The Presidents/Chief Executive Officers,
All Banks/DFIs


Dear Sir/Madam,

Treatment of Risk Sharing Facility - Low Cost Housing Finance

Please refer to BPRD Circular No. 1 of March 11, 2019, Basel Capital Adequacy Framework and Prudential Regulations on Housing Finance.

2. In this regard, to promote the Low Cost Housing in Pakistan, banks and DFIs are allowed:
   
   
   1. To apply a Risk Weight of 0%, for capital adequacy purposes, on the guaranteed portion of eligible Low Cost Housing Finance Portfolio covered under the Risk Sharing Facility (RSF).
      
      
   2. To deduct the guaranteed portion of eligible Low Cost Housing Finance Portfolio covered under the RSF while arriving at the provisioning requirements provided mark-up/ interest on classified accounts will be taken to Memorandum Accounts instead of Income Account.

3. However, the subject treatment will remain available as long as Government’s irrevocable and unconditional commitment to financially support the Trust remains valid under the RSF arrangement. The benefit will cease w.e.f. issuance of “Contingent Capital Claim Event Notice” by the Trustee, in terms of Master Credit Guarantee Agreement, until such time, Trustee issues the “Cessation Notice”.
   
   
4. Please acknowledge receipt.