RECORDER REPORT

KARACHI: In order to encourage consumer financing, State Bank of Pakistan (SBP) has allowed financing of cars older than five years and up to nine years.

Earlier, financing of cars up to five years old was allowed and with this move, the banks can now finance cars older than five years to facilitate the consumers.

Although, the SBP has allowed financing of up to 9 years old cars, however, the financing of over five years old cars will be restricted for a maximum period of 12 years of such cars age. It means, a nine-year-old car can get only three years financing; generally banks are financing up to five-year-old cars for a period of 3 to 5 years.

As per SBP BPRD Circular No 07 of 2014 Prudential Regulations for Consumer Financing has been amended and it has been decided to allow financing of cars older than five years and up to nine years. Accordingly, Prudential Regulation O-8 of Consumer Financing has been amended.

The regulation O-8 says: “The banks/DFIs desirous of financing the purchase of used cars shall prepare uniform guidelines for determining the value of the used vehicles. In no case the bank/DFI shall finance the cars older than nine years. However, cars older than five years and up to nine years can only be financed subject to the condition that complete repayment of financing is restricted within 12 years of such car age”.

Appreciating the State Bank’s move, bankers said that the step would help promote consumer financing, which had been on the decline for the last few years.