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  • Immunity to SBP officials proposed in legal proceedings

    Immunity to SBP officials proposed in legal proceedings

    ISLAMABAD: The officials of State Bank of Pakistan (SBP) to be given immunity against any legal suit and prosecution for any act of commission or omission done in exercise of any powers.

    According to proposed amendments to the State Bank of Pakistan Act, 1956 issued by the finance ministry on Thursday, “No suit, prosecution or any other legal proceeding including for damages shall lie against the SBP, board of directors of member thereof, governor, deputy governors, member of any board committee and monetary policy committee, officers and employees of the central bank for any act of commission or omission done in exercise or performance of any functions, power or duty conferred or imposed by or under this Act upon such persons or any rules and regulations made thereunder or any legislation administered by the SBP unless such act is done in bad faith and with mala fide intent.”

    It is further proposed the governor, deputy governors, directors, members of any board committee and monetary policy committee, officers and employees of the bank shall not be liable in their personal capacity for any act of commission or omission done in their official capacity in good faith and in case of any such proceedings as mentioned in sub-section (1), they shall be indemnified by the bank which shall bear all the expenses thereof, till final decision of the case.

    Another immunity proposed to SBP officials, which stated: :”No action, inquiry, investigation or proceedings shall be taken by National Accountability Bureau (NAB), Federal Investigation Agency (FIA) or provincial investigation agency, bureau, authority or institution by whatever name called without prior consent of the board of directors of the SBP.”

    Whereas, the present law says: “Every (person in service) of the bank shall be deemed to be a public servant within the meaning of Section of the Pakistan Penal Code.”

    The proposed amendments also suggested increasing the tenure of SBP governor to five years from existing three years.

  • SBP issues revised mark-up subsidy for low cost house financing

    SBP issues revised mark-up subsidy for low cost house financing

    KARACHI: State Bank of Pakistan (SBP) on Thursday issued revised mark up subsidy allowed by the government for low cost housing scheme.

    The SBP issued instructions to the banks for implementation of the revised mark up subsidy approved by the government.

    In view of the feedback received from various stakeholders, Government of Pakistan (GoP) has decided to revise features of the G-MSS to align it with market dynamics. These revisions aim at significantly enhancing outreach of Scheme to the individuals and households who currently do not own a house.

    The key features of the revised G-MSS approved by the GoP are given below:


    Particulars    		Mark up Subsidy Program


    Eligibility Criteria    		All men/women holding CNIC First time home owner One individual can have subsidized house loan facility under this scheme only once


    Tiers of the Scheme    		Financing under Tier 0 is available through microfinance banks for financing of housing units under non-NAPHDA projects. Financing under Tier 1 is available through banks for financing under NAPHDA projects Financing under Tier 2 and Tier 3 is available through banks for financing of housing units under non-NAPHDA projects

    Size of Housing Unit
    Size of the loan is segregated into four tiers, as under: Tier 0 (T0) – (a) House upto 125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft. Tier 1 (T1) – (a) House upto 125 sq yds (5 Marla) with maximum covered area of 850 sq ft and (b) Flat/apartment with maximum covered area of 850 sq ft. Tier 2 (T2) – (a) House upto 125 sq yds (5 Marla) and (b) flat/apartment with maximum covered area of 1,250 sq ft. Tier 3 (T3) – (a) House upto 250 sq yds (10 Marla) and (b) flat/apartment with maximum covered area of 2,000 sq ft.

    Age of housing units


    Newly constructed housing units during last one year from the date of application. However, this    requirement will not be applicable till March 31, 2023 under Tier 0, Tier 2 and Tier 3.


    Maximum Price of Housing Units
    Maximum Price (Market Value) of a single housing unit at the time of approval of financing, as under:
    Tier 1 (T1) – Rs 3.5 million
    Tier 0 (T0), Tier 2 (T2) and Tier 3 (T3) – No cap


    Maximum Loan size
    Maximum size of the loan of a single housing unit, as under:
    Tier 0 (T0) – Rs 2.0 million
    Tier 1 (T1) – Rs 2.7 million
    Tier 2 (T2) – Rs 6.0 million
    Tier 3 (T3) – Rs 10.0 million


    Loan type


    Long term housing finance loans


    Loan Tenor


    Minimum 5 years and maximum 20 years loan tenor, depending upon choice of customers.


    Security Requirements


    As per banks’credit policy and prudential regulations for housing finance, the housing unit financed will be    mortgaged in favor of financing bank.

    Allocation in Budget
    Finance Division shall give authority to SBP to debit GOP account on quarterly basis for the subsidy    payment to banks.

