Wednesday, 30 November 2022
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State Bank of Pakistan tightened the rules and regulations of auto financing

The State Bank of Pakistan has tightened the rules and regulations of auto financing for consumers to get cars of up to 1000cc. It has revised the Prudential Regulations for Consumer Financing. This targeted step will help to moderate the demand growth in the economy and will lead to slower import growth that will support the balance of payments.

According to the State Bank of Pakistan (SBP), the maximum tenure of auto finance has been reduced from seven years to five years, and the minimum down payment for auto financing has been increased from 15 percent to 30 percent. Also, the overall auto financing limits availed by one person from all banks/DFIs (in aggregate) will not exceed Rs. 3,000,000 at any point in time.

These new regulations are not applicable to locally manufactured or assembled vehicles of up to 1000cc engine capacities in order to protect the lower to middle-income category purchases. They are also not applicable to locally manufactured electric vehicles to promote the use of clean energy. The financing of these two categories of vehicles will continue to be governed by the previous set of regulations.

Furthermore, the regulatory instructions for the Roshan Apni Car product of the banks or DFIs have also not been changed to encourage Roshan Digital Accounts and facilitate overseas Pakistan who have opened these accounts.

The changes in the Prudential Regulations (PRs) effectively prohibit financing for imported vehicles and tighten regulatory requirements for the financing of domestically manufactured/assembled vehicles of more than the 1000cc engine capacity and other Consumer Finance facilities like personal loans and credit cards.

The following changes have been made in this regard:

  • The maximum tenure of a personal loan has been reduced from five years to four years.
  • The maximum debt-burden ratio allowed to a borrower has been decreased from 50 percent to 40 percent.

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