The State Bank of Pakistan (SBP) on Tuesday has said that the Cash Reserve Requirement (CRR) for banks will not be applicable on targets of housing and construction finance.

In a circular issued today, the central bank stated, “To facilitate banks, the SBP has decided that the lower/additional CRR for banks that meet/do not meet quarterly targets will not be applicable on surplus/shortfall in targets of housing and construction finance for the quarter ending September 30, 2022, and onwards till further instructions on the matter.

"Accordingly, banks will maintain lower/additional Cash Reserve Requirement in respect of surplus/shortfall in targets for the quarter ending June 30, 2022 in the next quarter as per defined procedure.

“This means banks will maintain CRR (without lower/additional requirement) from the first reserve maintenance period starting after October 21, 2022,” read the circular, while adding that all other instructions on the subject shall remain unchanged.

Housing finance: SBP ups banks’ mandatory target

Earlier this year, the SBP announced increase in the mandatory target for financing of housing and construction of buildings from 5% to 7% of their domestic private sector credit.

The SBP already had directed banks to gear up infrastructure and capacity to ensure compliance of meeting these targets. As per the directive, each bank is required to develop a concrete action plan with detailed measures and their timelines to achieve its housing and construction finance targets.