SBP revises prudential regulations for consumer financing

KARACHI: The State Bank of Pakistan (SBP) has revised the prudential regulations for consumer financing, a statement said.

This targeted step will help moderate the demand growth in the economy, leading to slower import growth and; thus, supporting the balance-of-payments position.

The changes in the prudential regulations effectively prohibit financing for imported vehicles, and tighten regulatory requirements for financing of domestically manufactured/assembled vehicles of more than 1,000cc engine capacity and other consumer finance facilities such as personal loans and credit cards.

The changes made in the prudential regulations included maximum tenure of auto finance has been reduced from seven to five years; maximum tenure of personal loan has been reduced from five to four years; maximum debt-burden ratio, allowed to a borrower, has been decreased from 50 per cent to 40 per cent; the overall auto financing limits availed by one person from all banks/DFIs, in aggregate, will not exceed Rs3,000,000 at any point in time; and the minimum down-payment for auto financing has been increased from 15 per cent to 30 per cent.

With the objective to protect lower to middle income category purchases, these new regulations are not applicable to the locally-manufactured or assembled vehicles of up to 1,000cc engine capacity.

These prudential regulations are also not applicable to the locally-manufactured electric vehicles to promote the use of clean energy.

The financing of these two categories of vehicles will continue to be governed by the previous set of regulations.

Further, to encourage Roshan Digital Accounts and facilitate overseas Pakistanis who have opened these accounts, regulatory instructions for Roshan Apni Car products of the banks or DFIs have also not been changed