KARACHI: The State Bank of Pakistan (SBP) has revised the prudential regulations to promote consumer financing in sustainable and fair manner while ensuring financial stability of the banks/DFIs.
A statement on Wednesday said that the revised regulations provide more discretion in decision making to banks/DFIs in line with their dynamic business environment.
The central bank periodically reviews its regulatory framework in order to align it with changing business environment and international best practices, the statement added.
It said that under these regulations, amongst others, banks/ DFIs are advised to develop common glossary of important terms to use in loan documentation.
The development of common nomenclature of important terms will not only complement the disclosure requirements of terms and conditions but will also facilitate the general public to better understand the terms of the loans and perform a meaningful comparison of the financing products offered by different banks.
Banks/DFIs have also been advised to initiate assessments for introduction of differentiated loan pricing in all consumer financing products, which inter alia should be sensitive to loan product characteristics, borrowers’ risk assessment, timely regular repayments and exemplary behaviour.
They maintain general provision against performing consumer financing portfolio to protect them from the risks associated with the economic cyclical nature of this business.