The State Bank of Pakistan (SBP) has allowed banks and development finance institutions (DFIs) to extend loans for the cost of ancillary items like CNG kits, global positioning systems and vehicle tracking devices, while sanctioning auto loans for the ex-factory tax-paid price fixed by car manufacturers.
However, banks and DFIs are not permitted to finance the premium charged by dealers and investors over and above the ex-factory price of vehicles.
According to a circular issued on Wednesday, Regulation R-11 of the prudential regulations for consumer financing has been substituted with the following: “While allowing auto loans, banks and DFIs shall ensure that the minimum down-payment does not fall below 10 per cent of the value of the vehicle.”
However, banks and DFIs will not finance the premium charged by the dealers and investors over and above the ex-factory tax-paid price for vehicles, fixed by the manufacturers, according to the circular.
The amendments were made taking into account the feedback received from banks and DFIs, the central bank said.
Published in The Express Tribune, April 28th, 2011.
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