Banks asked to end discriminatory lending

Banks asked to end discriminatory lending

KARACHI: The State Bank of Pakistan (SBP) believes banks follow adiscriminatory lending policy that hurts the economy and violates rules set for financial institutions.

The SBP asked banks and development finance institutions (DFIs) on Monday not to discriminate against any segment of society.

Banks and DFIs are required to desist from adopting discriminatory practices on the basis of trade, region, gender, ethnicity, specific profession, class or group of citizens, such as lawyers, politicians and officials of law enforcement agencies (LEAs).

Banks do not provide loans to lawyers, journalists, policemen and security officials. This has been the case for decades now. Banks provide these applicants with no specific reason for the refusal of loans. The applicants are conveyed the message that loans are not provided to people belonging to their professions as per bank policy.

Banks seem to believe that professionals, like policemen, lawyers and journalists, can go into litigation against them.

However, in the case of politically exposed persons (PEPs), the lending policy changes depending on the ‘influence’ of the persons involved.

The SBP said that PEPs have repeatedly raised concerns about the banks’ discriminatory practices in providing them with consumer finance and general banking facilities.

The SBP has further asked banks to explicitly convey reasons for the refusal of loans in writing to the applicant and keep a separate file for all approved and rejected cases of PEPs.

“Such practices are against the spirit of fundamental rights ordained by the constitution of Pakistan and regulatory instructions on the subject and that these complaints have been viewed seriously at the central bank of the country,” said the SBP circular.

The SBP said any violation of the instructions will attract punitive action under the relevant provisions of Banking Companies Ordinance 1962.

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