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 dated March 11, 2019 regarding the Basel Capital Adequacy Framework and Prudential Regulations on Housing Finance.

2. In order to promote Low Cost Housing in Pakistan, banks and DFIs are allowed to:
   1. 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. 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 is taken to Memorandum Accounts instead of the Income Account.
3. However, the above treatment shall remain available as long as the Government’s irrevocable and unconditional commitment to financially support the Trust remains valid under the RSF arrangement. The benefit shall cease with effect from the issuance of the "Contingent Capital Claim Event Notice" by the Trustee, in terms of the Master Credit Guarantee Agreement, until such time as the Trustee issues the "Cessation Notice".
4. Please acknowledge receipt.