State Bank of Pakistan removes limit of Rs 10m for housing finance
Pakistan Times Business & Commerce Desk

KARACHI: The State Bank of Pakistan has allowed certain relaxations to banks and DFIs in the present regulatory framework in order to facilitate origination of housing loans and provide security of mortgage, construction and developer finance.

SBP Director Mohammad Kamran Shehzad says that keeping in view the active role of banks and 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 and 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 and DFIs shall ensure that the total monthly amortisation payments of consumer loans, inclusive of housing loan, should not exceed 50 percent of the net disposable income of the prospective borrower.

Moreover banks and 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.

To facilitate securitisation of mortgage, construction and developer finance through Special Purpose Vehicle (SPV) in accordance with BPD Circular No.31 dated November 14, 2002, Banks and DFIs are allowed the following relaxations with respect to listed and unlisted Mortgage/ Construction/Developer Finance Asset Backed Securities (ABS).

Listed ABS: The minimum credit rating for banks and 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)”.

Unlisted ABS: Banks and 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.●