Presidents/Chief Executive Officers
All Banks/ DFIs
Dear Sir/ Madam,
Basel Capital Adequacy Framework: Lowering
of Risk Weight on Low Cost Housing Finance
Please refer to the instructions contained
in BSD Circular No. 08 of 2006 dated June
27, 2006 regarding Minimum Capital Requirements
– Implementation of Basel II.
2. Under the existing instructions, the
standardized risk weight as applicable on
banks/ DFIs’ exposure to “Residential
Mortgage Finance” is 35%. However,
to support the growth of “Low Cost
Housing” in Pakistan, it has been
decided to lower the risk weight to 25%
for banks/ DFIs’ exposure to “Low
Cost Housing” wherein borrowers are
meeting the relevant criteria as prescribed
by SBP, from time to time.
3. Currently, “Low Cost Housing”
exposure of only those banks and DFIs shall
be entitled to receive the preferential
risk weight of 25% for capital adequacy
purposes, wherein borrowers are meeting
the requisite criteria as specified in IH&SMEFD
Circular No. 04 of 2019.
4. All other instructions, on the subject,
shall remain unchanged.
Please acknowledge receipt.