Working Couples Can Now Jointly Apply for Loans, Leases

Good news is here for working, married couples. Now they can avail the opportunity to borrow loans for house, cars, computers and generators from any commercial banks against certain monthly installments.

This has being made possible thanks to the new and revised regulations on Consumer Financing by State Bank of Pakistan (SBP).

State Bank has allowed banks to consider the income of the spouse of the borrower for lending them loans. This measure makes it possible for couples to jointly share the burden of monthly installments from their salaries. As a consequence, families could now find it easier to manage their expenses and apply for loans from banks jointly.

However, loans could be disbursed to married couple by banks if both the wife and husband consent to it and state themselves as co-borrowers in the credit bureau.

Working Husband and Wife Can Now Avail Loans as Co-Borrowers for Consumer Financing Services

SBP has also directed banks to be careful while performing the income assessment for the following:

  • non-salaried couple
  • non-salaried spouse
  • entrepreneur spouse

This directive has been taken in order to avoid inflated income levels built artificially and reflected on their bank statements by these type of borrowers.

Consumer Financing to Grow

With the lower interest rates in the banking industry, commercial banks are now targeting consumers through different products such as Auto/ House financing, Credit Cards, Personal loans, which are now affordable to a large section of public falling middle and lower middle class.

Banks have been asked to ensure that the total installment of the financing facilities should be commensurate with the monthly income and repayment capacity of the borrower. It is ensured that the total monthly loan payments of consumer financing facilities should not exceed 50% of the net disposable income of the prospective borrower.

The banks must clearly disclose all the important terms, conditions, fees, charges and penalties, which interalia include Annualized Percentage Rate, prepayment penalties and the conditions under which they apply. For ease of reference and guidance of their customers, banks are encouraged to publish brochures regarding frequently asked questions.

The banks shall ensure that their accounting and computer systems are well equipped to avoid charging of mark-up on mark-up. For this purpose, it should be ensured that the mark-up/profit charged on the outstanding amount is kept separate from the principal.

Banks may lend a customer up to Rs 2 million depending on his/her income under Credit Card and Personal Loan.

Furthermore, banks shall also ensure that overall credit card and personal loan/financing limits, both on secured as well as on unsecured basis, that is availed by one person from all banks in aggregate should not exceed Rs 5 million at any point in time.

To protect the interests of consumers, SBP has also told banks that they shall be liable for all transactions not authorized by the credit card holders after they have been properly served with a notice that the card has been lost / stolen.

However, the bank liability shall be limited to those amounts wrongly charged to the credit card holder’s account. In order to mitigate the risks in this respect, the banks/DFIs are encouraged to take insurance / takaful cover against wrongly charged amounts, frauds, etc.

State Bank of Pakistan (SBP) has revised regulations for consumers financing mainly to facilitate the general public so that they get benefits from commercial banks in order to meet their personal needs.

However, these regulations have still not addressed the malpractices of banks that blacklist certain professions such as freelancers, lawyers, media persons, and areas of different cities.

The regulator did not have any strict formula to check banks’ malpractice to loot customers through hidden charges. It neither addresses the forceful recovery methods in use by bankers to get money from borrowers.

The complete prudential regulations by SBP on consumers financing can be viewed here.