PRUDENTIAL REGULATIONS FOR CONSUMER FINANCE

Please refer to the Prudential Regulations on Consumer Financing issued by State Bank of Pakistan.

2. The following amendment/ clarification may be noted;

a) Housing Finance: The banks/DFIs will not allow Housing Finance purely for the purchase of land/plots; rather, such financing would be extended for the purchase of land/plot and construction on it. In this connection, the sanctioned loan limit, assessed on the basis of repayment capacity of the borrower, value of land/plot and cost of construction on it etc., should be disbursed in tranches, i.e. up to a maximum of 50% of the loan limit can be disbursed for the purchase of land/plot, and the remaining amount be disbursed for construction there-upon. Further, the lending bank/DFI will take a realistic Construction Schedule from the borrower before allowing disbursement of the initial loan limit for the purchase of land.

b) Maximum Clean Lending Limit under Credit Card and Personal Loan: In order to provide flexibility in the regulatory framework with respect to clean lending limit against Credit Cards and Personal Loans, it has been decided to allow assigning a clean limit higher than Rs.500,000 to the prime customers of the banks/DFIs. Accordingly, R-7 and R-24 of the Prudential Regulations for Consumer Financing are replaced as under:
Maximum Card Limit (Regulation R-7)

i) Maximum unsecured limit under credit card to a borrower (supplementary cards shall be considered part of the principal borrower) shall generally not exceed Rs 500,000/.

ii) However, the banks/DFIs may assign a clean limit beyond Rs 500,000 but not in excess of Rs 2 million to their prime customers who have extraordinary strong repayment capacity, moderate debt burden and a clean track record. But the aggregate outstanding in this respect should not exceed 10% of the total outstanding credit card portfolio at any point in time. However, while availing benefit of this provision, banks/DFIs would place on record a well defined criteria for terms "Prime Customers" and "Moderate Debt Burden" approved by their Board of Directors/ Chief Executive.

iii) The banks / DFIs may also allow financing under the credit card scheme in excess of Rs 500,000/- (up to Rs 2 million) to other customers as well, provided the excess amount is appropriately secured according to the definition as given at serial No. 23 in Part A of the Prudential Regulations.

iv) The loan secured against liquid securities shall, however, be exempted from this limit.

v) The loans against the securities issued by Central Directorate of National Saving (CDNS) shall be subject to such limits as are prescribed by CDNS / Federal Government / State Bank of Pakistan from time to time.

vi) For Charge Cards, pre-set spending limits generated by the standardized systems, as is the global practice, shall be allowed.
Per Party Limit (Regulation R-24)

i) The clean limit per person for personal loans will generally not exceed Rs 500,000/-.

ii) However, the banks/DFIs may assign a clean limit beyond Rs 500,000 but not in excess of Rs 2 million to their prime customers who have extraordinary strong repayment capacity, moderate debt burden and a clean track record. But aggregate outstanding in this respect should not exceed 10% of the total outstanding personal loans at any point in time. However, while availing benefit of this provision, banks/DFIs would place on record well defined criteria for terms "Prime Customers" and "Moderate Debt Burden" approved by their Board of Directors/ Chief Executive.

iii) The banks / DFIs may also allow financing under Personal Loans in excess of Rs 500,000 (up to Rs.1,000,000) to other customers as well, provided the loan is appropriately secured according to the definition given at serial No. 23 of Part A of the Prudential Regulations.

iv) The loan secured against liquid securities shall, however, be exempted from this limit.

v) The loans against the securities issued by Central Directorate of National Saving (CDNS) shall be subject to such limits as are prescribed by CDNS / Federal Government / State Bank of Pakistan from time to time.

4. Other instructions on the subject will, however, remain unchanged.