SBP has decreased the consumer financing duration for vehicles on Tuesday, lowering it down to three years for cars with engine displacements exceeding 1,000 cc and five years for those with engine displacements under 1,000. The SBP decided to change the Prudential Regulations for Consumer Financing (PRCF) in its circular Letter No. 19 of 2022. Additional modifications issued by BPRD Circular Letter No. 29 on September 23, 2021, will apply to financing for all locally assembled/manufactured vehicles, including financing for vehicles of up to 1,000 cc engine displacement and locally assembled/manufactured electric vehicles. “However, the regulatory treatment of Roshan Apni Car product communicated earlier to RDA participant banks will continue to remain effective,” says the circular. SBP has stated that the PRCF modifications will be immediately applicable to new financing arrangements, even if the banks or DFIs have not yet obtained approval for their implementation. Other than that, the rest of the instructions will remain unchanged. Just one day earlier, the Monetary Policy Committee (MPC) increased the benchmark interest rate by 150 basis points, bringing it to 13.75 percent, the highest interest rate since 2011. Export Finance Scheme (EFS) markup rates also went hiked from 5.5 percent to 7.5 percent that same day as well, according to the SBP. Experts say the policy will not have a significant influence on the banking sector, but it will have a detrimental impact on the auto industry. Banks would not aggressively pursue vehicle finance in the current economic climate, where interest rates are already high, because their priority will be changed from consumer to corporate credit, they added. Economists believe that the current move by the central bank and the continued rise in automobile costs do not bode well for the industry. Auto financing is thought to account for 30 to 40 percent of all vehicle sales. The installment amount would rise as a result of a shorter term, reducing demand,” they said. The government had previously declared a ban on the import of 38 products in an effort to halt the loss in foreign currency reserves. Exports of automobile components will be less expensive now that the import bill has been reduced.