Tag: SBP

SBP imposes monetary penalty of Rs1.68 billion on 15 banks

KARACHI: State Bank of Pakistan (SBP) has imposed monetary penalty of Rs1.68 billion upon at least 15 commercial banks for violating various regulations including anti-money laundering (AML) and counter financing of terrorism (CFT).

The SBP on Saturday released the data of significant enforcement actions by the central bank during March – June 2020.

The top banks are also amongst the list for serious violation of regulations including customers due diligence, known your customer, asset quality, foreign exchange operation, corporate governance and AML/CFT.

Sr.No	Institution	Nature of Offence	Action Taken	Monetary Penalty (Rupees in million)
1	United Bank Ltd	Procedural violations in the areas of CDD/KYC, Asset Quality, FX Operations, Corporate Governance	In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.	137.001
2	JS Bank Ltd	Procedural Violations in the areas of CDD/KYC, FX Operations	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	71.417
3	Meezan Bank Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.	81.060
4	Faysal Bank Ltd	Procedural violations in the areas of CDD/KYC, Asset Quality, FX Operations	In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.	96.128
5	The Bank of Punjab	Procedural violations in the areas of CDD/KYC, Asset Quality, FX Operations, Corporate Governance	In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.	286.333
6	Habib Bank Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	204.217
7	MCB Bank Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	158.474
8	National Bank Of	Procedural violations in the areas of CDD/KYC, Asset Quality, FX Operations	In addition to penal action the bank has been advised to strengthen its processes to avoid recurrence of such violations.	269.810
9	Bank Alhabib Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	46.802
10	Habib Metropolitan Bank Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	22.805
11	Bank Alfalah Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	40.305
12	Askari Bank Ltd	Procedural Violations in the area of CDD/KYC	In addition to penal action the bank has been advised to strengthen its processes related to CDD/KYC, to avoid recurrence of such violations in future.	29.814
13	Bank Islami Ltd	Procedural violations in the area of FX Operations	In addition to penal action, the bank has been advised to strengthen its process related to FX operations, in order to avoid recurrence of such violations in future.	11.517
14	Punjab Provincial Cooperative Bank Ltd	Violations in the area of AML/CFT	Penal and administrative action taken against the bank. Moreover, the bank has been advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials.	81.500
15	Zarai Taraqiati Bank Ltd	Violations in the area of AML/CFT	Penal and administrative action taken against the bank. Moreover, the bank has been advised to conduct an internal inquiry on breaches of regulatory instructions and take disciplinary action against the delinquent officials.	147.250

The SBP said that these actions are based on deficiencies in regulatory compliance and does not constitute a comment on the financial soundness of the entity.

The SBP from July 2019 started public disclosure of penal action against banks. “Enforcement actions are an integral part of regulatory regime which involves imposition of monetary penalties and other actions against institutions and individuals for violations of laws, rules, regulations, guidelines or directives issued by SBP from time to time,” according to a circular issued by the central bank.

In order to bring more transparency and strengthen market discipline, SBP has decided to publicly disclose significant enforcement actions.

July 11, 2020

SBP notifies amendments to consumer financing regulations

KARACHI: State Bank of Pakistan (SBP) on Friday notified amendment in the Regulation R-4 of Prudential Regulations for Consumer Financing.

Following are the amendments notified by the central bank:

REGULATION R-4: GENERAL PROVISION AGAINST CONSUMER FINANCE

The term “general reserve” used in the Regulation R-4 of Prudential Regulations for Consumer Financing shall henceforth be read as “general provision”.

The Banks/DFI, subject to conditions prescribed below, can release and use the general provision maintained, in terms of Regulation R-4 of Prudential Regulations for Consumer Financing, against the secured and unsecured consumer finance portfolio:

The general provision will only be available for use to make good the specific provision requirement of the consumer financing portfolio; and,

The aforesaid treatment will expire on December 31, 2021. Thereafter, the general provision against the consumer financing portfolio will be maintained as per the method prescribed in the Regulation R-4 of Prudential Regulations for Consumer Financing prevailing on July 09, 2020.

The Banks/DFIs may, as per their own discretion and in terms of relevant internal policies, maintain the general provision against consumer financing.

The SBP said that all other instructions on the subject shall, however, remain unchanged. The Banks/DFIs are advised to follow the regulations in letter and spirit.

Any deviation or non-compliance of the same shall attract punitive action under the relevant provisions of the Banking Companies Ordinance, 1962, the SBP said.

