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  • SBP advises banks to register security interest under STA

    SBP advises banks to register security interest under STA

    KARACHI: State Bank of Pakistan (SBP) on Friday advised banks, microfinance banks and development financial institutions (DFIs) to register their security interest under secured transaction laws.

    The SBP in a circular said that with a view to provide for registration of charge on security/collateral offered by un-incorporated entities including sole proprietorships and partnerships and thereby enhancing their access to finance, The Financial Institutions (Secured Transactions) Act, 2016 (STA) was promulgated on July 1, 2016.

    The government has authorized the Securities and Exchange Commission of Pakistan (SECP) to operate Secured Transactions Registry (STR) to record statements in relation to security interests created by entities under STA. SECP is going to launch the Secured Transactions Registry (STR) under the STA on April 27, 2020 for registration of security interests on movable assets of entities, other than companies.

    In view of the above, all the banks, microfinance banks and DFIs are advised to register their security interests against movable assets of entities for future as well as prior security interests (i.e. security interests created before the operationalization of the STR as provided under section 73 of the STA) in the STR.

    The security interest has been defined as: “a right, title, encumbrance or interest of any kind upon movable property created or provided for by a security agreement in relation to a transaction that in substance secures the payment or performance of a customer’s obligation under a finance without regard to the form of the transaction or the terminology used by the parties or the identity of the person who title to the movable property, and includes any charge, mortgage, hypothecation, fixed charge, floating charge, assignment, lien, pledge, assignment of receivable by way of security and transactions under which a secured creditor retains title such as a finance lease, hire purchase agreement, sale and lease back arrangement, conditional sale agreement and retention of title arrangement, having similar effect.”

  • Bank timings during Ramazan-ul-Mubarak

    Bank timings during Ramazan-ul-Mubarak

    KARACHI: State Bank of Pakistan (SBP) on Friday announced timings for public dealing by banks during the holy month of Ramazan ul Mubarak.

    DaysBusiness (Banking) Hours for Public Dealing
    Monday to Thursday10:00 a.m. to 1:30 p.m. (without break)
    Friday10:00 a.m. to 1:00 p.m. (without break)

    The SBP said that in modification of BPRD Circular Letter No.18 dated April 14, 2020 regarding office timings under measures against COVID-19, it has been decided that SBP will continue to observe the following office hours during the month of Ramazan-ul-Mubarak 1441 A.H., which will also be followed by all banks / DFIs / MFBs:

    DaysOffice Hours
    Monday to Thursday10:00 a.m. to 4:00 p.m. (with prayer break from 2:00 p.m. to 2:15 p.m.)
    Friday10:00 a.m. to 1:00 p.m. (without break)
  • Bank holiday declared on April 27

    Bank holiday declared on April 27

    KARACHI: State Bank of Pakistan (SBP) on Friday announced that banks will remain closed for public dealing for the purpose of deduction of Zakat.

    The central bank said that it will remain closed for public dealing on Monday, April 27, 2020, which shall be observed as “Bank Holiday” for the purpose of deduction of Zakat.

    All banks / DFIs / MFBs shall, therefore, remain closed for public dealing on Monday, April 27, 2020.

    However, all employees of the banks / DFIs / MFBs will attend to their official assignments (in-office or work-from-home, as designated under the current COVID-19 situation) on Bank Holiday treating it as a normal working day (except for public dealing).

  • SBP’s reserves fall to $10.889 billion

    SBP’s reserves fall to $10.889 billion

    KARACHI: The official reserves of State Bank of Pakistan (SBP) have reduced by $85 million to $10.889 billion by week ended April 17, 2020, the central bank said on Thursday.

    The SBP attributed this decline to government external debt payments of $145 million.

    The SBP said that on April 20, 2020, it received $1.39 billion from International Monetary Fund (IMF) under the Rapid Financing Instrument (RFI) to address the economic impact of the Covid-19 shock.

    These funds will be part of SBP weekly reserves data as of 24-April-2020, to be released on 30-April-2020.

    The total liquid foreign reserves held by the country stood at $17.300 million on April 17, 2020. The reserves held by commercial banks were at Rs6.41 billion.

  • SBP issue guidelines to dampen COVID-19 effects, facilitates IBIs customers

    SBP issue guidelines to dampen COVID-19 effects, facilitates IBIs customers

    The State Bank of Pakistan (SBP) has issued comprehensive guidelines to help Islamic Banking Institutions (IBIs) mitigate the economic impact of COVID-19 on their customers.

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  • SBP allows banks to suspend dividend distribution for two quarters

    SBP allows banks to suspend dividend distribution for two quarters

    KARACHI: State Bank of Pakistan (SBP) has allowed banks to suspend distribution of dividends for two quarters as financial institutions may face loan infection amid COVID-19.

