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Category: Money & Banking

Money and banking drive economic activity by facilitating transactions, savings, and investments. Banks manage financial resources, offer credit, and regulate money supply, ensuring stability and growth in Pakistan’s financial sector.

Bank deposits reach record high at Rs16.23 trillion

KARACHI: The deposits of banking systems have reached record high at Rs16.23 trillion by end of June 30, 2020, according to data released by State Bank of Pakistan (SBP) on Tuesday.

The deposits of baking system registered 12.24 percent growth by end of June 2020 as compared with Rs14.46 trillion by end of same month last year.

Analysts at Topline Securities explained that during second quarter of 2020, the deposits have increased by higher-than-largely-expected 7 percent, as Net Domestic Assets (NDA) of the Banking System increased by 6 percent during this period, on the back of 11 percent increase in the government borrowings for budgetary support.

Investments have grown by 40 percent YoY and 3 percent MoM to Rs10.68 trillion by end June 2020. The same is up 21 percent YTD (vs. 6 percent YTD growth by end March 2020).

As a result, IDR has increased to 66 percent in June 2020 from 53 percent in June 2019 and 61 percent in March 2020.

On the other hand, Advances have grown by just 1 percent YoY, and have actually declined by 2 percent MoM in June 2020 despite the aggressive cuts in interest rates by the Pakistan Central Bank since March 2020.

This is due to the impact of the pandemic COVID-19, which has caused the overall slowdown in the economic activity. In YTD 2020, advances are up 1 percent.

As a result, ADR has dropped to 51 percent in Jun-2020 from 56 percent in Jun-2019 and 55 percent in March 2020.

The Currency in Circulation (CIC) has increased by 17 percent in YTD 2020 to Rs6.19 trillion, with CIC as a percentage of M2 clocking in at 31 percent, above past 5-year average of 27 percent.

Going forward, the analysts expect deposit growth in the range of 10-11 percent during 2020 (vs. historical 3-year average growth of 11 percent), while they expect advances to grow by around 5 percent during the year (vs. historical average 3-year growth of 14 percent).

July 8, 2020
SBP extends deferment of principal amount facility till September 30

KARACHI: State Bank of Pakistan (SBP) has decided to extend the deferment of principal amount facility up till September 30, 2020, a statement said on Tuesday.

The central bank said that considering the fact that COVID-19 pandemic is continuing to stress the cash flow of small and medium sized businesses and households, SBP has decided to extend the Deferment of Principal Amount facility up till September 30, 2020.

This facility will however be available for Small & Medium Enterprise Financing, Consumer Financing, Housing Finance, Agriculture Finance and Micro financing only.

The facility is not being extended to corporates and commercial borrowers since a significant amount of their loans and advances has already been deferred.

It is expected that more businesses and households, who were not able to avail the facility, will benefit from this extension.

On March 26, 2020, amid growing concerns about the potential economic impact of the COVID–19 pandemic, SBP with the collaboration of Pakistan Banks Association (PBA) announced a comprehensive set of measures to help businesses and households to manage their finances.

Among these, a key measure was the deferment of principal amount of loans and advances by banks and DFIs.

Under this facility, businesses and households could request for the deferment of their loans and advances for a period of one year, albeit continuing to service the mark-up amount.

The measure also ensured that the deferment of principal will not affect borrower’s credit history and such facilities will not be reported as restructured/rescheduled in the credit bureau’s data.

This measure proved extremely helpful for borrowers and is evident from the fact that up till 3rd July 2020, banks deferred Rs593 billion of principal amount of loans of over 359 thousand borrowers.

A very large number of borrowers— 95 percent of total beneficiaries of this scheme, as of July 3, 2020 have been small borrowers including SMEs, consumer finance, and microfinance.

July 7, 2020
Rupee weakens by 23 paisas on demand for import payments

KARACHI: The Pak Rupee weakened by 23 paisas on Tuesday owing to demand for import and corporate payments.

The rupee ended at Rs166.95 to the dollar from previous day’s closing Rs166.72 in interbank foreign exchange market.

Currency experts said that due to enhanced economic activities after ease in lockdown the importers were seen active to purchase currency for foreign buying.

Further, they said that the demand for foreign currency was also seen from multinational and foreign companies to repatriate their profits after close of fiscal year ended June 30, 2020.

The rupee depreciated by around 74 paisas against dollar during first two days of this week.

July 7, 2020
SBP expands refinance facility for health sector to combat COVID-19

KARACHI: The State Bank of Pakistan (SBP) on Monday expand the refinance facility at lower rates for health sector in order to combat COVID-19.

