Sustainable economic development is dream of every developing country. And that is not possible without growth in economic activity. Businesses require liquidity for investments in new projects as well as expansion of existing ones. This is not possible without making available sufficient liquidity for businesses.
For this purpose, SBP has announced a historic loan facility at maximum markup rate of 5% for investment in plan & machinery. This financing facility can be availed for new projects as well as existing projects. The SBP has also announced a separate finance facility for businesses for payment of salaries amid COVID-19.
Salient Features of Loan Facility at Fixed 5%
Scope & Eligibility Criteria
This facility is available for new imported and locally manufactured plant & machinery for setting up of new industrial units/projects and BMR/expansion of existing industrial units/projects. This facility is available for all sectors of the economy across the board, except for power sector where SBP’s Financing Scheme for Renewable Energy already exists.
Maximum financing limit per project is Rs. 5 billion, which can be provided by a single bank/DFI or a consortium.
Tenor & Validity
Tenor of the facility is ten years including grace period of two years. The facility can be availed by 31st March 2021. Banks/DFIs shall take no more than one month after obtaining all information from the prospective borrower in processing the loan application.
Markup shall be charged at 5%, which shall be payable on calendar quarter basis.
Repayment of Principal
Repayment of principal portion can be made on quarterly basis or half yearly basis in 10 years including grace period of 2 years.
Other Terms & Conditions
The banks/DFI shall evaluate project proposals as per their risk management policies including requirement of collateral.
Banks/DFIs shall carry out necessary due diligence as per Prudential Regulations. In case of imported plant & machinery, they shall also observe compliance of rules & regulations under Chapter XIII of Foreign Exchange Manual.
Sponsor’s share in the project shall be in the form of equity. Equity can be contributed in the shape of land, construction of building, etc. and cash. If it is in the form of cash, it shall be deposited in an escrow account maintained with the bank/DFI, and shall only be used for the purposes of the project.
Before securing this long term facility for the project, the sponsor shall also ensure a working capital facility for the project. Working capital facility can be secured/agreed by the same bank/DFI.
Financing shall be available against Import LCs in case of imported and against Inland LCs in case of locally manufactured plant & machinery.
Second hand machinery shall not be eligible for financing under this scheme.
Financing shall not be available for acquisition of land and construction of buildings, etc.
Financing shall be available to the extent of C&F value in case of imported and ex-factory/show room price in case of locally manufactured plant & machinery.
Disbursements under the financing scheme shall be made directly to the manufacturer/supplier.
This financing facility is available for new projects as well as Balancing, Modernization & Replacement (BMR) or expansion of existing projects and businesses.
After installation of plant & machinery, the borrower shall be required to submit to the bank/DFI a report in this respect from a Pakistan Banks Association’s approved surveyor.
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