    The central bank in a statement on Wednesday said that the banks/DFIs in Pakistan have much higher capital levels than prescribed globally or minimum levels advised by the SBP.

    Accordingly, SBP sees no immediate signs of systemic capital fragility across the banking industry. “However, banks/DFIs have been advised to suspend the dividend distribution for the next two quarters.”

    The banks/DFIs that have approved dividend declaration for quarter ended March 2020 by 22nd April 2020 have been advised to suspend dividend distribution for June and September quarters 2020.

    “All other banks have been advised to suspend dividend distribution for March and June 2020 quarters.”

    “This important decision has been taken keeping in view uncertainty arising out of COVID 19 pandemic and probability of higher infections in loan portfolios of banks as a result of that,” the SBP said.

    This measure will also enhance loss absorption capacity of the banking system and will enable them to further support the real sector in Pakistan.

    Notably, while releasing prescribed capital buffers and taking other regulatory relief measures, a number of other jurisdictions across the globe have also placed moratorium on dividend distribution and payment of cash bonuses to senior/executive officers and material risk takers.

    The SBP is confident that the suspension of dividend payout will further increase the resilience of banking sector and improve their ability to provide much needed credit support to the real economy.

    SBP will keep on closely monitoring the performance of banks/DFIs under its regulatory domain and take appropriate action as needed to ensure safety and soundness of individual banks/DFIs and the overall banking system.

    The central bank in a statement on Wednesday said that amid the growing concerns of COVID – 19 pandemic, the SBP, thus far, announced a number of regulatory relief measures for the financial sector and real economy.

    These measures are primarily aimed at ensuring the safety and soundness of banking sector while enhancing their lending capacity to support the economic activities in the country.

  • KCCI demands policy rate at 4 percent

    KCCI demands policy rate at 4 percent

    KARACHI: Karachi Chamber of Commerce and Industry (KCCI) on Wednesday demanded the central bank to reduce policy rate to 4 percent instead easing in bits and pieces.

    KCCI President Agha Shahab Ahmed Khan in a statement urged the State Bank of Pakistan (SBP) to bring down the policy rate from 9.0 percent to 4.0 percent in view of the extra-ordinary circumstances and a global scale economic crisis, which is certain to have a long term negative impact on Pakistan’s economy.

    In a letter sent to Governor SBP Dr. Reza Baqir, President KCCI stressed that reduction in policy rate in bits and pieces is not enough to provide the much needed stimulus to the economy hence, it is necessary to significantly reduce the interest rate in a single step, to help the businesses sail through the unprecedented crisis.

    He was of the opinion that there is now ample justification for reduction in policy rate because the inflation rate has declined sharply due to a steep fall in prices of crude oil, commodities and raw materials, while the demand has also been suppressed.

    President KCCI appreciated the measures taken by SBP to support the industry and exporters to meet the challenges and financial crunch faced by them due to prolonged lockdowns to prevent the spread of Covid-19 coronavirus.

    While acknowledging the interest rates of 4 percent and 5 percent for filers and non-filers respectively in the package, he suggested that in view of the special circumstances, the rate of interest should be zero to support the economy and sustain the industries at least for the next one year.

    He however stressed that there is a dire need to announce a Rescue Package for Micro level Enterprises and SMEs which contribute around 40 percent to GDP.

    He pointed out that unfortunately, no relief has so far been announced for Micro enterprises and SMEs, which are under much greater financial stress then the large scale businesses and their survival is at stake.

  • SBP receives $1.39 billion from IMF under Rapid Financing Instrument

    SBP receives $1.39 billion from IMF under Rapid Financing Instrument

    KARACHI: State Bank of Pakistan (SBP) on Wednesday said that it has received $1.39 billion from International Monetary Fund (IMF) under Rapid Financing Instrument program to fight against COVID-19.

    The Executive Board of the IMF last week approved the disbursement of $1.386 billion under the Rapid Financing Instrument to address the economic impact of the Covid-19 shock.

    With the near-term outlook deteriorating sharply, the authorities have swiftly put in place measures to contain the impact of the shock and support economic activity. Crucially, health spending has been increased and social support strengthened, it added.

    As the impact of the COVID-19 shock subsides, the authorities’ renewed commitment to implement the policies in the existing EFF will help support the recovery and strengthen resilience.

    The Executive Board of the International Monetary Fund (IMF) approved a purchase of Pakistan under the Rapid Financing Instrument (RFI) equivalent to SDR 1,015.5 million (US$ 1.386 billion, 50 percent of quota) to meet the urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.

