The State Bank of Pakistan’s latest upgradation of prudential regulations for corporate and commercial banking enables banks to seek more opportunities, and to do so in a professional and transparent manner to avoid future risks.
One important aspect of the revised regulations is that after more than seven years, the central bank has again imposed a limit on bank financing to the housing sector. In April 2007, the SBP had advised banks to keep their housing finance up to 10pc of their net advances. The purpose was to enable banks to develop their housing finance portfolio ‘to a reasonable level’.
Now, this limit has been re-imposed with two key changes. Banks’ financing to the real estate sector will now be up to 10pc of their advances and investment (minus investment in government securities). However, the limit will not apply on financing to government-sponsored low-cost housing schemes.
Bankers say whereas prudential regulations for corporate and commercial banking have been in place for a long time, the SBP has now come up with a complete set of regulations in one document which will make their implementation easier.