KARACHI: The State Bank of Pakistan (SBP) has officially announced that it, along with all commercial and microfinance banks, will observe a bank holiday on May 1, 2021, in observance of Labor Day.
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Financing to housing sector increases to Rs202 billion: SBP
KARACHI: Recent measures taken by the State Bank of Pakistan (SBP) the financing for housing and construction sector increased significantly to Rs202 billion in March 2021.
The SBP in a statement said that housing and construction finance has been progressing significantly and a momentum in housing and construction finance is building up. The banks’ housing and construction finance portfolio has increased from Rs148 billion by the end of June 2020 to Rs202 billion in March 2021 (chart).
This represents a growth of Rs54 billion or 36 percent in three quarters of FY21 compared to a stagnant position in earlier quarters. Such growth in housing and construction finance in such a period has never been witnessed in Pakistan’s history previously.
Overall financing to the housing and construction sector by banks is likely to increase further significantly as mortgage finance activity under Mera Pakistan Mera Ghar Scheme is picking up pace. As of April 20, 2021banks have received applications for financing of more than Rs52 billion from the general public under this scheme. Of these, the banks have approved financing of more than Rs15 billion to the applicants while the remaining applications are at different stages of the evaluation and approval process.
The SBP said that keeping in view the need to improve housing in the country and the important role of construction sector in boosting economic activities in the countries, the Government of Pakistan envisions to increase the number of housing units manifold in coming years and has taken several measures in this regard. A key element to ensure sustainable increase in the construction of building activities is the provision of financing both to the supply and demand side players of the housing and construction sector.
Financing to the housing and construction sector in Pakistan has almost always remained quite negligible in the credit portfolios of banks when compared with other developed and developing countries for various reasons. To support the vision of the Government of Pakistan, the State Bank of Pakistan has taken several measures since July 2020 to support the provision of financing for the housing and construction sector by way of giving incentives and targets to the banks. A key regulatory measure in this direction was assigning mandatory targets to banks to increase financing for mortgages to builders and developers. Banks are required to increase their housing and construction finance portfolios to at least 5 percent of their private sector advances by end December 2021.
In October 2020, the Government of Pakistan augmented these efforts by introducing the Government Markup Subsidy Scheme, now commonly known as Mera Pakistan Mera Ghar Housing Finance Scheme. This scheme enables banks to provide financing for the construction and purchase of houses at very low markup rates, targeting low to middle income segments of the population.
The State Bank of Pakistan has been actively engaged with banks to ensure that a vast majority of masses could benefit from the Mera Pakistan Mera Pakistan Housing Finance Scheme. For this purpose, SBP with the help of Pakistan Banks’ Association (PBA) and banks is ensuring that process of applying for housing finance is easy for the masses and in case they face any difficulty or have complaints, help is provided to them promptly and complaints are resolved in a timely manner.
To begin with, commercial Banks have designated 50% of their branches, around 7,700, across the country for accepting applications under Mera Pakistan Mera Ghar Housing Finance Scheme. In addition, all the remaining branches will also provide basic information about the scheme and refer applicants to the designated branches. Banks are regularly advertising the features of the scheme to attract and encourage potential customers.
In order to address complaints, the State Bank has established a comprehensive complaint resolution mechanism which comprises of an internet portal supported by a network of State Bank and commercial bank staff. The IT portal is live for registration of complaints by applicants who face any difficulty in obtaining loans. State Bank has also established help desks in its 16 offices across the country to facilitate applicants in registration of their complaints through the IT portal. These help desks address access challenges of applicants, especially from low-income strata, arising out of potential language and technology barriers.
The Pakistan Banks’ Association (PBA) has also been playing a very active role in the promotion of Mera Ghar Mera Pakistan Housing Finance Scheme. It is very close to establishing a single call center to address applicant’s questions and to guide them towards their nearest branches to submit application for home loans.
A significant number of Pakistanis who currently do not own a house and are eligible for financing under the Mera Pakistan Mera Ghar Scheme face difficulties in providing documentary evidence of regular sources of income to prove their ability to repay. To address this issue, the State Bank is coordinating with banks to develop a mechanism whereby income proxies, based on demonstrated expenses like rent payments or utility bills, could be used for credit evaluation and income assessment.
