severely shake the Pakistani economy.

SBP stated in a series of Tweets “in collaboration with the Pakistan Banks Association (PBA) — was aimed at helping people “manage their finances through this temporary phase of disruption amid COVID-19”.

SBP stated that funds kept by commercial banks to be lent out had been bumped up by Rs800 billion as the capital conservation buffer ration was cut from 2.5% to 1.5%.

Small- and medium-sized enterprises (SME) could also avail larger amount of funds as the banks’ regulatory retail limit was “permanently enhanced” from Rs125 million per business to Rs180 million.

State Bank of Pakistan slashes interest rates to 11%

The debt-burden ratio (DBR) on consumer loans, which is any person’s ability to bear liabilities as a percentage of their income, was relaxed from 50% to 60% so that “individuals may borrow more from banks in this time of need”.

SBP has provided major relief by postponing principal loan repayment by a year and an understanding that it would “not affect borrower’s credit history”.

“Borrowers may request banks before 30 Jun [2020],” the central bank added. “They will continue to service mark-up amount as per agreed terms and conditions.”

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