In order to enhance the level of disbursement for housing finance under the Government's Mark-up Subsidy Scheme (G-MSS), the State Bank of Pakistan (SBP) has decided to penalize banks falling short of their targets with effect from July 31, 2021.

The central bank in its circular on Tuesday said that banks are expected to make all-out efforts to harness the full potential of the scheme.

In April 2021, the SBP assigned monthly mandatory targets of the number of housing units and amount of disbursements (G-MSS targets) to banks in proportion to share in total banking assets.

Housing finance: SBP sets mandatory targets for banks

“In view of foregoing, it has been decided that penalty will be imposed on banks falling short of their G-MSS targets w.e.f July 31, 2021, on both targets of the number of housing units and amount of disbursements,” read the circular.

SBP said that a baseline penalty will be charged on shortfall from cumulative targets till July 31, 2021, while a higher penalty will be charged on shortfall from targets of subsequent months.

This is the latest move by the central bank eyeing enhanced housing finance. Last month, the SBP asked banks to develop and deploy an income estimation model for the extension of low-cost housing finance to such applicants, in order to ease difficulties being faced by the general public in availing housing finance under G-MSS, commonly known as Mera Pakistan Mera Ghar.

Low-cost housing finance: SBP asks banks to develop, deploy income estimation models

Meanwhile, the SBP informed that the penalty charged on a bank will be adjusted after review of the bank’s efforts in terms of logins of applications, approvals of housing finance, results of SBP’s latest mystery shopping surveys, involvement of bank’s management, evidence of board information and support, sale, and marketing efforts, innovation in delivery channels, capacity building of staff and human resource (headcount) involved in G-MSS.

To assess efforts, State Bank will, if required, collect information from banks that fail to meet their targets.