PBA is engaged with internationally renowned experts to develop scoring models in this regard in the coming months. The State Bank is facilitating banks to get data from mobile phone companies, utility providers and other government agencies to run these credit scoring models. Banks have already developed initial judgmental income proxy model to accommodate applicants with informal incomes till the time expert’s developed scoring models are implemented.
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Current account posts $959 million surplus during nine months
KARACHI: The current account balance of the country has posted surplus of $959 million during first nine months (July – March) of 2020/2021 as compared with a deficit of $4.14 billion in the corresponding months of the last fiscal year, according to data released by State Bank of Pakistan (SBP) on Friday.
Due to high import volume balance of trade in goods registered a deficit of $18.65 billion during the first nine months of the current fiscal year as compared with deficit of $15.85 billion in the corresponding months of the last fiscal year.
However, the current account deficit on trade in services narrowed to $1.36 billion during July – March of the current fiscal year as compared with the deficit of $2.86 billion in the corresponding period of the last fiscal year.
The deficit in balance of primary income also narrowed to $3.59 billion during the period under review as compared with the deficit of $4.13 billion during first nine months of the last fiscal year.
The major component that helped a surplus current account is worker remittances received by the central bank during the period under review. The inflows of workers’ remittances were at $21.46 billion during July – March 2020/2021 as compared with $17 billion in the corresponding period of the last fiscal year.
The balance of payment posted a current account deficit of $4.44 billion for the fiscal year 2019/2020 and a deficit of $13.43 billion for the fiscal year 2018/2019.
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SBP imposes Rs96 million as monetary penalties on top banks
KARACHI: The State Bank of Pakistan (SBP) has imposed around Rs96 million as monetary penalties on top banks for violating regulatory instructions, including instructions related to anti-money laundering (AML) and combating financing of terrorism (CFT), a notification said on Friday.
The SBP imposed these penalties during quarter ended March 31, 2021 on Habib Bank Limited, MCB Bank Limited, MCB Islamic Bank Limited and United Bank Limited.
The details shows that the central bank imposed an amount of Rs39.77 million on Habib Bank Limited for violating regulatory instructions pertaining to Foreign Exchange and General Banking Operations. The SBP, in addition to penal action, directed to strengthen its process with respect to identified areas.
The SBP imposed penalty of Rs10 million on MCB Bank Limited for violating the regulatory instructions pertaining to general banking operations. In addition to penal action the bank has been advised to strengthen its processes with respect to identified areas.
The central bank imposed monetary penalty of Rs37.09 million on MCB Islamic Bank Limited for violating the regulatory instructions pertaining to AML/CFT, Foreign Exchange and General Banking Operations. In addition to penal action, the bank has been advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials.
The SBP imposed an amount of Rs10.71 million as monetary penalty on United Bank Limited for violating the regulatory instructions pertaining to CDD/KYC and general banking operations. In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.
The SBP from July 2019 started public disclosure of penal action against banks. “Enforcement actions are an integral part of regulatory regime which involves imposition of monetary penalties and other actions against institutions and individuals for violations of laws, rules, regulations, guidelines or directives issued by SBP from time to time,” according to a circular issued by the central bank.
In order to bring more transparency and strengthen market discipline, SBP has decided to publicly disclose significant enforcement actions.
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Foreign exchange reserves flat at $23.21 billion
KARACHI: The foreign exchange reserves of the country registered nominal fall of $7 million to $23.213 billion by week ended April 16, 2021, State Bank of Pakistan (SBP) on Thursday.
The foreign exchange reserves of the country were $23.22 billion by week ended April 09, 2021.
The official foreign exchange reserves of the SBP fell by $62 million to $16.044 billion by week ended April 16, 2021 from $16.106 billion a week ago.
However, foreign exchange reserves maintained by commercial banks increased by $55 million to $7.169 billion by week ended April 16, 2021 as compared with $7.114 billion a week ago.
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SBP, SECP revise ToRs for joint task force
KARACHI: The State Bank of Pakistan (SBP) and the Securities and Exchange Commission of Pakistan (SECP) have amended the Terms of Reference (ToRs) of their Joint Task Force (JTF) on Financial Conglomerates to further strengthen the supervisory cooperation, inter alia, in AML/CFT/CPF supervision at financial-group level. Dr, Reza Baqir, Governor, SBP and Aamir Khan, Chairman, SECP have signed the Letter of Understanding (LoU) for amendments in the ToRs, according to a statement issued on Thursday.
The interagency cooperation between financial sector regulators is a crucial element for the effective supervision of financial groups, which comprise various types of financial institutions.
