With a view to combat the impact of COVID-19 pandemic, the State Bank of Pakistan (SBP) announced various refinance schemes. One of the schemes which received appreciation from the business community is the Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns. This facility provides concessional loans to businesses for financing their payroll / wage bill up to three months. The borrower is however required to commit to not lay off workers for the next three months.
According to a press release issued by the State Bank of Pakistan, the following further incentives have been provided to the conventional as well as Islamic banking customers with effect from April 22, 2020:
- Banks have been allowed to provide financing against corporate guarantees of companies in value / supply chain relationship with the borrowers. Moreover, clean lending (without collateral) up to Rs. 5 million has also been allowed. This will help SMEs including vendors and distributors to address their security/collateral related concerns.
- The mark-up rate for Filers (persons appearing on FBR`s Active Taxpayer List) has been reduced to 3% which was 4% previously. SBP will provide refinance to banks at 0%. On the other hand, the mark-up rate for persons not appearing on ATL is unchanged at 5%.
- Bank account opening requirement for employees of such concerns have also be relaxed. The banks can open account based on the information and documents provided by the employers along with an undertaking stating that these persons are bonafide employees/workers after carrying necessary identity verification through NADRA Verisys.
- The refinance can now be availed from any commercial bank and they will not be limited to avail loans from the bank that manages their payroll.
- Businesses will also be able to get reimbursement of salaries pertaining to the month of April 2020 that have already been disbursed through own sources.
- SMEs can now apply for the financing on a simplified loan application form prescribed by SBP for this scheme.
- Banks’ exposure under this scheme has been exempted from the per-party or the per-group exposure limits as stipulated in SBP`s Prudential Regulations.
Further details on these incentives as well as other refinance schemes is available at SBP website.
