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

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.