Accordingly, the SBP and SECP established the JTF in March 2009 to proactively identify and tackle the risks posed by conglomeration in the financial sector.
The ToRs of the JTF envisage the supervisory cooperation, holding periodic meetings and information sharing between both the regulators in respect of the financial groups. The ToRs have been revised from time to time to align with the developments in the regulatory sphere and dynamics of the financial market.
Keeping in view the importance of the group-level AML/CFT/CPF supervision, both SBP and SECP jointly agreed to specifically cover this area in the ToRs of the JTF in a more explicit manner.
These improvements in the ToRs will allow the regulators to effectively implement group-level AML/CFT/CPF supervision in line with the international standards, and strengthen cooperation and information sharing in a more systematic manner. Revised TORs will further the overall policy objectives of soundness, integrity and fair conduct in the financial system.
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Habib Bank pays penalty of Rs42.2 million to SBP
KARACHI: Habib Bank Limited (HBL) has paid monetary penalty of Rs42.2 million to State Bank of Pakistan (SBP) for violation of various regulatory provisions.
According to HBL it paid Rs42.2 million during first quarter (January – March) of 2021 against penalties imposed by the SBP. The bank had paid around Rs231.6 million as monetary penalties to SBP in the same quarter of the last year.
A total amount of Rs42.23 million was paid by the bank as penalties, including those imposed by other regulatory bodies. The bank had paid around 232.19 million as total penalty for the same quarter of the last year.
The bank had paid an amount of Rs320.79 million as penalty for various regulatory violations during the year ended December 31, 2020.
For the year ended December 31, 2020, the bank paid the amount of Rs320.79 million as penalties for violation of various regulations.
However, the payment of penal amount reduced by 33 percent when compared with Rs480.56 million paid in the preceding year.
The bank paid an amount of Rs296 million against fine imposed by the SBP for the year ended December 31, 2020. The latest amount of monetary penalty has been reduced when compared with Rs476 million that was imposed by the SBP on the bank during the preceding year.
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Foreign direct investment plunges by 35pc in nine months
KARACHI: The influx of foreign direct investment (FDI) into Pakistan has plummeted by 35 percent during the first nine months (July – March) of the fiscal year 2020/2021, as per data released by the State Bank of Pakistan (SBP) on Monday.
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SBP issues payment mechanism for housing finance markup subsidy
KARACHI: State Bank of Pakistan (SBP) on Monday issued mechanism for payment of markup subsidy for housing finance and issued instructions to banks and development financial institutions (DFIs) for the facility.
The SBP advised banks to submit their claims to Development Finance Support Department (DFSD), SBP BSC, Karachi as per instructions contained in the attached payment mechanism within 15 working days from the end of each Quarter.
However, the banks shall submit their claim within 15 working days for the quarter ending December 2020 and March 2021 from the date of issuance of this circular.
According to markup subsidy payment mechanism (MSPM), the SBP said that the government had issued markup subsidy scheme to provide concessional housing finance for promoting home ownership.
The SBP issued necessary instructions to all commercial banks, microfinance banks and HBFCL through a circular no. 03 dated March 25, 2021 and revised instructions issued from time to time.
All loans disbursed under the scheme shall be reported to SBP under housing finance.
Under the Scheme, loans are segregated into four tiers:
i. Tier 0 (T0) – (a) House up to125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft.
ii. Tier 1 (T1) – (a) House up to125 sq yds(5 Marla) with maximum covered area of 850 sq ft and (b) Flat/apartment with maximum covered area of 850 sq ft.
iii. Tier 2 (T2) – (a) House up to125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft.
iv. Tier 3 (T3) – (a) House up to250 sq yds (10 Marla) and (b) flat/apartment with maximum covered area of 2,000 sq ft.
Pricing for Housing Loans
Loan Tiers Customer Pricing Bank Pricing Tier 0 5% for first 5 years & 7% for next 5 years 1 Year KIBOR + 700 BPS Tier 1 3% for first 5 years & 5% for next 5 years 1 Year KIBOR + 250 BPS Tier 2 5% for first 5 years & 7% for next 5 years 1 Year KIBOR + 400 BPS (Spread may vary) Tier 3 7% for first 5 years & 9% for next 5 years 1 Year KIBOR + 400 BPS (Spread may vary) For loan tenors exceeding 10 years, market rate i.e. bank pricing will be applicable for the period exceeding 10 years. Procedure for loans disbursements and availing markup subsidy:
EAs shall evaluate financing applications of customers as per parameters of Markup Subsidy Scheme for Housing Finance approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks/DFIs vide IH&SMEFD Circular No. 03 dated March 25, 2021 and revised from time to time. The financing facility for a borrower shall be sanctioned and disbursed by the EA after completion of documentation formalities. These financing shall be entitled for markup subsidy as prescribed above. No further evaluation on eligibility of borrowers would be conducted by the State Bank of Pakistan.
