Friday, January 01, 2010
KARACHI: The State Bank of Pakistan after review of Prudential Regulations for Consumer Financing and feedback of the stakeholders has made amendments in the regulations.
According to SBP circular addressed to all banks/DFIs here on Thursday, the following amendments will come into effect immediately.
Rescheduling / Restructuring of Non-Performing Consumer Loans:
a) Banks/DFIs should frame policy for rescheduling/ restructuring of non-performing consumer loans. The policy should be approved by the Board of Directors or by the Country Head/Executive/Management Committee in case of branches of foreign banks.
b) For the purpose of rescheduling/ restructuring, banks/DFIs may:
i) Club or consolidate outstanding amounts on account of personal loans and credit cards and create one loan. The new loan so created shall be placed in the lowest category of classification amongst the classifications of the loans clubbed.
ii) Convert revolving facility into an instalment loan.
iii) Change the tenure of the loan by maximum two years beyond any regulatory cap on maximum tenure.
c) Rescheduling/ restructuring should not be done just to avoid classification of loans /advances and provisioning requirements. In this connection, banks /DFIs shall ensure that consumer financing facilities of any borrower should not be rescheduled/ restructured more than once within 12 months and three times during five year period.
d) While considering rescheduling/restructuring, banks/DFIs should, interalia, take into account the repayment capacity of the borrower. The condition of 50 per cent of Debt Burden Requirement (DBR) mentioned at Regulation R-3 of Prudential Regulations for Consumer Financing shall not be applicable to loan rescheduled/ restructured. However, any new consumer financing facility extended to a borrow who is availing any rescheduled/ restructured facility shall be subject to observance of minimum DBR prescribed in the Regulation R-3 of Prudential Regulations for Consumer Financing.
e) The status of classification of the non-performing loans shall not be changed because of rescheduling / restructuring unless borrower has paid at least 10 per cent of the rescheduled / restructured amount or six instalments as per terms and conditions of the rescheduling/ restructuring. However, for internal monitoring purpose, banks/DFIs may re-set the dpd (days past due) counter of the newly created loan to dpd.
f) Provisions already held against non-performing loan, to be rescheduled /restructured, will only be reversed if condition of 10 per cent recovery or six instalments is met.
g) If the borrower defaults (i.e. reaches 90 dpd) again within one year after declassification, the loan shall be classified for unsecured loan as loss and for secured loan under the same category in which it was prior to rescheduling / restructuring.
Banks / DFIs, however, at their discretion may further downgrade the classification based on their own internal policies.
Regulations for Credit Cards
Maximum Card Limit: The following paragraph will be added in Regulation R-7: Banks/DFIs may merge the clean limits to single person for Credit Cards and Personal Loans subject to the condition that total clean limit availed by him/her from all banks/DFIs does not exceed Rs2,000,000 at any point in time. It is re-emphasized that the aggregate clean limit of the borrower should not exceed Rs2000,000 in any case.
Regulations for Personal Loans including Loans for the Purchase of Consumer Durables
Regulation R-23: Clean Limit per Person for Personal Loan: The following paragraph will be added in Regulation R-23: Banks/DFIs may merge the clean limits to single person for Personal Loans and Credit Cards subject to the condition that total clean limit availed by him/her from all banks/DFIs does not exceed Rs2,000,000 at any point in time.
It is re-emphasized that the aggregate clean limit of the borrower should not exceed Rs2000,000 in any case.
The State Bank has advised the banks /DFIs to refer to Prudential Regulations for Consumer Financing as amended from time to time. All other instructions on the subject shall, however, remain unchanged.
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