SBP Revises Prudential Regulations For Consumer Financing

September 23, 2021 Off By Web Desk

The State Bank of Pakistan (SBP) has revised Prudential Regulations (PRs) for Consumer Financing. This targeted step will help moderate the demand growth in the economy, leading to a slower import growth and thus supporting the balance of payments.

The revisions in the PRs effectively prohibit financing for imported vehicles and tighten regulatory requirements for financing of domestically manufactured/assembled vehicles of more than 1000 cc engine capacity and other Consumer Finance facilities like personal loans and credit cards.

Following changes have been made in this regard:

The maximum tenure of auto finance has been reduced from seven (7) to five (5) years

The maximum tenure of a personal loan has been reduced from five (5) to four (4) years

The maximum debt-burden ratio, allowed to a borrower, has been decreased from 50% to 40%

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

The minimum down payment for auto financing has been increased from 15 percent to 30 percent

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

Source: Pro Pakistani