    Payment will be made to the banks on submission of quarterly-consolidated subsidy statement as per    format prescribed by State Bank.


    Pricing
    Pricing for Housing Loans: Loan Tiers Customer Pricing Bank Pricing Tier 0 5% for first 5 years &
    7% for next 5 years KIBOR+700 BPS Tier 1 3% for first 5 years &
    5% for next 5 years KIBOR+250 BPS Tier 2 5% for first 5 years &
    7% for next 5 years KIBOR+400 BPS
    (Spread may vary) Tier 3 7% for first 5 years &
    9% for next 5 years For loan tenors exceeding 10 years, market rate i.e. bank pricing will be applicable for the period exceeding 10 years.

    Executing Agency
    All commercial banks including Islamic banks, microfinance banks and House Building Finance Company    Limited (HBFCL)


    Application Form
    A standardized Application Form both in English and Urdu will require minimum essential information with    simple format.

    The processing time will not exceed 30 days after submission of all documents by the borrower and the    same will be clearly stated in the application form.


    Standardized Procedures    		Banks to have standardized loan documents and risk acceptance criteria

    Monitoring
    SBP will publish consolidated information about the loans extended under this program for information of    the public on quarterly basis on its website.


    Geographical distribution    		Whole of Pakistan

    The revised features are applicable with immediate effect. Accordingly, IH&SMEFD Circular No. 11 of 2020 is hereby superseded. However, instructions notified vide IH&SMEFD Circular No. 01 of 2021 will continue to remain applicable.

    The SBP directed the banks to ensure successful implementation of revised G-MSS through dissemination of necessary instructions to branches/ regions, capacity building of field staff, alignment of housing finance products and active marketing campaigns, etc.

  • Foreign exchange reserves increase to $20.435 billion

    Foreign exchange reserves increase to $20.435 billion

    The State Bank of Pakistan (SBP) reported a rise in the country’s liquid foreign exchange reserves, which increased by $276 million to reach $20.435 billion by the week ending March 19, 2021.

    (more…)
  • Deposits of Islamic banks grow by 28pc to Rs3.39 trillion

    Deposits of Islamic banks grow by 28pc to Rs3.39 trillion

    KARACHI: Deposits of Islamic banking institutions have increased by 28 percent to Rs3.39 trillion for the year ended December 31, 2020, the State Bank of Pakistan (SBP) said on Wednesday.

    The deposits of the Islamic banks were at Rs2.65 trillion by year ended December 31, 2019.

    The market share of Islamic banks in overall banking industry has increased to 18.3 percent by year ended December 31, 2020 as compared with 16.6 percent in the preceding year.

    Assets of the Islamic banks also surged by 30 percent to Rs4.27 trillion for the year ended December 31, 2020 as compared with Rs3.28 trillion in the preceding year. Whereas the share of Islamic banks in terms of assets increased to 17 percent by year December 31, 2020 as compared with 14.9 percent a year ago.

    The SBP said that during the quarter under review (October-December 2020), the asset base of Islamic Banking Industry (IBI) grew by 12.1 percent (Rs. 461 billion) and reached Rs4,269 billion.

    Similarly, the deposits of Islamic banking industry depicted a quarterly growth of 11.7 percent (Rs. 355 billion) and were recorded at Rs. 3,389 billion.

    ‘Assets’ of IBI witnessed YoY growth of 30 percent, which is the highest growth in asset base since December 2012, whereas ‘deposits’ also registered YoY growth of 27.8 percent, the highest growth since December 2015.

    The growth witnessed in the Islamic banking industry shows a promising transition to the new decade even amidst COVID-19 pandemic.

    In terms of market share, IBI achieved a significant mark of 17.0 percent and 18.3 percent in assets and deposits respectively, of overall banking industry by end December 2020. Moreover, profit before tax of IBI stood at Rs. 88.4 billion at the end of the December 2020.

  • SBP amends regulations to encourage investment in REITs

    SBP amends regulations to encourage investment in REITs

    KARACHI: State Bank of Pakistan (SBP) on Monday amended prudential regulations to encourage enhanced participation and investment of banks and development financial institutions in the Real Estate Investment Trusts (REITs).

    The SBP in a statement said that in line with the government initiative for the development of housing and construction sector, the State Bank of Pakistan (SBP) has been taking various regulatory steps to enhance banks/DFIs participation through their financing in the development of these sectors.

    In order to boost activities in these sectors further, the SBP has now made changes to certain provisions of existing Prudential Regulations for Corporate & Commercial Banking to encourage enhanced participation and investment of banks/DFIs in the REITs.

