KARACHI: The State Bank of Pakistan (SBP) has announced that it will impose penalty on the Financial Institutions (FIs) falling short of monthly mandatory targets of number of housing units and amount of disbursements assigned under the Government Mark-up Subsidy Scheme (G-MSS) for housing finance.

As the housing plays an important role in economic development by contributing to GDP growth, employment generation and more than 40 industries and 70 percent of unskilled labor are linked with housing and construction sector. Therefore, in order to provide formal financial services at affordable rates, Government of Pakistan announced Markup Subsidy Scheme for Housing Finance to enhance lending for the housing and construction sector.

Accordingly, banks and DFIs were advised to achieve mandatory financing targets for housing and construction of buildings (Residential and Non-Residential) equivalent to at least 5 percent of their domestic private sector advances by December 31, 2021.In April this year, in order to increase funding for housing and construction through capital markets and microfinance banks (MFBs), State Bank decided to allow counting of some exposures of banks/DFIs towards achievement of their housing & construction finance mandatory targets.

According to SBP, banks are expected to make all-out efforts to harness full potential of Scheme. Accordingly, in April 2021, SBP assigned monthly mandatory targets of number of housing units and amount of disbursements (G-MSS targets) to banks in proportion to share in total banking assets.

Now, in view of foregoing, SBP has decided that penalty will be imposed on banks falling short of their G-MSS targets with effect from July 31, 2021 on both targets of number of housing units and amount of disbursements. A baseline penalty will be charged on shortfall from cumulative targets till July 31, 2021 while higher penalty will be charged on shortfall from targets of subsequent months.

However, the penalty charged on a bank will be adjusted after review of 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.

In addition, to assess efforts, State Bank will, if required, collect information from banks which fail to meet their targets.

Copyright Business Recorder, 2021