SBP announces comprehensive relief package for households, businesses

KARACHI: Conditions for obtaining loan, as well as those on existing ones, have been relaxed for households and businesses, the State Bank of Pakistan announced on Thursday, in light of the ongoing COVID-19 pandemic which is expected to severely dent the Pakistani economy.

In a series of tweets, the central bank said the move — 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".

According to the SBP, 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%.

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.

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".

In addition, a major relief was provided by the SBP 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."

In terms of the Pakistani stock market and the tumbling share prices, "margin call requirement of 30% vis-à-vis banks’ financing against listed shares has been significantly reduced to 10%".