    REITs are asset management companies that own or finance income-producing real estate across a range of property sectors. These asset management companies raise funding from general public and institutions by floating various kinds of funds. REITs deploy funds by investing in real estate properties thereby enhancing the investment in housing and construction sector to contribute in economic growth and development.

    The units of listed REITs, are tradable on stock exchanges and offer a number of benefits to investors.

    The changes in SBP regulations would enable banks/DFIs to make higher investments in REITs to the tune of 15 percent of their equity as against existing limit of 10 percent of equity. This move will not only bring more capital towards REITs but would also enable banks/DFIs to diversify their investments.

    In addition, SBP has also relaxed restriction, in existing regulations, on seeking financing against shares of listed group companies. It will enable investors in raising liquidity for further investment in new business opportunities and ventures leading to greater economic activity.

    The change in regulation would also benefit the capital market by encouraging sponsors of companies to consider listing on the stock exchanges.

    This will promote documentation of the economy, transparency, and good corporate governance practices as well.

  • Overview of banking payment system in Pakistan

    Overview of banking payment system in Pakistan

    KARACHI: The State Bank of Pakistan (SBP) recently issued key information about payment system of banking system in the country.

    Following is the snapshot of payment system in Pakistan:

    Snapshot details as on December 31, 2020

    Total Population in Pakistan: 208.31 million

    Currency in Circulation (in million PKR) 6,543,806

    Number of Banks’ Accounts: 5 59,910,511

    Payment Systems Infrastructure as on December 31, 2020

    Number of Banks 44 and (Branches) (16,304)

    Commercial/ Specialized Banks Branches15,096

    Microfinance (Branches) 1,208

    Number of Real Time Online Branches (RTOBs): 16,165

    Number of banks having ATM machines: 35

    Number of banks having open-looped POS machines: 5

    Number of banks having closed-looped POS machines: 4

    Number of banks providing Internet Banking services: 27

    Number of Banks providing Mobile Phone Banking services: 27

    Number of Banks providing Call Center Banking services: 23

    Total Number of PRISM System Participants: 50

    Total number of ATMs Interoperable Switches: 1

    Total number of Cash & Cheque Deposits Machines (CDMs): 225

    Total number of Cash Deposits Machines with Cash Withdrawal facility: 20

    Multipurpose ATMs (With Cash & Cheque Deposit & Cash Withdrawal):  15

  • SBP issues instructions to banks for wheat procurement by private sector

    SBP issues instructions to banks for wheat procurement by private sector

    KARACHI: The State Bank of Pakistan (SBP) on Friday issued instructions to banks for procurement of wheat by private sector for the season 2021.

    The SBP said that for private sector participation in the wheat procurement season 2021, banks are required to strictly fulfill the following minimum conditions for extending financing to eligible borrowers (licensed and functional flour mills duly evidenced by some documentation or licensed wheat traders registered with concerned authority/department).

    Banks will provide financing to eligible borrowers only for the procurement of indigenous wheat for the harvest season of 2021.

    Banks will ensure that the subject financing will be used only for intended purposes. Special efforts shall be made to ensure that the facilities availed for purposes other than wheat procurement are not utilized for financing of wheat stocks.

    Fresh financing for procurement of wheat shall start from commencement of wheat procurement season 2021 in respective provinces. Financing against wheat and by-products of wheat viz. flour, meada, sujee etc. will be subject to minimum cash margin requirement of 10% of the value of the wheat stock & by -products. Banks shall not provide any financing facilities (funded or non- funded) to enable borrowers to meet the margin requirements.

    Financing to private sector for procurement of wheat shall be provided against pledge of fresh wheat stock only and hypothecation / charge of moveable or immovable property would not be acceptable as collateral for such financing. Moreover, banks will ensure that no revaluation of the pledged stock is considered for release of any differential financing amount to the borrowers against stock of wheat already pledged with the banks.

    Banks will not entertain any application for grant of fresh loans after 30th June, 2021 for procurement of wheat. However, banks may provide financing facility to functional flour mills for purchase of indigenous wheat from their authorized representative and respective Food Department against supply of wheat by them. Quantum of such loan shall not be more than the value of wheat to be supplied by the respective Food Department or actual purchase from wheat traders, commensurate to the milling capacity of each mill. Banks will also monitor that existing stock of wheat purchased by the concerned functional flour mill, has been grinded and that the by-products of wheat (financed against bank loan) have also been released to the market gradually to repay the loans so obtained.

    Banks are also allowed to provide financing facilities for wheat procurement by the seed processing plants duly evidenced by the testing certificates issued by the Federal Seed Certification and Registration Department, in line with their lending policies and the capacity/production plans of the seed processing plants ensuring that such stock of wheat will be used for processing purposes

    These loans will be fully settled on or before 31st January 2022, positively.

