sbp banking services corporation - pakistan textile ... refinance-2.pdfsbp banking services...

Refinance Scheme Unit.SBP Banking Services CorporationFaisalabad.

Prepared By, Muhammad Maqsood Sr. Officer

SBP Export Finance Scheme

• The scheme was launched in March 1973 known as “Refinance Schemefor Non Traditional and Newly Emerging Exports” with a view to provideadequate bank credit for exports of non traditional and newly emergingcommodities on attractive terms.

• This was 90 days (Pre-shipment) facility with a 90 days Rollover Option.

• May 1976 the scheme was renewed as “Refinance Scheme for Exports”to include all exports of manufactured goods other than raw cotton, ricewool and hides and skins for concessionary finance.

• October, 1977 the scope of scheme was further enhanced to introduce anew feature of performance based finance under Part-II of the schemethat was re-named as “Export Finance Scheme (EFS)”.

Introduction & Transitional Overview

• 1998, Refinance facility was also extended to Indirect Exporterssubject to fulfillment of requirements.

• The Export Finance Scheme has gone into major modifications inthe years 1985, 1998, and 2001.

• 2001, as a part of liberalization of banking sector and to addressthe issue of excessive documentation, processing of Part-I caseswas entrusted to banks.

• July 2007, financing/ refinancing was introduced on a ratio as:

Bank : SBP

• November 2008, 100% refinancing by SBP.

• February 2009, extension of 90 days was provided under Part-I.subject to showing performance 117% of borrowed amount.

• SBP ACT-1956 Section 17(2a) and 17(4c) authorize SBP to carryon and transact the several kinds of business includingpurchase, sale & rediscount of bills of exchange and promissorynotes maturing within 180 days as well as advances or loans tocommercial banks.

• The extension of advances to commercial banks under thescheme is made out of the “Export Credit Fund” establishedunder section 17C(2a) of SBP ACT 1956.

• Section 17(6B) also authorizes SBP to provide refinance tocommercial banks and financial institutions for agricultural orindustrial purposes on other such terms and conditions as theCentral Board of SBP may decide from time to time.

SBP Export Refinance SchemeLegal Framework

Scope & Objective of EFS

• Short term Financing Facility to Exporters

• Uplift of exports of Pakistan

• Concessionary finance to encourage/motivate exporters

• Diversification of Exports

• Value added & finished products

• Manufactured goods

• Expansion & spreading out new markets

• Growth of economy- Rise in GDP

• Inflow of FOREX-International trade

Development Finance Support Department 6

Objectives of EFS

Rationale of Negative List

• Raw Cotton

• Crude Vegetable Materials

• Hides & Skins

• All metals/ ores

• Jewelry exported under entrustment Scheme

• Works of Arts & Antique

• Wood in rough & squared

• Wool & Animal hair

• Stone, sand & gravels

• Petroleum Products

• All Grains including Grain Floor

• Cotton Yarn all types

• Crude Animal Materials

• Leather wet blue

• Fertilizer Crude

• Mutton and Beef other than frozen & preserved

• Fur Skins

• Bleach & Un-bleach cloth

• Live Animals

• Waste & Scrape of all kinds

• Crude vegetable materials

• Crude Minerals

Negative List

Salient Features of EFS

Categorization of EFS:

A. EFS- Part-I

Transactions Oriented

B. EFS Part-II

Performance Oriented

Operational Mechanism

EFS- Part-I ( Transactions oriented)

1. Pre-Shipment

2. Post Shipment

Pre-shipment – Process

Pre-Shipment:

Exporter having received the Firm Export Order / Letter ofCredit approaches the commercial bank.

Commercial bank, if satisfied with the documents,provides pre-shipment finance to the exporter tomanufacture the order.

Bank then approaches SBP BSC for the Refinance.

Pre-shipment

Pre-Shipment:

Exporter after availing the finance has to:

1. Make the shipment within 180 days of obtainingthe finance.

2. Get the export proceeds realized within 210 days ofdate of shipment

Post-Shipment - Process

Post Shipment:

Exporter having shipped the goods approachescommercial bank for short term finance against itsshipment to bridge the gap between his immediatefinancial needs and export proceeds realization.