On March 17, 2020, SBP introduced a refinance scheme, titled Refinance Facility to Combat Covid-19 (RFCC), to support the hospitals and health sector for providing services to directly fight against Covid-19.

Under this scheme, banks provide concessional loans at a maximum end-user rate of 3 percent for 5 years for hospitals and medical centers to purchase medical equipment and set up isolation wards for developing capacity and supporting the health sector in fight against COVID-19.

Since its inception up till 2nd July 2020, Rs 6.4 billion of concessional credit have been approved for hospitals and other eligible facilities to fight COVID-19.

Keeping in view the encouraging response and the potential to help developing the health facilities in the country, SBP has now expanded the scope of this refinance facility further.

The scheme now allows manufacturers of protective gears and equipment, including items such as masks, dresses, testing kits, hospital beds, ventilators etc. to avail financing under RFCC.

Moreover, to cope with the rising needs of the health facilities in general in the country, SBP has allowed hospitals serving patients even other than COVID-19 to avail this facility.

Refinance facility will be available for setting up or expansion of the existing hospitals fulfilling minimum specified standards.

For setting up new hospitals under this scheme, payments will be released by the banks on completing relevant milestones.

RFCC is highly subsidized facility where SBP provides refinance to banks at 0% whereas banks can keep a maximum margin of 3%. Some of the banks treating this as part of their CSR are keeping margins very low.

July 6, 2020
Rupee weakens by 51 paisas on import, corporate demand

KARACHI: The Pak Rupee ended down by 51 paisas against the dollar on Monday owing to higher demand for import and corporate demand.

The rupee closed at Rs166.72 to the dollar from last Friday’s close of Rs166.21 in interbank foreign exchange market.

Currency experts said that the market was opened after two days weekly holidays which escalated the demand for dollar.

They said that the due to ease in lockdown the activities in foreign trade had been increased. The importers were placing orders in the international markets.

The experts hoped that the recent inflows from international financial institutions the rupee may recover.

The foreign exchange reserves of the country increased by $1.24 billion to $17.97 billion by week ended June 26, 2020, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves of the country were at $16.73 billion by week ended June 19, 2020.

The official foreign exchange reserves of the SBP increased by $1.27 billion to $11.231 billion by week ended June 26, 2020. The official reserves of the central bank were at $9.961 billion a week ago.

The SBP said that during the week ended June 26, 2020, the central bank received around $2,046 million official inflows, including $737 million from World Bank, $503 million from Asian Development Bank, $500 million from Asian Infrastructure Investment Bank and $300 million as GOP loan disbursement from China.

After incorporating government external debt payments of $ 809 million, SBP reserves increased by $ 1,270 million to $ 11,231 million.

During the current week, SBP has received additional $1,000 million as GOP loan disbursement from China.

These funds will be part of SBP weekly reserves data as of July 03, 2020 to be released on July 09, 2020.

July 6, 2020
Rupee gains 68 paisas on improved foreign exchange reserves

KARACHI: The Pak Rupee gained 68 paisas against dollar on Friday after improvement in foreign exchange reserves of the country.

The rupee ended Rs166.21 to the dollar from previous day’s closing of Rs166.89 in interbank foreign exchange market.

Currency experts said that the lower demand for imports and inflows from international financial institutions helped the rupee to gain value.

The foreign exchange reserves of the country increased by $1.24 billion to $17.97 billion by week ended June 26, 2020, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves of the country were at $16.73 billion by week ended June 19, 2020.

The official foreign exchange reserves of the SBP increased by $1.27 billion to $11.231 billion by week ended June 26, 2020. The official reserves of the central bank were at $9.961 billion a week ago.

The SBP said that during the week ended June 26, 2020, the central bank received around $2,046 million official inflows, including $737 million from World Bank, $503 million from Asian Development Bank, $500 million from Asian Infrastructure Investment Bank and $300 million as GOP loan disbursement from China.

After incorporating government external debt payments of $ 809 million, SBP reserves increased by $ 1,270 million to $ 11,231 million.

During the current week, SBP has received additional $1,000 million as GOP loan disbursement from China.

These funds will be part of SBP weekly reserves data as of July 03, 2020 to be released on July 09, 2020.

July 3, 2020
Meezan Bank’s Shariah Board approves guidelines for COVID related refinance schemes

KARACHI: Meezan Bank’s Shariah Supervisory Board (SSB) has approved guidelines for COVID-19 related refinance schemes intended to provide relief to businesses and individuals during these challenging times.

