Keeping the present economic situation and bulging import bill in view the State Bank of Pakistan has made the amendment to the Regulation R-11 of the Prudential Regulations for Consumer Financing (PRCF). Hence, decreasing the maximum tenure of the auto financing loan period to three years. The central bank said that the amendments to the PRCF will be applicable, with immediate effect, on new financing facilities where the banks/DFIs have not granted the approval yet. However, all other instructions on the subject shall remain unchanged.
Changes made to the auto financing loan period
According to a circular issued by the SBP, the maximum tenure of the auto financing loan period is reduced to 3 years from 5 years for vehicles above 1,000 cc engine displacement. The maximum tenure of the auto finance facility is reduced to 5 years from 7 years for vehicles up to 1,000 cc engine displacement.
The central bank said that the other amendments issued earlier, vide BPRD Circular Letter No. 29 dated September 23, 2021, would henceforth be applicable on financing for all locally assembled/manufactured vehicles, including on financing for vehicles of up to 1,000cc engine displacement and locally assembled/manufactured electric vehicles. However, the regulatory treatment of Roshan Apni Car products communicated earlier to RDA participant banks will continue to remain effective.
Experts anticipate a drop in car sales
Head of Research, Pak Kuwait Investment Company, Samiullah Tariq anticipates a 10 percent drop in sales of cars after July because of high vehicle prices, rising interest rates, and fresh measures to control auto financing by the SBP. An analyst at KTrade Alert of KASB said; “Vehicle sales may fall by 20-25pc in FY23 due to a sharp 30pc increase in automobile prices, to date. Auto prices are also under pressure due to depreciation of the rupee, elevated commodity prices, and surging freight rates.”