Commercial bank, if satisfied with the documents,provides Post-shipment finance to the exporter against theshipment already made.

Bank then approaches SBP BSC for the Refinance.

Post-shipment:

Exporter has already shipped the goods

Exporter has to get the proceeds realized within 210 days of date of shipment

Processing at SBPBSC:

Step I:- Bank will disburse financing to the eligibleexporter against in order requisite documents. Bank willapproach the concerned SBP BSC Office to obtainrefinance.

Step II:- The bank will submit Form D and DP Note(executed by the exporter concerned) to SBP BSC(Bank) to claim refinance.

Step III:- If documents are in order, SBP BSC willprovide refinance within 48 hours.

Repayment of Finance:

On Maturity of Loan.

Earlier, if export proceeds are realized before the expiryof the tenor of the loan.

Banks have to repay refinance within 3 working days ofthe negotiation / realization of export proceeds, failingwhich punitive action will be taken as per rules.

If on maturity of the loan, borrower does not pay to thebank, bank will settle SBP BSC Bank refinance loan ondue date in any case.

EFS Part-II:

Performance oriented

Limit Allocation:

A revolving finance limit equivalent to 50% of export proceeds realized during the previous year is fixed on annual basis.

Maximum period of loan is 180 days

Export performance is matched annually against total loan availed during the year on daily product basis

Procedure of Entitlement:

The bank shall allow a limit to the exporter on the abovebasis and send all copies of Form EE‐1 in respect of eachcase to Foreign Exchange Operations Department (FEOD)of the respective office of SBP BSC for verification ofrealization of proceeds.

After verifying EE-1 , the concerned FEOD shall return theoriginal and duplicate copies to the concerned bank andretain the third.

Exporter may obtain finance limit from more than one bankto the extent of 50% of exports realized through eachbank.

Monitoring of Export Performance:

Performance of the exporter shall be watched by the bankconcerned by obtaining Form EF‐1 from concernedexporter.

Form EF‐1 is submitted in triplicate to FEOD forverification after close of financial year.

After verification of these Forms by FEOD, the original andduplicate copies shall be returned to the bank concerned,the third copy retained by FEOD.

The duplicate copy shall be submitted by the bank to therespective office of SBP BSC by 31st August.

Nature of Irregularity Rate of Fine

Non Shipment. Paisa 37 per day per Rs.1000/-

Short/ Delayed Shipment. Paisa 28 per day per Rs.1000/-

Late adjustment of funds Paisa 42 per day per Rs.1000/-

Delayed submission of shipping documents by the exporters.

Rs.2000/- for default and Rs.100/- for each day of default.

Fine for wrong/ incorrect reporting/ entry Rs.100/- per such wrong/ incorrect reported entry.

Fine for non submission of EPRC . Rs.20,000/-, 25% of which i.e., Rs.5000/- would be non refundable even on late submission of EPRC.

Fine for irregular availment of pre-shipment /post-shipment export finance facility by the exporter.

In all pre-shipment/post-shipment loans cases where it has been noticed that shipment(s) was madebefore/after (in case of post-shipment) disbursement of finance , the shipment has to be treated as in ordersubject to recovery of fine @ Rs.2000/- and Rs.100/-per day for the period for which the refinance loan remains outstanding on the part of bank or up to the date of factual position conveyed to concerned SBP BSC Office, whichever is earlier.

Fines under Part-I of EFS

• LTFF

Long Term Financing Facility (LTFF) For Plant Machinery

• The scheme was launched in December, 2007 for long termfinancing facility to promote export led industrial grow thecountry. The facility will provide necessary finance to exportersfor adoption of new technologies and modernizing plant andmachinery in line with the international competitive environment.