In the 47th meeting of Meezan Bank’s Shariah Supervisory Board (SSB) was recently held as an online event, with the goal of preventing contagion and staying consistent with the recommendations of global and local health authorities and the Government.

This was the first Shariah Supervisory Board meeting conducted completely online where members from across different countries participated via video conferencing.

The meeting was chaired by Justice (Retd.) Mufti Muhammad Taqi Usmani and was attended by Dr. Muhammad Imran Ashraf Usmani, Sheikh Esam Mohamed Ishaq (Bahrain) along with other members of the SSB.

Meezan Bank’s Founding President and CEO – Irfan Siddiqui, Deputy CEO – Ariful Islam and senior management of the Bank were also present at the meeting.

In view of the current situation and the outlook for the coming months, the Bank’s SSB has approved guidelines for COVID-19 related re-finance schemes intended to provide relief to businesses and individuals during these challenging times.

The Board reviewed several key issues including policies adopted by the Bank as well as the corresponding contingency plans ensuring that the Bank continues to serve its customers normally despite the challenges faced due to COVID-19.

Products and structures for providing relief to customers were also discussed in detail after which the SSB approved a comprehensive set of guidelines to ensure that SMEs get adequate support to mitigate the impact of the pandemic on their activities.

The SSB also approved Smart Remittance Account that will enable Overseas Pakistanis to apply for bank accounts online either in PKR or USD currency from anywhere outside Pakistan.

This account will permit Overseas Pakistanis to remit money either in PKR or USD and to invest in Shariah-compliant alternative of “Overseas Pakistanis Saving Scheme” announced by Government of Pakistan (GoP).

Furthermore, the structure for the re-opening of GoP Ijarah Sukuk was also approved by the Board, making it the first time that a re-opening mechanism will be introduced in any Sukuk issued in Pakistan. The re-opening of Sukuk is expected to bring depth in the Pakistani Sukuk market.

The SSB appreciated the Bank’s ‘Work from Home’ policy amid the COVID-19 crisis; which has been adopted to protect the wellbeing of its employees, customers and stakeholders and expressed its overall satisfaction on the Shariah compliance environment and operations of the Bank.

July 3, 2020
Rupee strengthens by Rs1.16 against dollar on inflows

KARACHI: The Pak Rupee made significant gain of Rs1.16 against dollar on Thursday owing to ease in demand for import and corporate payments and substantial inflows during past week.

The rupee ended Rs166.89 to the dollar from June 30, 2020 closing of Rs168.05 in interbank foreign exchange market.

The currency market was remained closed for public dealing on July 01, 2020 on account of bank holiday.

Currency dealers said that the rupee was under pressure due to payment demand by end of fiscal year.

However, they said that the inflows from international financial institutions helped the rupee to gain the value.

The State Bank of Pakistan (SBP) has received $1.3 billion as government of Pakistan loan disbursements from Chinese Banks this week.

This brings the total amount of official inflows received since June 23, 2020 to around $3 billion.

Experts said that the transfers would also help the central bank to improve foreign exchange reserves.

July 2, 2020
SBP directs banks, exporters to submit undertaking for true e-form
KARACHI: State Bank of Pakistan (SBP) has directed banks and exporters to submit undertaking for true e-form under export finance scheme.

According to a circular issued on July 01, 2020 the banks shall provide details of exporters including name and address, NTN. Besides, the banks will also provide number and amount of export proceeds.

Furthermore, both banks and exporters shall undertake that:
In case of mismatch between the commodity and HS code provided, the entry will not be considered for performance/entitlement until rectified.

The contents of subject MS excel file titled[Bank Prefix-Exporter’s NTN-Serial Number] are correct and complied with relevant instructions of the EFS.

The exports on usance basis reported in the above referred statement are against irrevocable letter(s) of credit which is/are eligible for negotiation and the usance bills in respect thereof have not been negotiated with a scheduled bank in Pakistan except those mentioned there against.

The statement does not include:

I. Any export of commodities which do not qualify for export finance under the Scheme.

II. Any export made under a Contract/LC against which they obtained export finance from any bank under Part-I of the Scheme (this clause is required in case of EF-1 Statements only).

The SBP further said that through circular letter no. 12 dated June 26, 2020 wherein banks have been advised to get verified their EE-1/EF-1 statements and submit the same to concerned SBP-BSC offices.