    While uncertainty remains high, the near-term economic impact of COVID-19 is expected to be significant, giving rise to large fiscal and external financing needs. The IMF support will help to provide a backstop against the decline in international reserves and provide financing to the budget for targeted and temporary spending increases aimed at containing the pandemic and mitigating its economic impact.

    The IMF remains closely engaged with the Pakistani authorities and as the impact of the COVID-19 shock subsides will resume discussions as part of the current EFF.

    Following the Executive Board discussion, Geoffrey Okamoto, First Deputy Managing Director and Acting Chair, made the following statement:

    “The outbreak of Covid-19 is having a significant impact on the Pakistani economy. The domestic containment measures, coupled with the global downturn, are severely affecting growth and straining external financing. This has created an urgent balance of payments need.

    “In this context of heightened uncertainty, IMF emergency financing under the Rapid Financing Instrument provides strong support to the authorities’ emergency policy response, preserving fiscal space for essential health spending, shoring up confidence, and catalyzing additional donor support.

    “In response to the crisis, the government of Pakistan has taken swift action to halt the community spread of the virus and introduced an economic stimulus package aimed at accommodating the spending needed to tackle the health emergency and supporting economic activity. Crucially, the authorities are increasing public health spending and strengthening social safety net programs to provide immediate relief to the most vulnerable. Similarly, the State Bank of Pakistan has adopted a timely set of measures, including a lowering of the policy rate and new refinancing facilities, to support liquidity and credit conditions and safeguard financial stability. In this context, the authorities’ policies should be targeted and temporary.

    “As the crisis abates, the authorities’ renewed commitment to the reforms in the existing Extended Fund Facility—in particular those related to fiscal consolidation strategy, energy sector, governance, and remaining AML/CFT deficiencies—will be crucial to entrench resilience, boost Pakistan’s growth potential, and deliver broad based benefits for all Pakistanis.

    “Expeditious donor support is needed to close the remaining balance of payments gap and ease the adjustment burden.”

  • SBP further reduces interest rate on loan obtained for wages, salaries

    SBP further reduces interest rate on loan obtained for wages, salaries

    KARACHI: The State Bank of Pakistan (SBP) on Wednesday further reduced interest rate for loan obtained for wages and salaries under business incentive scheme.

    SBP has enhanced the incentive to business which are active tax payers by reducing the mark up rate for them to 3 percent that was set as 4 percent earlier.

    Now the SBP will provide refinance to banks at zero percent. This also increases the gap between the rates charged to active tax payer and the non-tax payers businesses, as the latter can be charged an end user markup rate of up to 5 percent, SBP said.

    On April 10, 2020 the State Bank of Pakistan announced an incentive scheme— entitled Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns—that enables the provision of concessional credit for payroll finance to businesses that commit to not lay off workers for the next three months.

    SBP has introduced further incentives under this scheme to support employment and avoid layoffs in the country.

    These additional incentives include relaxations in collateral requirements, further reduction in end-user rate, reimbursement of wages, special accounts for employees to receive wages, borrowing from banks other than maintaining payrolls, simplification of application form for SMEs and bank’s exposure limits.

    These additional incentives are effective as of today.

    The central bank said that based on feedback from stakeholders, SMEs including vendors and distributors were particularly facing the problem of providing security/collateral.

    To address this issue, SBP has now allowed banks for providing financing against corporate guarantees of companies in value / supply chain relationship with the borrowers. Moreover, banks have also been encouraged to provide loans without any collateral i.e. taking clean exposure of up to Rs 5 million.

    To facilitate employees for receiving wages under the scheme directly, banks have been allowed to open their accounts on the information and documents provided by the employers along with an undertaking stating that these persons are bonafide employees/workers.

    Banks will ensure verification of the employees using NADRA Verisys before activation of such accounts. These accounts, however, could be used solely for salary disbursement and withdrawal purposes only.

    Businesses have also been given flexibility to avail loan under SBPs refinance scheme for wages from any bank and they will not be limited to avail loans from the bank that manages their payroll. Further, businesses will also be able to get reimbursement of salaries pertaining to the month of April 2020 that have been disbursed through own sources, provided they have applied for financing under the scheme before disbursement and the same is subsequently approved by the banks. SMEs can apply for the financing on a simplified loan application form prescribed by SBP for this scheme.

    To facilitate the banks further for lending under the scheme, Banks’ exposure under the scheme has been exempted from the per-party or the per-group exposure limits. It will enable them to lend to borrowers that have exhausted their exposure limits.

    All these benefits will also be available to businesses availing financing under the scheme from Islamic Banking Institutions.