Banks to face fines on falling short of housing finance targets

KARACHI: Banks will face penalty if they fail to meet the mandatory targets of disbursements under the Government’s Mark-up Subsidy Scheme (G-MSS) for housing finance, the central bank said in a circular issued on Tuesday.

Banks are expected to make all-out efforts to harness the full potential of the scheme. In April 2021, SBP assigned monthly mandatory targets of number of housing units and amount of disbursements (G-MSS targets) to banks in proportion to share in total banking assets.

“In view of foregoing, it has been decided that penalty will be imposed on banks falling short of their G-MSS targets wef (with effective from) July 31, 2021 on both targets of number of housing units and amount of disbursements,” the circular said.

“A baseline penalty will be charged on shortfall from cumulative targets till July 31, 2021 while higher penalty will be charged on shortfall from targets of subsequent months.”

The penalty charged on a bank would be adjusted after review of the bank’s efforts.

The review would be in terms of logins of applications, approvals of housing finance, results of SBP’s latest mystery shopping surveys, involvement of bank’s management, evidence of board information and support, sales and marketing efforts, innovation in delivery channels, capacity building of staff and human resource (headcount) involved in G-MSS.

To assess efforts, the central bank would, if required, collect information from banks which fail to meet their targets, it said.

In order to facilitate low cost housing finance applicants with informal income, the SBP asked banks to develop and deploy an income estimation model for extension of low cost housing finance to such applicants.

This measure is expected to ease difficulties being faced by the general public in availing housing finance under the scheme.

A number of steps have already been taken to make this facility available to the general public, especially low cost housing finance applicants.

These steps include relaxation of debt burden ratio, extension of housing finance against personal guarantee, development of online complaint resolution portal and establishment of banks’ joint call centre to address queries.

As of June 15, 2021, banks have received applications of around Rs90 billion under the scheme against which an amount of around Rs30 billion has already been approved, whereas banks are processing the rest of the applications, the SBP said last month.

In October 2020, the government introduced the scheme, which enables banks to provide financing for the construction and purchase of houses at very low markup rates.