State Bank of Pakistan (SBP) has introduced a mechanism of incentives and penalty for banks to promote housing and construction financing in pursuance of its policy of setting mandatory target for banks to extend mortgage loans and financing for developers and builders.

In a statement, it is said that under this new mechanism, against incentives offered to banks for their increased financing in housing and construction industry, they will be penalized for a shortfall in the financing targets set for them.  

To be implemented from Dec. 31, 2020, this mechanism will provide the banks with an incentive of maintaining reduced Cash Reserve Requirement with State Bank, in the next quarter, in case they achieve or exceed the target of financing for housing and construction of buildings set for the quarter.

Further details of the incentive mechanism are provided in the circular issued to banks and available at: https://www.sbp.org.pk/dmmd/2020/CL3.htm

SBP has been actively working with banks to support finance for the promotion of housing and construction of building activities in the country. The growth of the housing and construction sector is vital for the economy, due to its linkages with a number of allied industries and potential for jobs creation.