July 10, 2020

SBP issues revised features of PM’s youth business loan

KARACHI: State Bank of Pakistan (SBP) on Friday issued revised features of Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme.

The SBP said that the government had approved revision in key features of loan program under Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme.

The revised features of the scheme as approved by the government are reproduced below:

S. No	Particulars	Kamyab Jawan Program
1	Eligibility Criteria	All men/women holding CNIC, aged between 21 and 45 years with entrepreneurial potential are eligible. For IT/ E-Commerce related businesses, the lower age limit will be 18 years. Small and medium enterprises (startups and existing businesses) as per definition of SBP and owned by youth as per above mentioned age brackets are also eligible. For IT/E-Commerce related businesses, at least matriculation or equivalent education will be required.
2	Loan size	Size of the loan is segregated into three tiers, as under: Tier 1 (T1) loans- Rs 100,000 to Rs. 1 million Tier 2 (T2) loans- Above Rs 1 million and upto Rs 10 million Tier 3 (T3) loans-Above Rs 10 million and upto Rs 25 million
3	Loan type	Long Term Loan for Machinery and Equipment / Working Capital Loan/ Running Finance, and Leasing of Business on wheels on 2/3/4 wheel locally manufactured vehicles.
4	Loan Tenor	Upto 8 years with maximum grace period of upto one year.
5	Debt: Equity ratio	For New Businesses: Tier 1 – 90:10 Tier 2 & 3 – 80: 20 For Existing Businesses: Nil for all tiers The Borrower’s contribution of equity would be in the form of cash or immovable property and will be required after approval of loan.
6	Focus on Women	25% of the loans will go to women borrowers.
7	Security Requirements	Security arrangements will be as under: T1 loans: Clean; however only personal guarantee of the borrower T2 & T3 loans: As per bank’s own credit policy
8	Risk Mitigation	Government will bear credit losses (principal portion only) on the disbursed portfolio of the banks as under: T1 loans: Upto 50% T2 loans: Upto 20% T3 Loans: Upto 10%
9	Allocation in Budget	Finance Division shall allocate funds in each fiscal year’s budget as per estimates provided by SBP. Payment will be made on submission of consolidated claims of all banks by the SBP on quarterly basis.
10	Pricing	Pricing for Working Capital & Term Loans: Product Customer Pricing Bank Pricing Tier 1 3% KIBOR+400 BPS Tier 2 4% KIBOR+400 BPS Tier 3 5% KIBOR+400 BPS
11	Executing Agency	All Commercial, Islamic and SME banks are advised to come on board.
12	Sectors and Products	All sectors and products including agriculture.
13	Application Form	The Form would be both in English and Urdu and require minimum essential information with simple format available on Government provided Kamyab Jawan portal. The processing time will not exceed 30 days and will be stated clearly in the application form. Non-refundable form processing fee will be Rs. 100/- inclusive of NADRA online CNIC verification fee.
14	Monitoring	SBP will publish consolidated information about the loans extended under this program for information of the public on quarterly basis on its website.
15	Geographical distribution	Whole of Pakistan. In case of Balochistan, at least one branch of NBP will be designated per Division. All non-designated NBP branches will also provide and receive filled application forms and dispatch them to the nearest branches.
16	Additional Measures	Executing Agencies (EAs) under this program should ensure following additional measures: Criteria for assessing entrepreneurial potential should be developed and implemented. In case of loan for existing businesses, a robust independent verification mechanism may be introduced to ensure proper utilization of loans. Further, for new businesses, a robust mechanism for ongoing monitoring of the loans’ utilization should be developed and implemented. All loans previously disbursed or approved under this scheme will be converted into the new parameters with effect from July 01, 2020.

The SBP directed the banks to gear up their systems for successful implementation of this scheme and to avoid any misuse of the scheme. Eligible borrowers may apply for the loans immediately after formal launch of the scheme by the Prime Minister’s Office.

July 10, 2020

Pakistan’s foreign exchange reserves increase by $819 million

KARACHI: The liquid foreign exchange of the country increased by $819 million to $18.79 billion by week ended July 03, 2020, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves of the country were at $17.971 billion a week ago ended on June 26, 2020.

The official reserves held by the SBP increased by $811 million to $12.042 billion by week ended July 03, 2020 as compared with $11.231 billion a week ago.

The SBP attributed the increase in reserves to proceeds of $1,000 million as GOP loan disbursement from China.

