State bank limits personal loans, credit cards to max Rs1 million per person

[Naveed Yaseen]

KARACHI (February 12 2009): The increasing number of default cases in consumer financing and credit cards have compelled the State Bank to take some preventive steps. Therefore, the State Bank of Pakistan on Wednesday amended the regulations and fixed the personal loan and credit card limit at Rs 1,000,000 for a single person and asked the banks to obtain consumer credit report from CIB before allowing any consumer facility.

The SBP said that based on the review of prudential regulations and feedback from banks and DFIs, following amendments in the regulations for consumer financing have been made with immediate effect. As per amendment at the time of granting facility under various modes of consumer financing, banks/DFIs shall obtain a written declaration on the prescribed format (Annexure-CF 1) from the borrower divulging details of various facilities already obtained from other banks/financial institutions.

Before allowing any facility, the banks/DFIs shall obtain a consumer credit report from the Credit Information Bureau of State Bank of Pakistan, or from any consumer Credit Information Bureau of which they are member.

Under regulation R-3, while determining the credit worthiness and repayment capacity of the prospective borrower, the banks/DFIs shall ensure that total monthly amortisation payments of consumer loans should not exceed 50 percent of the net disposable income of the prospective borrower. Bank/DFI may issue credit card to one person with a maximum unsecured limit not exceeding Rs 1,000,000 subject to mandatory credit check and prescribed debt burden and condition that total unsecured credit card limits availed by that person from all banks/DFIs does not exceed Rs 1,000,000, the SBP circular said.

It said that as a result of above upward revision in clean limit for credit card, regulation concerning prime customers mentioned in R-7 stands withdrawn.

Under house financing regulation (R-17), banks/DFIs may extend mortgage loans for housing up to any tenure defined in the bank's/DFI's duly approved credit policy and keeping in view the maturities' profile of their assets and liabilities.

SBP, amending regulation for personal loan including loans for the purchase of consumer durables, said that banks/DFIs may assign personal loan limits to one person with a maximum unsecured limit not exceeding Rs 1,000,000, subject to mandatory credit check and prescribed debt burden and condition that total unsecured personal loans limits availed by that person from all banks/DFIs does not exceed Rs 1,000,000.

As a result of above upward revision in clean limit for personal loans, regulation concerning prime customers mentioned in R-23 stands withdrawn, SBP said. Other instructions on the subject will remain the same.

http://www.brecorder.com/index.php?id=886152