State Bank allows one year moratorium on consumer loans’ principle

KARACHI: The State Bank of Pakistan (SBP) on Monday said banks and development finance institutions (DFIs) would defer the principal amount on consumer loans for one year to facilitate borrowers in the wake of covid-19.

The SBP’s official twitter account posted that borrowers availing consumer finance for auto, housing, and personal loans and credit cards, who were regular on their payments up till December 31, 2019 could request banks to defer principal amount for one year without fee or increase in mark-up. However, it said that they would continue to service the mark-up amount.

“Borrowers who are unable to service the mark-up amount or need deferment exceeding one year, may request the bank to reschedule/ restructure their facilities,” it added.

Earlier, the central bank in a circular incorporating revised prudential regulations said that banks/DFIs, upon a written request of an obligor received before June 30, 2020, would offer deferral of principal comportment of instalments for one year, unless the customer requests for a shorter period, at no fee or increase in mark-up rate or mark-up on mark-up; provided that the obligor would continue to service the mark-up amount as per agreed terms and conditions.

The circular also said that banks/DFIs would convey their decision to an obligor within 15 working days after the receipt of the written request.

“In case, banks/DFIs decide to decline the request of the obligor, they will record reasons for this decision in their response to the obligor,” it notified. The banks/DFIs would also submit the details about deferments granted by them to their borrowers at the end of each week to Director, Off-Site Supervision and Enforcement Department (OSED) SBP.

“If the rescheduling/restructuring is done within 180 days of the loans being past due, such financing facilities will continue to be treated as regular,” it said. Central bank circular also said that the deferment of principal component or rescheduling/restructuring would not affect the credit history of the borrower.

Borrowers would be able to request for deferment or principal amount of rescheduling/restructuring of loans at the Call Centre through recorded lines from registered number or from their authorised email addresses.

The central bank said to enable the individuals avail additional financing facilities for fulfilling their urgent financial needs, the Debt Burden Ratio has been increased temporarily from 50 percent to 60 percent.

The banks/DFIs, therefore, while determining the repayment capacity and credit worthiness of the borrowers would ensure that the total monthly amortisation payments of the consumer financing facilities would not exceed 60 percent of the net disposable income of the borrower.

“The banks/DFIs may allow temporary Excess Over Limit (EOL) of up to 15 percent of the original sanctioned limit. The EOL, made available to customers upon their request, shall be repayable equally in next twelve monthly bill payments.”