Salient Features of LTFF

A. Scope: Exporters (including SMEs) can avail financingunder the facility through participating financinginstitutions (PFIs) for new imported and locallymanufactured plant and machinery. The Facility will beavailable to the export oriented projects with at least 50%of their sales constituting exports or if their annualexports are equivalent to US$ 5 million, which ever islower. Financing shall be available to the extent of theC&F value of the imported new plant and machinery andex-factory/showroom price of the new locallymanufactured machinery.

B. Eligible Financial Institutions: The commercial banksincluding Islamic Banks and DFIs approved as PFIs willprovide LTFF.

C. Period of Financing: The loans availed under the facilityshall be repayable within a maximum period of 10 yearsincluding a maximum grace period of 2 years fromavailment date. However, where financing facilities havebeen provided for period of upto 5 years maximum graceperiod shall not exceed one year. The repayment offinancing (principal amount of loan) shall be made by theborrowers in equal half yearly / quarterly installmentsdepending upon the tenure for which the facility isavailed. MarkUp / service charges shall be made quarterly.

D. Provision of refinance: (i) SBP shall allocate an overallyearly limit under the facility which shall be sanctioned toindividual PFIs on first come first serve basis in line withthe international criteria developed by the State Bank.(ii) Refinance under the limit shall be provided to the PFIson service charge basis which shall be announced onyearly basis effective from 1st July each year.

E. Disbursement of Refinance: : SBP BSC shall providerefinance within two working days from the date ofreceipt of request on submission of duly filled in prescribedocuments.

F. Fines for Default: (i) In case of violation of the terms &conditions laid down in the facility the State Bank shallreserve right to recover the amount of refinance grantedalongwith fine at the rate of paisa 60 per day per Rs1,000/-. (ii) Late adjustment fine paisa 60 per day per Rs1,000/-.

Sectors eligible for financing under the Facility (LTFF)

Core Categories:

1. Textile Garments i.e. Fabrics, Garments, Made up, Towelsand Art silk & synthetic textiles.

2. Rice Processing

3. Leather & leather products

4. Sports goods

5. Carpets & Wools

6. Surgical Instruments

Developmental Categories:

1. Fishiries

2. Poultry & Meat

3. Fruits/Vegetable & processing, cereal.

4. I.T. –Software & Services.

5. Marble & Granite

6. Gems & jewlllery

7. Engineering goods.

Subsequently eligible Categories:

1. Import of generators / captive power plants.

2. Ethanol

3. Imported second hand machinery not more than threeyears old will qualify in March, 2009.

4. Glass sector

5. Dairy sector

6. Preservations of food items.

7. Service Sector (LTFF-SS) i-Transportation ii- Computer &information Technology.

Rate of service charges / mark up

Tenor Rate of Refinance

Bank’s Spred End User’s Rate

Up to 3 years 6.00 % 1.50 % 7.50 %

Over 3 years and up to 5 years

5.00 % 2.50 % 7.50 %

4.50 % 3.00 % 7.50 %

• FFSAP

Financing Facility for Storage of Agricultureal Produce (FFSAP)

• The scheme was launched in June, 2010 in order to develop theagricultural produce marketing and enhance storage capacity.SBP has decided to float a Scheme (FFSAP) to encourage PrivateSector to establish Silos, Warehouses and Cold Storages.

Salient Features of FFSAP

A. Scope: i- Financing shall be available on long term basisfor establishment, expansion and balancing,modernization & replacement (BMR) ofsteal/metal/concrete Silos, Warehouses & Cold Storagefacilities for storing agricultural produce.

ii- Financing shall be available for:-

a- Purchase of new imported & locally manufacturedplant & machinery, equipment and accessories thereof, tobe used in steal/metal/concrete Silos, Warehouses & ColdStorages.

b- Purchase of new generators.

c- Upto 65% cost of entire civil works.

B. Tenor and size of Loans:

i Financing shall be available for a maximum period ofseven years including a maximum grace period of sixmonths.

ii In case financing is provided on staggered basis,maximum period of financing shall start from the date ofdisbursement of 1st installment.

iii Maximum financing of banks/ DFIs to a single projectshall not exceed Rs. 500 million.