Calculation of Equally Monthly Installment (EMI) for Borrower
For first five years EMI, amortization schedule would be prepared for full tenor of financing at markup rate i.e. 3 percent, 5 percent or 7 percent depending upon the financing tier.
EMI for next five years i.e. 6th year to 10th year would be on the basis of amortization schedule prepared at the applicable subsidized markup rate (i.e. 5 percent, 7 percent or 9 percent depending upon the financing tier) on outstanding principal for remaining financing tenor.
After 10th year of financing, EMI would be calculated on the basis of amortization schedule at applicable markup rate.
Calculation of Markup Subsidy for Banks
After calculating the EMI for end user, the EAs will calculate the difference to be paid by Government of Pakistan by applying the difference between 1-Year KIBOR + spread and end user markup rate on the outstanding principal.
The banks will calculate the subsidy for the period of markup subsidy i.e. 10 years.
Mechanism for Payment of Markup Subsidies: Payment of subsidy to EAs will be made through SBP’s operational arm viz. Development Finance Support Department (DFSD), SBP BSC, Head Office, Karachi.
The executing agencies (EAs) / banks shall prepare and submit claims on quarterly basis to DFSD for receiving government markup subsidy on outstanding principal amount of their performing housing finance portfolio up to expiry of each individual loan. In case of a loan becoming non-performing, no markup subsidy will be paid after being classified as ‘Loss’ as per SBP PRs for Housing Finance. The EAs claims shall contain particulars of each individual loan along with calculations of subsidy based on relevant 1-year KIBOR used. For the sake of simplicity, EAs shall assign unique number to each loan i.e. “Bank Name—Loan Number” (ABC-12345678). The markup subsidy claim should be duly vetted by internal audit department of the EA. The audited claim along with a certificate from EA relating to eligibility of borrowers for the subject scheme and correctness of the subsidy amount shall be submitted to DFSD within 15 working days after the end of respective quarter for payment of subsidy. The claims shall be submitted to DFSD as per the format attached as Annexure B (Annexure B-1 for Banks/DFIs and Annexure B-2 for MFBS).
DFSD, SBP BSC shall scrutinize subsidy claim of EAs within 15 working days after receipt of complete information from EAs. DFSD shall ascertain that calculations of EAs subsidy claim are correct and applicable KIBOR has been used by the EAs. Thereafter, DFSD shall submit scrutinized claims to Accounts Department, SBP BSC for release of funds, through Karachi Office, to respective EA account maintained with SBP BSC, Karachi from Government account ‘Non-Food Account 1’.
Banking Inspection Department of State Bank during regular inspection of the EAs shall conduct inspection of their housing finance portfolio on sampling basis using its own sampling techniques. SBP inspectors shall randomly select credit files and review them from the perspective of eligibility of borrowers under the Program, status of loan (regular or NPL) and GOP subsidy claim. The BID inspection report section on ‘Markup Subsidy on Housing Finance’ shall be used as an important input for reviewing the Scheme and assessing its effectiveness in fulfilling the Government objective of promoting home ownership in the country.
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Pakistan foreign exchange reserves increase to $23.22 billion
KARACHI: The foreign exchange reserves of the country have increased by $2.54 billion to $23.22 billion by week ended April 09, 2021, State Bank of Pakistan (SBP) said on Thursday.
The foreign exchange reserves of the country were at $20.679 billion by week ended April 02, 2021.
The official foreign exchange reserves of the State Bank increased by $2.579 billion to $16.106 billion by week ended April 09, 2021 as compared with $13.527 billion a week ago.
The increase in reserves has been attributed to receipt of proceeds of $2.5 billion against issuance of Pakistan Euro Bonds.
The foreign exchange reserves held by commercial banks eased by $38 million to $7.114 billion by week ended April 09, 2021 as compared with $7.152 billion a week ago.