KARACHI – The State Bank of Pakistan (SBP) has revised the credit limit for banks and Development Financial Institutions (DFI) under consumer financing at Rs 5.0 million.
The central bank has also allowed commercial banks and DFIs to waive the requirement of 50 percent debt burden in case the borrower’s credit card and personal loan happens to be properly secured through liquid assets with a minimum 30 percent margin.
The State Bank introduced the new regulations with immediate effect through amending certain provisions of its Prudential Regulations for Consumer Financing. SBP BPRD Circular No 1, which was issued Thursday, stated that the regulator had revised Regulation R-7 pertaining to the maximum card limit. Under revised regulation, the banks and DFIs are required to ensure that the overall credit card and personal loan limits, both on secured as well as unsecured basis, availed by one person in aggregate should not exceed Rs 5.0 million at any point in time.
The restriction, however, is subject to the condition that the overall unsecured/clean facilities on account of credit card and personal loan of that individual do not exceed Rs 2.0 million.
The State Bank has added a new paragraph, R-23, in which provides that: “Banks/DFIs shall ensure that overall personal loan limits and credit card limits, both on secured as well as on unsecured basis, availed by one person from all banks/DFIs in aggregate should not exceed Rs 5,000,000, at any point in time, subject to the condition that the overall unsecured/clean facilities on account of personal loan and credit card of that individual do not exceed Rs 2,000,000.” The SBP circular said the amendments would render void all applicable instructions concerning secured personal loans other than secured against liquid assets mentioned in Regulation R-23.
The central bank has also amended Regulation R-3 by adding a new provision which states as under: “Banks/DFIs may waive the requirement of 50 percent Debt Burden in case a Credit Card and Personal loan is properly secured through liquid assets (as defined in prudential regulations) with minimum 30 percent margin.” With regard to Regulation R-1 pertaining to facilities to related persons, the SBP has replaced the first paragraph of the said regulation with the following paragraph:
“This condition shall not apply to the consumer financing allowed by the banks/DFIs to their employees as part of compensation package provided the detailed terms and conditions of the benefits which the banks/DFIs want to give to their employees are specifically mentioned in the employees service rules/HR policy. These employees service rules/HR policy should be duly approved by the board of directors. Furthermore, such consumer financing to the employees should be treated as staff loans and not as general consumer loans.”
