State Bank relaxes restrictions

State Bank relaxes restrictions, housing criteria, micro-enterprise loans

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The State Bank of Pakistan (SBP) reported a raise in the limits on the different loans, as well as an upward revision of the eligibility of prospective lenders for rent, taking into account the economic difficulties of the coronavirus pandemic. In its Statement outlining the revisions to the prudential regulations, the SBP claimed that it raised the ceiling for housing and micro-enterprise loans from Rs1 million to Rs3 million and revised the upper limit for general loans from Rs150,000 to Rs350,000.

This was made applicable to persons, including workers, whose annual income was equivalent to or under Rs1.2 million (general loans) and Rs1.5 million (housing loans), according to the declaration. It added that the cap for gold protection against loans for urgent domestic needs or emergency conditions has also been updated.

People who were qualified to apply for general and micro-enterprise loans at the same time could only benefit from loans of Rs3 million or less. The central bank emphasized that microfinance banks (MFBs) would take into account the monthly income of the applicant as well as their willingness to repay the loan. Repayments were then expected to be less than 50% of their net disposable income.

In its instructions to the MFBs, the SBP specified that the financial institutions would ensure that the overall microenterprise loans without general loans do not reach 40 % of the total loans given. Even, it cautioned that MFBs would insure that the proportion did not reach 20% in the initial process.

With respect to gold leverage lending, it specified that loans would not surpass 50 per cent of the overall portfolio of MFBs. In addition, microenterprise financing has only been provided to facilities that have been able to build capacity to conduct these loans and have been consistent with the Minimum Capital Provision (MCR) and the Capital Adequacy Ratio (CAR).