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.

SBP increases maximum limit to Rs2.5bn under long term financing facility

KARACHI: State Bank of Pakistan (SBP) on Thursday increased the maximum financing to Rs2.5 billion for a single project under long term financing facility.

The central bank in a circular said that with a view to further promote investment in export oriented projects, it has been decided to increase the maximum financing limit for a single project under LTFF and Islamic LTFF from Rs1.5 billion to Rs2.5 billion.

Under LTFF, Participating Financial Institutions (PFIs) can provide long term local currency finance for imported and locally manufactured new plant and machinery to be used by the export oriented projects.

The facility will be available to the export oriented projects with at least 50 percent of their sales constituting exports or if their annual exports are equivalent to $ 5 million, whichever is lower.

Financing shall be available through banks / DFIs approved as PFIs; list of which is given on State Bank of Pakistan’s Website.

Other banks/ DFIs can also lodge their requests to Infrastructure, Housing & SME Finance Department of SBP for seeking the status of a PFI which shall be processed as per SBP’s criteria, as follows:

i. Banks / DFIs should meet the minimum capital adequacy requirements set by SBP from time to time.

ii. Banks / DFIs should have minimum 3 years experience of project financing/long term financing.

iii. Banks / DFIs should have profitable operations during last consecutive three years.

iv. SBP would consider the requests of banks/DFIs keeping in view the CAELS ratings assigned by SBP as well as ratings assigned by Credit Rating Agencies in Pakistan.

c) In order to provide Shariah compliant alternative of the facility through the eligible Islamic banking institutions (IBIs), SBP has issued Islamic Long Term Financing Facility (ILTFF), vide IH&SMEFD Circular No. 01 dated 14-02-2018. IBIs may submit their requests for the status of Participating Islamic Banking Institution (PIBIs) under ILTFF, keeping in view the criteria given in said scheme.

d) Financing under the facility will be available to the extent of the C&F value of the imported new plant and machinery and ex-factory/showroom price of the new locally manufactured machinery to be purchased by the eligible borrowers.

e) Export oriented SME borrowers (as defined in Prudential Regulations for SMEs financing), may purchase imported machinery from the commercial importers or authorized dealers of the foreign manufacturers in Pakistan and authorized suppliers in case of locally manufactured machinery and plant. While providing financing under the facility to SME borrowers, the PFIs, however, will ensure that financing under the facility, when taken together with other borrowings, does not exceed the borrowing ceiling fixed for SMEs under the Prudential Regulations for SMEs financing.

Maximum financing of banks/DFIs to a single export oriented unit shall not exceed Rs 2.5 billion under LTFF. However, banks/DFIs may provide financing facilities as per their credit policies over and above the said maximum limit from their own sources subject to adherence of applicable Prudential Regulations.

April 26, 2019
SBP launches refinance, credit guarantee scheme for women entrepreneurs

KARACHI: State Bank of Pakistan (SBP) on Thursday launched refinance and credit guarantee scheme for women entrepreneurs in order to support and revive economic activities in the country.

The SBP said that the financing would be available to women entrepreneurs across the country for a period of up to 5 years, including maximum grace period of up to six months.

The maximum financing limit under the scheme will be Rs 1.5 million. The financing under the scheme should be provided for setting up of new business enterprises or for expansion of existing ones.

The SBP said that financing under the scheme should be provided to women borrowers preferably under the personal guarantee of the borrower.

The central bank said that as per the government’s policy to support and revive economic activities in the country and SBP’s measures for improving access to finance for the women entrepreneurs, a refinance cum credit guarantee scheme is being launched for the women borrowers across the country.

Under the scheme, banks and DFIs will be required to provide financing facilities to women entrepreneurs to meet credit needs of their businesses.

Under the scheme, refinancing will be provided by SBP at zero percent to participating financial institutions for onward lending to women entrepreneurs across the country at a mark-up rate of up to 5 percent per annum.

Such loans will also be eligible for 60 percent risk coverage under SBP’s Credit Guarantee Scheme for Small and Rural Enterprises.

The SBP said that it would allocate limits to PFIs under the scheme on receipt of request from them. The limits will be reviewed on yearly basis.

At least 20 percent of the limit should be allocated for lending to women entrepreneurs in Balochistan.

Applications for sanction of limits shall be sent by the interested banks/DFIs to the Director, Infrastructure, Housing & SME Finance Department.

The SBP said that repayment of loans by borrowers shall be made in equal quarterly installments after grace period (if any). The refinance granted by SBP BSC offices to the PFIs shall be recovered, on the due dates as reported in the original repayment schedule, from the accounts of the PFIs maintained with the respective office of the SBP BSC.