During the week, SBP also made government external debt payments of $ 231.2 million.

The foreign exchange reserves held by commercial bank witnessed nominal growth of $8 million to $6.748 billion by week ended July 03, 2020 as compared with $6.74 billion a week ago.

July 9, 2020
SBP revises banking timings from July 13

KARACHI: State Bank of Pakistan (SBP) on Thursday revised timings for banks and microfinance banks to be observed from July 13, 2020.

The central bank said that effective from July 13, 2020, the banks/MFBs shall observe the following office timings till further orders.

However, banks/MFBs may prescribe business hours for branches as per their business requirement subject to observance of SBP business (banking) hours for public dealings as notified vide BPRD Circular Letter No. 20 dated April 23, 2020.

The timings shall be:

Monday to Thursday: 09:00 a.m. to 5:30 p.m. (with prayer / lunch break from 1:30 p.m. to 2:00 p.m.)

Friday: 09:00 a.m. to 5:30 p.m. (with prayer / lunch break from 1:00 p.m. to 2:30 p.m.)

The SBP said that all banks / MFBs are accordingly advised to ensure compliance of the above-mentioned timings in letter and spirit.

July 9, 2020
SBP asks banks not to accept institutional investment in saving schemes

KARACHI: State Bank of Pakistan (SBP) on Thursday informed banks about restriction imposed on institutional investment in saving schemes.

The central bank said that the Central Directorate of National Savings (CDNS) on July 01, 2020 restricted participation of institutional investors in national saving schemes.

In this connection, the SBP advised all authorized commercial banks to review the instructions contained in the above mentioned letters and ensure that no institutional investment of any kind should be accepted in National Savings Schemes (NSS) dealt by banks i.e. Special Savings Certificate (SSC) / Defence Savings Certificate (DSC) on or after July 01, 2020.

The SBP asked the banks to disseminate necessary instructions down the line to all authorized branches and concerned officials for information and strict compliance.

July 9, 2020
SBP slashes refinance rate to five percent for temporary, long term schemes

KARACHI: State Bank of Pakistan (SBP) has decided to reduce the mark up rates on temporary economic refinance facility (TERF) to five percent from 7 percent and on long term financing facility (LTFF) from non-textile sector to five percent from six percent.

The central bank on Wednesday said that taking cognizance of the negative fallout of COVID-19 Pandemic for the economy, SBP has been constantly taking steps to safeguard the businesses and households and a reduction in the policy rate has been a key step since March 2020.

SBP has reduced the policy rate by 625 basis points since 17th March, 2020 to 7 percent.

To extend the benefits of this reduction in the policy rate to the users of its refinance schemes, SBP has now decided to align the end user markup rates on two of its refinance schemes for promoting investment in the country.

Temporary Economic Refinance Facility (TERF): SBP introduced this facility to provide stimulus to the economy by supporting new investment and balancing, modernization and restructuring (BMR) of the existing projects.

To further improve the incentive under the scheme, SBP has lowered the end user mark-up rates from existing 7 percent to 5 percent.

SBP will now be providing refinance to banks at 1 percent with banks’ maximum margin of 4 percent. Further, SBP has also allowed the TERF facility in cases where LCs/Inland LCs were opened prior, but retiring after the introduction of the scheme on March 17, 220.

These measures, in the backdrop of earlier policy action of allowing BMR under TERF, are expected to further support the economic activity, new long term investment and employment generation.

Under this scheme, up till 2nd July 2020, Rs10.5 billion have been approved by banks for 21 projects.

Long Term Financing Facility (LTFF): LTFF is one of the oldest refinance schemes of SBP under which financing is available for export-oriented projects for purchase of imported and locally manufactured new plant and machinery.

In March, 2020 SBP opened the LTFF to all sectors across the board. Earlier the end user markup rate under this scheme were 5 percent for textile sector and 6 percent for non-textile sectors.

State Bank has now reduced its refinance rate for non-textile sector by 1 percent and therefore the end user rate for all sectors across the board will be 5 percent.

It is expected that the above measures will help facilitate long term investment in both domestic and export market.

July 8, 2020
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
Government borrowing from commercial banks rises to Rs2,413 billion in 2019/2020

KARACHI: The federal government has borrowed Rs2,413 billion from commercial banks during fiscal year 2019/2020 as against retirement of Rs771.6 billion in the preceding fiscal year, according to statistics released by State Bank of Pakistan (SBP) on Monday.
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July 7, 2020