Auto financing in Pakistan by the banks have soared to an all time high of PKR326 billion in August this year. Major reason for this increase is that financing became affordable for more people due to the drop in interest rates amid the covid-19 pandemic.

A 46.8 per cent year-on-year increase was witnessed in August, mostly due to low interest rates in the country, Geo News quoted a brokerage revealing data from State Bank of Pakistan (SBP).

As per reports, the Central Bank in its third quarterly report on Pakistan’s economy for fiscal year 2021 said, “The growth in auto financing during Q3FY21 is mainly attributed to low interest rate environment, increasing prices of passenger cars, which affected the consumers’ capacity to buy on cash, and new entrants in the automobile market that provided wider options to the consumers”.

The report added that this was consistent with an across the board “increase in the sales of auto assemblers during the period under review. In particular, cars below 1,000cc and jeeps were in higher demand”.

 

Meanwhile, experts believe that a slow-down in car financing is expected because of the high cost of borrowing. Moreover, the SBP also raised the interest rates by 25 points to 7.25 per cent to moderate demand growth.

The private sector credit also witnessed a growth of over 11 per cent during the fiscal year 2021 after historic cuts in the policy rate and the introduction of SBP’s coronavirus related support packages. Major reason for its growth is the consumer loans followed by a broad based expansion in credit for fixed investment and finally working capital loans.

“The MPC felt that some macro prudential tightening of consumer finance may also be appropriate to moderate demand growth as part of the move toward gradually normalising monetary conditions,” Geo reported the committee as saying.

Aside from that, the lending from banks to consumers surged by 34 per cent year-on-year in August. While the consumer loans such as home, car and personal, and credit cards rose to PKR742 billion in August from PKR550 billion recorded in the previous year.

From : pk.mashable.com

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