As it is in the knowledge of banks that in order to streamline the process and ensure smooth execution of workflow, hard copy submission of EE-1/EF-1 Statements has already been dispensed with and only soft copies of EE-1/EF-1 statement on the excel format attached at Annexure-I shall be submitted by banks.

In addition, banks shall submit scanned copy of original undertaking duly signed by the exporter and the authorized personnel of the bank on the format attached at Annexure-II. Banks shall attach the scanned copy of the undertaking in the email containing soft copy of EE-1/EF-1 statement.

The soft copies of EE-1/EF-1Statements of Karachi region shall be sent electronically to FEOD-HOK, through bank personnel’s official email address on: [email protected];whereas, for regions other than Karachi, the respective SBP-BSC Office will provide email addresses to banks’ Regional Heads.

The following must be ensured by banks at the time of submission of email containing soft copy of EE-1/EF-1statement and undertaking:
1. Email is properly titled as “Verification of EE-1/EF-1Statement: M/s [Exporter Name]”
2. Excel file is properly titled as “[Bank Prefix –Exporter’s NTN –Serial Number]”.
3. Single consolidated statement is submitted for each exporter having Advance Payment and Post-shipment entries.
4. E-Form No. and NTN is in the correct format.
5. Currency, Schedule and Sales Term is statedasper formatprovided in the list in drop-down of the relevant column in MS Excel file.
6. All entries have been reported in ITRS.
7. All shipping documents have been submitted for shipments against Advance Payments.
The SBP said that soft copies of EE-1/EF-1statements should be submitted at FEOD Karachi and Field Offices along with undertaking strictly as per the formats provided.
July 2, 2020
SBP extends employment support scheme for three months

KARACHI: State Bank of Pakistan (SBP) has extended the Rozgar scheme for another three months and, in collaboration with the Government of Pakistan, has increased the risk coverage for SMEs under the scheme.

Soon after the outbreak of Covid-19 pandemic, SBP took a number of steps to provide economic support to businesses and households. SBP reduced the financial cost to the private and public businesses and households by reducing the policy rate by a cumulative 625 basis points since 17th March 2020. To improve the cash flow of businesses and households, it allowed deferment of principal amount and restructuring of loans. In addition to these measures, SBP introduced several refinance schemes to support employment and investment to fight the economic impact of COVID-19, the SBP said.

Refinance Scheme to Support Employment and Prevent Layoff of Workers, commonly known as SBP Rozgar scheme: This scheme provides concessional loans to businesses for wages and salaries expenses provided they commit not lay off their employees for the period of the loan. SBP has decided to extend the validity of this scheme by another 3 months to end September, 2020. Businesses will now be able to obtain financing to pay wages and salaries for a maximum period of 6 months starting April 2020 till September 2020.

Effectively, this suggests that not only businesses can obtain loans to fund their wages and salaries bill up to a period of 3 months from July till September 2020, but can also get reimbursement for the wages and salaries paid during April-June 2020. For those who have already availed financing under the scheme, financing limits for the months of July to September 2020 will be calculated on the same basis on which limits were calculated for the months of April to June 2020.

Under the scheme, up till 19th June 2020, financing of Rs 112.8 billion have been approved by banks for 1653 businesses covering wages and salaries of over 1.1 million employees.

The government Risk Sharing Facility under SBP Rozgar Scheme: With a view to incentivize banks/DFIs for financing to SMEs and non SME corporates, Government of Pakistan (GoP) introduced a Risk Sharing Facility (RSF) for SBP’s Rozgar Scheme.

Under this facility, GoP bears 40 percent first loss on disbursed portfolio (principal portion only) for eligible borrowers.

Government of Pakistan has now decided not only to extend validity of its risk sharing facility (RSF) for another three months for SMEs and small corporates with turnover of up to Rs 2 billion but also enhanced risk coverage for SMEs from 40 percent to 60 percent First Loss on portfolio basis.

This higher risk coverage will help banks to provide financing under Rozgar scheme to collateral deficient SMEs which are otherwise struggling hard.

SBP now expects that more SMEs will benefit from the scheme mainly due to higher risk coverage, more awareness of the scheme among the stakeholders and robust support mechanism to address queries and complaints with well organized set up comprising regional focal persons of SBP Offices and banks all across the country. Under the RSF, up till 19th June 2020, financing of Rs 25.4 billion have been approved by banks for around 1100 businesses covering wages and salaries of over 220,000 employees.

It is expected that the above two measures will allow more businesses to benefit from these schemes and thereby support the employment of their employees.

June 30, 2020