SBP reduces auto financing period

The State Bank of Pakistan (SBP) on Tuesday reduced the consumer financing tenure for vehicles, bringing it down to a maximum of three years for cars with engine displacement of above 1,000cc, and to five years for those under 1,000cc.

In its circular Letter No.19 of 2022, the SBP made the amendment to the Prudential Regulations for Consumer Financing (PRCF): “The maximum tenure of auto finance facility is reduced from five (5) years to three (3) years for vehicles above 1,000 cc engine displacement and from seven (7) years to five (5) years for vehicles up to 1,000 cc engine displacement,” read the circular.

The central bank further said that other amendments issued earlier, vide BPRD Circular Letter No.29 dated September 23, 2021, will henceforth be applicable on financing for all locally assembled/manufactured vehicles, including on financing for vehicles of up to 1,000 cc engine displacement and locally assembled/manufactured electric vehicles. “However, the regulatory treatment of Roshan Apni Car products communicated earlier to RDA participant banks will continue to remain effective,” read the circular.

The central bank said that the amendments to the PRCF will be applicable, with immediate effect, on new financing facilities where the banks/DFIs have not granted the approval yet. However, all other instructions on the subject shall remain unchanged.

The central bank’s latest measure comes a day after the Monetary Policy Committee (MPC) raised the key interest rate by 150 basis points, taking it to 13.75%, the highest interest-rate level since 2011 when it stood at 14%.

On the same day, the SBP announced an increase in the markup rate for financing under the Export Finance Scheme (EFS) as well, taking it from 5.5% to 7.5%.

Earlier, the government also announced a ban on the import of 38 products to arrest the decline in foreign exchange reserves. The latest measure could provide a minor relief to the economy, in curtailing the import bill, especially in terms of auto parts.

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