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KARACHI: The State Bank of Pakistan (SBP) has announced to reduce the maximum tenor of auto finance facility by two years with immediate effect.

The SBP has amended the Regulation R-11 of Prudential Regulations for Consumer Financing (PRCF) related to auto loans and financing to reduce the maximum tenor of auto loans being provided by the banks to the customers.

As per amendment in Regulation R-11 of PRCF the maximum tenure of auto finance facility is reduced from five (5) years to three (3) years for vehicles above 1,000 cc engine displacement. While, for vehicles up to 1,000 cc engine displacement, auto financing and loan is also reduced by two years from seven (7) years to five (5) years.

Moreover, other amendments issued earlier, vide BPRD Circular Letter No. 29 dated September 23, 2021, will henceforth be applicable on financing for all locally assembled/ manufactured vehicles, including on financing for vehicles of up to 1,000 cc engine displacement and locally assembled/ manufactured electric vehicles.

SBP raises key interest rate by 150 basis points, takes it to 13.75%

As per previous amendment, total financing facilities to be commensurate with the Income and the total monthly amortization payments of consumer financing facilities should not exceed 40 percent of the net disposable income of the prospective borrower. In addition, the minimum down payment was increased from 15 percent to 30 percent of the value of the vehicle.

For limit on auto financing, overall auto loans/ financing limits availed by one person from all banks/ DFIs, in aggregate, shall not exceed Rs3,000,000/-, at any point in time. However, the financing limit of borrowers whose approved limit already exceeds Rs3,000,000/- may be amortized as per existing terms and the same shall not be further increased.

However, according to SBP, the regulatory treatment of Roshan Apni Car products communicated earlier to Roshan Digital Account (RDA) participant banks will continue to remain effective.

These amendments in Prudential Regulations for Consumer Financing will be applicable, with immediate effect on new financing facilities where the Banks/ DFIs have not granted the approval yet. All other instructions on the subject shall; however, remain unchanged.

Copyright Business Recorder, 2022

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