SBP extends borrowing limit from banks for housing finance

KARACHI: State Bank of Pakistan (SBP) on Monday announced to enhance the limit for housing finance and microenterprise loans up to Rs3 million from the existing limit of Rs1 million, ARY NEWS reported.

According to a press release from the SBP detailing the decision, besides increasing the borrowing limit from banks, the maximum size of general loans has been enhanced from Rs150,000 to Rs350,000.

It further said that to commensurate with enhanced loan sizes, annual income eligibility for general loans and housing loans has been increased up to Rs1.2 million and Rs1.5 million, respectively.

“The limit for lending against gold collateral to meet borrowers’ immediate domestic or emergency needs has also been enhanced,” the SBP announced.

The central bank said that the borrowing limit was raised after realizing that the existing loan limit was insufficient to promote low-cost housing finance through banks.

The SBP hoped for improving economic activity during the pandemic with such measures.

It, however, said that in order to ensure sustainability, the enhanced loan sizes for housing and microenterprises would be allowed to those microfinance banks only which are on a sound footing and have the capacity to successfully cater to the higher loan sizes.

Read More: SBP sets mandatory targets for banks to extend loans for housing sector

In addition, SBP Relief Package for microfinance banks, which included deferment of principal and restructuring of microfinance loans to deal with the adverse implications of the ongoing Covid-19 pandemic, has now been expanded with three measures.

First, the relief measures that were earlier available from Feb 15, 2020, have now been allowed to borrowers who were regular on December 31, 2019.

This would allow more borrowers to avail from the regulatory relief who were previously not eligible. Second, to facilitate banks during these testing times, the provisioning requirements have been extended by 2-months; and third, the client’s consent through recorded lines has been allowed to facilitate the customers to avail the relief package.