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050319
STATE BANK OF PAKISTAN - BANKING POLICY DEPARTMENT
BPD Circular No. 10 of 2005
March 19, 2005
The Presidents/Chief Executives,
All Banks/DFIs
Dear Sirs/Madam,
HOUSING FINANCE: RELAXATIONS IN THE REGULATORY FRAMEWORK
In order to facilitate origination of housing loans and securitization of
mortgage/construction/developer finance, following relaxations in the present
regulatory framework are allowed to Banks/DFIs:
Removal of Per-Party Limit:
2. Keeping in view the active role of banks/DFIs for the provision of housing
finance to a cross section of the society, the maximum per party limit of Rs.10
million in respect of housing finance, as per Regulation R-15 of the Prudential
Regulations for Consumer Financing, is being removed with immediate effect.
Accordingly, banks/DFIs are allowed to determine the housing finance limit in
accordance with their internal credit policy, credit worthiness and loan
repayment capacity of the borrowers. At the same time, while determining the
credit worthiness and repayment capacity of the prospective borrower, banks/DFIs
shall ensure that the total monthly amortization payments of consumer loans,
inclusive of housing loan, should not exceed 50% of the net disposable income of
the prospective borrower. Moreover, Banks/DFIs are advised to observe strict
compliance to R-16 to R-22 of the Prudential Regulations for Consumer Financing
and BPD Circular No.32 of 2004 while undertaking housing finance as part of
their Consumer Banking operations.
Facilitating Securitization of Mortgage/Construction/Developer Finance:
3. In order to facilitate securitization of mortgage/construction/developer
finance through Special Purpose Vehicle (SPV) in accordance with BPD Circular
No.31 dated November 14, 2002, banks/DFIs are allowed the following relaxations
with respect to Listed and Unlisted Mortgage /Construction/Developer Finance
Asset Backed Securities (ABS):
a. Listed ABS: The minimum credit rating for banks/DFIs to make direct
investment and for taking exposure (i.e. undertaking lending and reverse repo)
against listed ABS for mortgage/construction/developer finance is reduced from
“A” to “A- (or equivalent)”.
b. Unlisted ABS: Banks/DFIs are allowed to invest in non-listed
mortgage/construction/developer finance ABS having a minimum credit rating of
“A- (or equivalent)” as well as to take exposure (i.e. undertaking lending and
reverse repo) against the security of such non-listed ABS. Regulation
R-6(1-A)(c) of PRs for Corporate/Commercial Banking is accordingly modified.
4. Please acknowledge receipt.
Yours faithfully,
S/d
(MUHAMMAD KAMRAN SHEHZAD)
DIRECTOR
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