The Chief Executives,
All Banks/DFIs

Dear Sirs/Madam,

 

Restriction on Financing of Premium under the Car Finance Schemes

Please refer to the Prudential Regulations for Consumer Financing issued vide BPD Circular No. 35 dated October 28, 2003.

2. It has been reported to the State Bank of Pakistan that the Premium, also called on money, on purchase of cars is being financed by some banks/DFIs, under their respective car finance schemes. In order to discourage speculative activities on car purchases, which may be facilitated by the bank financing of premium, it has been decided with immediate effect that the banks/DFIs shall extend loans only for the ex-factory tax paid price fixed by the car manufacturers. In other words, bank/DFI’s loans cannot finance the premium charged by the dealers and/or investors over and above the ex-factory tax paid price of cars fixed by the manufacturers.

3. All other instructions on the subject shall, however, remain unchanged.