C. The repayment of financing (principal amount of loan)shall be made by the borrowers in equal half yearly /quarterly installments depending upon the tenure forwhich the facility is availed. MarkUp / service chargesshall be made quarterly.

D. Fines for Default: (i) In case of violation of the terms &conditions laid down in the facility the State Bank shallreserve right to recover the amount of refinance grantedalongwith fine at the rate of paisa 60 per day per Rs1,000/-. (ii) Late adjustment fine paisa 60 per day per Rs1,000/-.

Up to 3 years 5.00 % 2.50 % 7.50 %

4.75 % 2.75 % 7.50 %

4.00 % 3.50 % 7.50 %

• Scheme for Financing Power Plants Using Renewable Energy

Scheme for Financing Power Plants Using RenewableEnergy

• The scheme was launched in December, 2009 in order to meetthe growing electricity demand and to promote renewableenergy projects in the country.

Salient Features of Scheme

A. Eligibility Criteria: Scope: i- Financing shall be available tothe prospective sponsors desirous of setting up of PowerProjects with a capacity of up to 20 MW, who havecompleted prescribed requirements of Alternative EnergyDevelopment Board (AEDP).

ii- Financing shall be available only for establishing newpower plants of up to 20MW installed capacity usingalternative / renewable energy sources (wind, hydel,biogas, biofuels, bagasse cogeneration, solar power andgeothermal as fuel)

iii- For purchase of new imported and locallymanufactured plant, machinery and equipment.

iv- Against LCs established from the date of issuance ofthis circular and up to June 30, 2016. 41

B. Tenor and size of Loans:

i Financing shall be available for a maximum period of tenyears including a maximum grace period of 2 years.

ii In case financing is provided on staggered basis,maximum period of financing shall start from the date ofdisbursement of 1st installment.

iii Maximum financing of banks/ DFIs to a single projectshall not exceed Rs. 3 billion.

C. The repayment of financing (principal amount of loan)shall be made by the borrowers in equal half yearly /quarterly installments depending upon the tenure forwhich the facility is availed. MarkUp / service chargesshall be made quarterly.

D. Fines for Default: (i) In case of violation of the terms &conditions laid down in the facility the State Bank shallreserve right to recover the amount of refinance grantedalongwith fine at the rate of paisa 60 per day per Rs1,000/-. (ii) Late adjustment fine paisa 60 per day per Rs1,000/-.

Up to 5 years 5.00 % 2.50 % 7.50 %

4.50 % 3.00 % 7.50 %

• Refinance Facility for Modernization of Small and Medium Enterprises (SMEs)

Refinance Facility for Modernization of Small and Medium Enterprises (SMEs)

• The scheme was launched in November, 2009.

Salient Features of Modernization of SMEs

A. Scope and Eligibility Criteria: i- Financing shall beavailable only for Balancing, Modernization andReplacement (BMR) of existing units / projects.

ii- Only SME borrowers, as defined in PrudentialRegulations for SMEs, shall be eligible to avail financingfacilities under the scheme.

iii- For import / purchase of new Rice Husking Machines,Paddy Driers and Parboiling Plants.

Salient Features of Modernization of SMEs

B. Period of Financing and Grace Period:

Financing shall be available for a maximum period ofseven years including a maximum grace period of sixmonths.

C. Participants: Financing facilities shall be provided throughall commercial banks and DFIs.

Salient Features of Modernization of SMEseme

D. The repayment of financing (principal amount of loan)shall be made by the borrowers in equal half yearly /quarterly installments depending upon the tenure forwhich the facility is availed. MarkUp / service chargesshall be made quarterly.

E. Fines for Default: (i) In case of violation of the terms &conditions laid down in the facility the State Bank shallreserve right to recover the amount of refinance grantedalongwith fine at the rate of paisa 60 per day per Rs1,000/-. (ii) Late adjustment fine paisa 60 per day per Rs1,000/-.

Salient Features of Modernization of SMEseme

Up to 3 years 5.00 % 2.00 % 7.50 %

4.75 % 2.75 % 7.50 %

4.50 % 3.00 % 7.50 %

• Refinance Scheme for Revival of SMEs & Agricultural Activities in Flood Affected Areas of 2014.

