State Bank of Pakistan (SBP) announced to relax loans for households and businesses in light of the ongoing coronavirus pandemic which is expected to severely shake the Pakistani economy.
SBP stated in a series of Tweets “in collaboration with the Pakistan Banks Association (PBA) — was aimed at helping people “manage their finances through this temporary phase of disruption amid COVID-19”.
SBP stated that funds kept by commercial banks to be lent out had been bumped up by Rs800 billion as the capital conservation buffer ration was cut from 2.5% to 1.5%.
1/SBP in collaboration of Pakistan Banks Association (PBA) has announced a comprehensive relief package for households and businesses to manage their finances through this temporary phase of disruption amid COVID-19. Check out our page on Countering COVID: https://t.co/mDIefDPJOk
— SBP (@StateBank_Pak) March 26, 2020
Small- and medium-sized enterprises (SME) could also avail larger amount of funds as the banks’ regulatory retail limit was “permanently enhanced” from Rs125 million per business to Rs180 million.
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The debt-burden ratio (DBR) on consumer loans, which is any person’s ability to bear liabilities as a percentage of their income, was relaxed from 50% to 60% so that “individuals may borrow more from banks in this time of need”.
3/Individuals capacity to borrow from banks is limited by capacity to bear the burden of debt, defined as % of income and known as a Debt Burden Ratio. SBP has relaxed DBR for consumer loans from 50% to 60%. Now individuals may borrow more from banks in this time of need.
— SBP (@StateBank_Pak) March 26, 2020
SBP has provided major relief by postponing principal loan repayment by a year and an understanding that it would “not affect borrower’s credit history”.
“Borrowers may request banks before 30 Jun [2020],” the central bank added. “They will continue to service mark-up amount as per agreed terms and conditions.”
5/Keeping in view the steep decline in share prices, margin call requirement of 30% vis-à-vis banks’ financing against listed shares has been significantly reduced to 10%.
— SBP (@StateBank_Pak) March 26, 2020
