State Bank relaxes limits, requirements for housing, microenterprise loans

KARACHI: The State Bank of Pakistan (SBP) on Monday announced an enhancement in the limits on various loans, as well as an upward revision in the income eligibility for potential borrowers, in light of the challenges the coronavirus pandemic has wreaked on the economy.

In its statement detailing the revisions in the prudential regulations, the SBP said it was increasing the limit for housing and microenterprises loans from Rs1 million to Rs3 million and revising the upper end for general loans from Rs150,000 to Rs350,000.

This was made available for individuals, including salaried people, whose annual income equalled or was under Rs1.2 million (general loans) and Rs1.5 million (housing loans), according to the statement. It added that the limit of gold collateral against borrowing for immediate domestic needs or emergency situations was also revised.

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People who were eligible to apply for general and microenterprise loans simultaneously could only avail loans of or under Rs3 million.

The central bank stressed that the microfinance banks (MFBs) should take into account the borrower's monthly income, as well as their capacity to repay the loan. The repayments were, therefore, required to be under 50% of their net disposable income.

MFBs and requisites

In its orders to the MFBs, the SBP said the financial institutions should ensure that the total microenterprise loans sans general loans should not be more than 40% of their total loans offered. Still, it warned that MFBs should make sure the proportion did not go beyond 20% in the initial phase.

With regard to lending against gold collateral, it said the loans should not exceed 50% of the MFBs' total portfolio.

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In addition, microenterprise lending was only allowed to facilities that were able to develop capacity to undertake such loans and were compliant with the Minimum Capital Requirement (MCR) and Capital Adequacy Ratio (CAR).

The MFBs were also advised to apply to the SBP for approval to change their category to commercial-scale facilities.