Refinance Scheme for Revival of SMEs & Agri. Activities In FloodAffected Areas of 2014.

• The scheme was launched in October, 2014. in order to reviveagricultural activities and facilitate the flow of fresh credit in theFlood Affected Areas, State Bank of Pakistan is introducing aconcessional financing scheme through banks for agri.Production/working capital finance to farmers and SMEs indistricts affected by flood of 2014, as reported by NationalDisaster Management Authority.

• Under the scheme financing will be provided ataffordable/concessional mark-up rates through banks/DFIs forwhich Rs.10 billion has been allocated.

1. Agricultural Production Loans to Farmers.

A. Scope and Eligibility Criteria:

i- Agricultural credit shall mean “Farm Credit” and “Non-Farm Credit” for meeting production and working capitalrequirements, as defined under the Prudential Regulationsfor Agriculture Financing.

ii- All categories of farmers (owners, owner-cum-tenantsand tenants) of the specified areas will be eligible foragricultural loans under the scheme.

iii- Bank shall provide agri. loans to farmers as per theirlending policy approved by their Board of Directors andSBP Rules & Regulations.

iv- Banks are encouraged to arrange for insurance of theloans provided under the scheme and Mandatory CropLoan Insurance for five major crops viz. wheat, rice,cotton, sugarcane and maize to avoid risk of losses due tonatural calamities.

B. Tenor and Size of Loans.

i- Tenor of the crop production loans and repayment ofthe principal amount will be bases on the cropping cycleup-to a maximum period of one year.

ii- The borrowing limit of farmer shall be fixed by thebank keeping in view credit requirements, cash flows,repayment capacity, risk profile of the borrower, etc.

1. Short Term Loans to the SMEs

i- Banks may provide Short-Term Loans to SME borrowers,as defined under the Prudential Regulations for SMEs inFlood Affected Districts.

ii- Bank shall provide financing facilities as per theirlending policy approved by their Board of Directors andSBP Rules & Regulation

B. Tenor and Size of Loans.

i- Bank shall provide short term loans for working capitalrequirements of SMEs for a maximum period of one year.

ii- The borrowing limit of SMEs shall be fixed by the bankkeeping in view credit requirements, cash flows,repayment capacity, risk profile of the borrower, etc.

D. Principal amount of loans under the scheme shall have tobe repaid on agreed date between bank and the borrowerwithin a maximum period of one year. Markup / servicecharges shall be made quarterly in case of financing toSMEs. However, mark up on agri. Loans shall be paid onhalf yearly basis.

E. Fines for Default: (i) In case of violation of the terms &conditions laid down in the facility the State Bank shallreserve right to recover the amount of refinance grantedalongwith fine at the rate of paisa 60 per day per Rs1,000/-. (ii) Late adjustment fine paisa 60 per day per Rs1,000/-.

Up to 1 year 4.50 % 3.00 % 7.50 %

• Export Finance Facility for Locally Manufactured Machinery (EFF-LMM)

Export Finance Facility for Locally Manufactured Machinery (EFF-LMM)

• The scheme was launched in January, 2013. With a view topromote the export of locally manufactured plant & machinery ,The State Bank of Pakistan has decided to introduce the ExportFinance Facility for locally manufactured machinery (EFF-LMM).The exporters can avail long term financing facilities throughbanks for export of eligible plant & machinery and engineeringgoods under the facility.

• Financing facilities shall be available both at pre-shipment andpost-shipment stages.

• Bank’s spread is being increased to encourage them to extendfinancing to the non-traditional exporters i.e. Engineering Goods.

Tenor and Size of Loans.

i- Financing facilities shall be available for a maximumperiod of five years.

Up to 3 years 5.50 % 2.00 % 7.50 %

5.00 % 2.50 % 7.50 %

Thank You!

sbp banking services corporation - pakistan textile ... refinance-2.pdfsbp banking services...

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