    In order to curb the possibility of hoarding, banks shall:

    — require client(s) to disclose their storage location and verify the same.

    — strictly monitor the wheat stock held by the client vide periodical and random inspections of wheat pledged with the bank as well as the gradual release of wheat stock to generate cash for the purpose of repayment of bank loan. SBP may acquire stock reports from banks to verify their authenticity/genuineness as and when desired.

    — be under obligation to immediately recall the advances allowed to the private sector in case of hoarding of wheat.

    — ensure that no financing is allowed to client for retirement of loans availed from other banks.

    — ensure that their clients are in strict compliance with the guidelines of respective government (Federal/Provincial) for release of wheat stock and are not involved in any other activity which may cause speculation of wheat/flour price in market.

    The lending shall be in compliance with applicable laws, Prudential Regulations and other instructions of SBP issued from time to time.

    Banks will submit a monthly statement in respect of financing to private sector for wheat procurement to this department within ten working days from the close of the relevant month.

    Any violation of the above instructions will attract administrative and/or penal action under the provisions of BCO, 1962 and other relevant laws.

  • State Bank decides to maintain policy rate at 7pc

    State Bank decides to maintain policy rate at 7pc

    KARACHI: The State Bank of Pakistan (SBP) in a meeting held on Friday decided to maintain the policy rate at 7 percent for next two months.

    The meeting of the Monetary Policy Committee (MPC) noted that since the last meeting in January, growth and employment have continued to recover and business sentiment has further improved. While still modest, at around 3 percent, growth in FY21 is now projected to be higher than previously anticipated due to improved prospects for manufacturing and reflecting in part the monetary and fiscal stimulus provided during Covid.

    Recent inflation out-turns have been volatile, with the lowest reading on headline inflation in more than two years in January 2021 followed by a sharp rise in February.

    According to SBP estimates, the recent increase in electricity tariffs and sugar and wheat prices accounts for about 1½ percentage points of the 3 percentage point increase in inflation between the January and February out-turns.

    The recent increase in electricity prices will continue to manifest in headline numbers in coming months, keeping average inflation in FY21 close to the upper end of the previously announced range of 7-9 percent.

    In a statement the SBP said that while noting that the recent increase in inflation is primarily due to supply-side factors, the MPC also highlighted that the output gap is still estimated to be negative, core inflation continues to be relatively subdued, and inflation expectations—while drifting up somewhat due to the recent increase in headline inflation numbers—are still well-anchored.

    Looking ahead, as the temporary increase in inflation from administered prices wanes, inflation should fall to the 5-7 percent target range over the medium-term.

    Given this underlying inflation trajectory, the MPC felt that the existing accommodative stance of monetary policy remained appropriate to support the recovery while keeping inflation expectations well-anchored and maintaining financial stability.

    “From a policy mix perspective as well, given that fiscal policy is expected to remain contractionary to reduce public debt, the MPC noted that it was important for monetary policy to be supportive as long as second-round effects of recent increases in administered prices and other one-off supply shocks do not materialize and inflation expectations remain well anchored,” the SBP said.

    In reaching its decision on the policy rate, the MPC also took note of the uncertainty around the inflation and growth outlook. On the growth front, the MPC noted that despite recent momentum, risks remain due to the emergence of a third, more virulent wave of Covid in Pakistan just as the vaccine roll-out is beginning. In terms of the inflation outlook, this summer’s wage negotiations and any new tax measures in the next year’s budget could add further supply-side shocks.

    In addition, optimism about a stronger US-led world recovery this year is translating into higher international commodity prices, including both food and oil, which could continue to feed into domestic inflation. These trends in the outlook for inflation and growth will need to be carefully monitored. In the absence of unforeseen developments, the MPC expects monetary policy settings to remain broadly unchanged in the near term. As the recovery becomes more durable and the economy returns to full capacity, the MPC expects any adjustments in the policy rate to be measured and gradual to achieve mildly positive real interest rates.

  • Foreign exchange reserves remain flat at $20.159 billion

    Foreign exchange reserves remain flat at $20.159 billion

    KARACHI: The liquid foreign exchange reserves of the country are remained flat at $20.159 billion by week ended March 12, 2021, State Bank of Pakistan (SBP) said on Thursday.

    The foreign exchange reserves of the country were at $20.158 billion by week ended March 05, 2021,

    The official foreign exchange reserves of the central bank were at $13.02 billion by week ended March 12, 2021 as compared with $13.016 billion a week ago.

    The foreign exchange reserves held by commercial banks were at $7.139 billion by week ended March 12, 2021 as compared with $7.142 billion a week ago.