If a borrower repays the loan amount or its installment, in part or in full, before the due date(s), the PFIs shall be under obligation to repay the amount(s) so received within 15 days to the concerned office of SBP BSC failing which, fine for late adjustment of loan will be recovered from the concerned bank/DFI, at the rate of Paisa 60 per day per Rs 1,000 or part thereof or prospectively at such rate as may be announced by the State Bank from time to time.

In case a borrower fails to repay the amount of installment as per the original repayment schedule, the PFIs will be entitled to charge normal rate of mark up on such overdue principal amount besides taking other actions to recover the same as are incidental to such defaults.

The SBP will continue to recover the principal amount on the due dates as per the repayment schedule.

In no case, the liability of banks/DFIs to pay/repay to SBP BSC the principal amount of refinance as per the repayment schedule or mark-up or any other charges or penalty thereon shall be dependent upon the recovery from the borrower nor shall such liability be affected by any default on the part of the borrower.

April 25, 2019
Rupee ends unchanged for ninth consecutive trading day

KARACHI: The Pak Rupee ended without change against dollar for the ninth consecutive day on Thursday.

The rupee ended Rs141.40 to the dollar, the same last day’s closing, in interbank foreign exchange market.

The interbank foreign exchange market was initiated in the range of Rs141.39 and Rs141.40.

The market recorded a high of Rs141.40 and low of Rs141.40 and closed at Rs141.40.

Currency experts said that traders were cautious ahead of IMF meeting with Pakistan authorities scheduled for this week.

The exchange rate in open market ended with losses of the local currency.

The buying and selling of dollar was recorded at Rs141.70/Rs142.20 as compared with previous day’s closing of Rs141.50/Rs142.00 in cash ready market.

April 25, 2019
Rupee remains unchanged for eighth consecutive trading day

KARACHI: The Pak Rupee remained unchanged against dollar for eighth consecutive trading day on Wednesday amid lackluster demand for import and corporate payments.

The rupee ended Rs141.40 to the dollar, the same last day’s closing, in interbank foreign exchange market.

The interbank foreign exchange market was initiated in the range of Rs141.39 and Rs141.40.

The market recorded day high of Rs141.40 and low of Rs141.39 and closed at Rs141.40.

Currency experts said that the traders were cautious about purchasing dollars over uncertainty about the future of exchange rate.

The exchange rate in open market ended with gain by the local currency.

The buying and selling of dollar was recorded at Rs141.50/Rs142.00 as compared with previous day’s closing of Rs141.70/Rs142.20 in cash ready market.

April 24, 2019
HBL declares 32 percent decline in net profit for first quarter

KARACHI: Habib Bank Limited (HBL) has announced 32 percent decline in profit after tax to Rs3.177 billion for first quarter of year 2019 as compared with Rs4.68 billion in the same quarter of the last year.

The earnings per share also declined to Rs2.08 for the period as compared with Rs3.12 in the same quarter of last year.

Analysts at Arif Habib Limited said that though the profit declined in first quarter as compared with the same quarter of the last year but it grew by 26 percent on quarter on quarter basis (QOQ) despite higher tax rate this quarter.

Major drivers for earnings this quarter that have contributed to a remarkable 116 percent QoQ increase in PBT include a total gain on foreign exchange income and derivatives compared to a hefty loss last quarter.

Moreover a net reversal was booked this quarter against a heavy provisioning expense booked last quarter. A dividend of PKR 1.25/share was also announced for the quarter.

NII of the bank settled at PKR 23.4bn for 1QCY19, rising 19 percent YoY as 63 percent higher interest expense was offset by the 39 percent rise in mark-up income. NII registered an uptick of 12 percent QoQ as well.

NFI of the bank depicted healthy improvement of 22 percent YoY / 60 percent QoQ. The bank booked a profit on FX income (and derivatives) of a total PKR 637mn compared to a staggering loss of PKR 3bn during 4QCY18 and PKR 478mn during 1QCY18. Moreover, fee income of the bank showed an impressive jump of 18 percent YoY.

The bank booked a net reversal of PKR 83mn compared to a hefty provisioning expense of PKR 3.2bn during 4QCY18 (owing to impairment charge on the equity book).

Higher OPEX (+21 percent YoY / 21 percent QoQ) owing to NY remediation/business transformation costs continued for the bank.

Effective tax rate was set at 62 percent for 1QCY19 vis-à-vis 36 percent SPLY due to additional super tax being booked this quarter on CY17 earnings.

April 24, 2019
SBP restrains banks’ chairmen from appointing adviser

KARACHI: State Bank of Pakistan (SBP) on Tuesday restrained board / chairman of banks from appointing adviser in any capacity.

The central bank amended Prudential Regulations G-1 to substitute Para C-3, which is as under:

“3. The Chairman/Board shall not appoint an `Advisor’ in any capacity. Accordingly, all Banks/DFIs are advised to ensure appropriate skill mix of the Board keeping in view the overall risk profile of the institution.”

All banks/DFIs are advised to ensure compliance within six months of the date of issuance of the circular letter, the SBP said.

