Interest rates up on government Loan Scheme for houses
Ibn-e-Ameer
Islamabad: The government has decided to increase the banks’ interest rates on loan schemes for houses.
It took the decision by reducing the guarantee to 50 percent on banks loan for government houses scheme. The banks will provide loans to finance houses under the government scheme.
The government had initiated different projects under Prime Minister (PM) housing loan scheme for the low-income class in the country.
The government had started the prime minister low-cost housing scheme 2020 for houses. The aim is to provide loans to low-income groups at subsidized rates.
Economic Coordination Committee (ECC) has recently approved Kamyab Pakistan Program.
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The government has taken this initiative to provide loans at subsidized rates for houses scheme.
The ministry had requested ECC to approve Kamyab Pakistan Program with features. It also proposed to grant exemption of rule 3(2) of Cash Management and Treasury Single Account Rules 2020.
The purpose is to allow the direct debit authority to the SBP beyond inevitable circumstances.
During the ensuing discussion, the chair clarified that the program is a milestone initiative of the present government.
Its distinctive feature is the uplift of the low-income groups by empowering them through the provision of small loans by microfinance institutions.
The government will provide such small loans to individuals’ households in the sectors like housing and agriculture. The target market of this facility shall be the households the “Ehsaas” Program has identified.
Chairman ECC asked to limit the overall debt servicing burden up to 33% of the total income of the borrower for the housing sector. It should be 50% for non-housing loans.
The proposal was to set a limit of Rs 150,000 per crop.
Governor SBP suggested limiting government guarantees at 50% instead of 100% for loans from the banks/DFIs/Pakistan Mortgage Refinance Companies (PMRCs).
It will ensure the sustainability of the credit market.
Moreover, for allowing direct debit, approval of the SECP would be required. Finally, he stated that the projections/time frame for the whole period of the scheme i.e. 22 years, should be presented as well.
ECC agreed to the suggestion for reduction of the guarantee limit for banks/DFIs/PMRCs at 50% of “first loss portfolio basis” instead of 100%.
It agreed to seek approval of the SECP for MFIs.
Meanwhile, this would entail an increase of 0.50% in applicable interest for banks. However, regarding the time frame for projections, the Finance Division responded to the projection for twenty-two years.
The chairman ECC observed to review the program after three years to assess performance, viability, and sustainability.
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Furthermore, the Economic Coordination Committee (ECC) of the Cabinet considered the summary and approved the proposal with the stipulation to keep government guarantee at 50 percent for the loans from the banks/ DFIS/Pakistan Mortgage Refinance Companies (PMRCs).
Meanwhile, the government will allow an increase of 0.50% in bank interest rate in view of reduced coverage of Government guarantees on a “first lose portfolio basis”.