After which, the non-compliance shall attract punitive action under relevant provisions of the Banking Companies Ordinance, 1962.

Earlier the SBP through amendment dated April 24, 2009 issued the following:

“Chairman of the Board of Directors may, if deemed necessary, appoint one advisor to advise and facilitate him in discharge of his duties/responsibilities. The appointment of such an advisor will be subject to the following conditions:

a) The advisor must possess the required technical experience relating to banking and finance at a senior level to enable him/her to render a professional advice to the Board.

b) The terms of reference of the advisor shall be approved by the Board.

c) A reasonable remuneration may be paid to the advisor with the approval of the Board of Directors.

d) The advisor may attend the meetings of Board of Directors and Board Committees in which his/her participation is required but he/she will not be a member of the Board and/or its committees.

e) The advisor shall be required to sign an appropriate confidentiality agreement to ensure confidentiality of documents / information that may come to his/her knowledge, before assuming any such role.”

April 23, 2019
Rupee remains unchanged for seventh straight trading day

KARACHI: The Pakistani Rupee (PKR) maintained its unaltered position against the US Dollar for the seventh consecutive trading day on Tuesday, reflecting a scenario of subdued demand for imports and corporate payments.
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April 23, 2019
Rupee remains unchanged for sixth straight trading day

KARACHI: The Pak Rupee remained unchanged against dollar for sixth straight trading day on Monday amid lackluster demand for import and corporate payments.

The rupee ended Rs141.40 to the dollar, the same last Friday’s closing, in interbank foreign exchange market.

The interbank foreign exchange market was initiated in the range of Rs141.39 and Rs141.40.

The market recorded a high of Rs141.40 and low of Rs141.40 and closed at Rs141.40.

Currency experts said that the traders were cautious about purchasing dollars over uncertainty about the future of exchange rate.

The exchange rate in open market ended with gain by the local currency.

The buying and selling of dollar was recorded at Rs141.80/Rs142.30 as compared with last Saturday’s closing of Rs142.00/Rs142.50 in cash ready market.

April 22, 2019
Foreign currency account restriction on non-filers not apply on non-residents: SBP

The State Bank of Pakistan (SBP) issued an important clarification on Monday regarding the restrictions on foreign currency accounts, emphasizing that these limitations do not apply to non-resident Pakistanis.
(more…)

April 22, 2019
SBP to expedite payment license issuance to FinTech companies

KARACHI: State Bank of Pakistan (SBP) will expedite issuance of payment licenses to FinTech companies in order to accelerate financial inclusion program.

A report on “Roadmap for Stability and Growth” issued by Finance Ministry, regarding financial inclusion program, stated that SBP to expedite issuance of Payment licenses to Fintech companies with established customer base; development of Micro Payment Gateway (MPG) for retail payments; facilitate expansion of national merchant integration into mobile payments and commence operationalization of Asaan Mobile Account (AMA) Scheme.

It said that much remains to be done on financial inclusion. As of 2015, merely 16 percent of the adult population had a bank account, with account ownership for women standing at a dismal 11 percent, whereas a large segment of faith-sensitive population remained voluntarily excluded.

Financing to priority sectors such as agriculture and housing remained constrained, with SMEs claiming a minuscule share.

Moreover, regional disparities increased over time.

The National Financial Inclusion Strategy (NFIS), developed and adopted by the government in 2015, aimed at achieving inclusive economic growth through enhanced access to finance and deposit base, promotion of small and medium enterprises, easy and affordable access to finance to farmers, facilitation in low cost housing finance and provision of Shariah-compliant banking solutions.

Digitization of payments across the country borders is a priority of the Government and the following targets have been set for achievement by 2023:

Enhance usage of Digital Payments (65 million active digital transaction accounts, with gender segregation of 20 million accounts by Women).

By digitizing government payments and receipts, automation of CDNS branches, and digitization of services provided by Pakistan Post the Government san kick start digitization of payments.

Fiscal concessions may be offered on mobile phone duties (< Rs 8k), and sales tax for user charges for Data be refunded into subscriber account monthly by Telephone companies, against Government refunds, or suitable alternative method. To oversee progressive digitization of government payments and to coordinate regulatory enabling, the Government may consider institutionalizing centralized responsibility under a Chief Digital Officer at the Ministry of Finance. It would be necessary to hire a market professional for this function.

• Enhance Deposit Base (Deposit-to-GDP ratio to 55 percent)

• Promote SME Finance (Extend finance to 700,000 SMEs; 17 percent of the private sector credit)

• Increase Agricultural Finance (Serve 6 million farmers through digitalized solutions; enhance annual disbursement to Rs1.8 trillion)

• Enhance share of Islamic Banking (25 percent of the banking industry; increase branches of Islamic banks to 30 percent of the banking industry)

April 22, 2019