Tag: State Bank of Pakistan

SBP issues procedure for loan disbursement to unemployed youth

KARACHI: State Bank of Pakistan (SBP) on Friday issued procedure for disbursement of loan to unemployed youth under Prime Minister’s Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES).

In a circular issued to all chief executives of banks and development financial institutions, the SBP said that executing agencies (EAs) shall evaluate loan applications of unemployed youth as per parameters of PMKJ-YES approved by the Federal Cabinet and circulated by the State Bank of Pakistan to all banks vide its IH&SMEFD Circular No. 08 of 2019 dated July 11, 2019.

The loan facility for a borrower shall be sanctioned and disbursed by the EA after completion of documentation formalities.

These loans shall be entitled for service charges subsidy and credit losses subsidy. No further evaluation on eligibility of borrowers would be conducted by the SBP.

The government has launched PM Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES) to provide concessional loans to youth for establishing or extending business enterprises thereby promoting entrepreneurship and reducing unemployment and poverty in Pakistan.

The SBP has issued necessary instructions to all banks through IH&SMEFD Circular No. 08 dated July 11, 2019. All loans disbursed under PMKJ-YES shall be reported to SBP under Small Enterprise Financing category.

Under the Scheme, loans are segregated into two tiers i.e. Tier 1 (T1) loans from Rs. 100,000 to Rs. 0.5 million and Tier 2 (T2) loans – above Rs 0.5 million and up to Rs 5 million.

The loans will be provided through the banking system at service charges of 6 percent per annum. for TI loans and 8 percent p.a. for T2 loans, while the rate of return for banks working as EAs for PMKJ-YES would be KIBOR (6- Months offer) + 500 bps for T1 loans and KIBOR (6- Months offer) + 400 bps for T2 loans with KIBOR to be reset bi-annually.

The government shall absorb the difference between the rate of return for EAs and end user rate as service charges subsidy, the SBP said.

Besides, GOP will also bear credit losses (principal portion only) on the disbursed portfolio of the banks up to 50 percent in case of T1 loans and up to 10 percent in case of T2 loans.

As per SBP’s Prudential Regulations for Small Enterprise Financing, loans are classified as loss on objective basis (time based criteria) when default period is 18 months or more or on subjective basis.

Hence, for determination of admissible credit losses against EA’s total PMKJ-YES disbursed portfolio at the end of each quarter, only loan cases classified under loss category as per SBP SME Financing PRs will be considered.

The SBP said that the payment of service charges subsidy to EAs will be made through SBP’s operational arm viz Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

The EAs shall prepare and submit claims to DFSD for receiving government service charges subsidy on outstanding principal amount of their regular PMKJ-YES portfolio up to expiry of each individual loan.

In case of a loan becoming non-performing, no service charges subsidy will be paid after being classified as ‘Loss’ as per SBP PRs for SME Financing.

The EAs claims shall contain particulars of each individual loan along with calculations of subsidy based on relevant six months KIBOR used. The service charges subsidy claim should be duly vetted by internal audit department of the EA. The audited claim along with a certificate from EA relating to eligibility of borrower for PMKJ-YES and correctness of the subsidy amount shall be submitted to DFSD within 15 working days after the end of respective quarter for payment of service charges subsidy.

DFSD, SBP BSC shall scrutinize subsidy claim of EAs within 15 working days after receipt of complete information from EAs.

DFSD shall ascertain that calculations of EAs subsidy claim are correct and applicable KIBOR rate has been used by the EAs.

Thereafter, DFSD shall submit scrutinized claims to Finance Division for release of funds. After receiving funds from GoP, DFSD will advise SBP BSC Karachi for crediting the subsidy amount in respective EA’s account maintained at SBP BSC Karachi.

Banking Inspection Department of State Bank during regular inspection of the EAs shall conduct inspection of their PMKJ-YES portfolio on sampling basis using its own sampling techniques.

SBP inspectors shall randomly select credit files and review them from the perspective of eligibility of borrowers under the Program, status of loan (regular or NPL) and GOP subsidy claim.

The BID inspection report section on PMKJ-YES shall be used as an important input for reviewing the Scheme and assessing its effectiveness in fulfilling the government objective of promoting youth entrepreneurship in the country.

On behalf of government, payment of credit losses subsidy to EAs will be made up to 50 percent in case of TI loans and up to 10 percent in case of T2 loans on their disbursed portfolio under the Scheme on quarterly basis through Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

EAs shall prepare claims for submission to DFSD, SBP BSC for receiving payment on account of credit losses subsidy from the government on their disbursed PMKJ-YES portfolio. The list containing details of individual loans classified as loss as per SBP SME PRs and calculation of credit loss subsidy based on total disbursed PMKJ-YES portfolio of EAs at the end of respective quarter shall be submitted to DFSD. EAs claim in this respect should be duly vetted by their internal audit department. The audited claim along with a certificate from EA relating to correctness of the claimed amount shall be submitted to DFSD within 15 working days after the end of respective quarter.

DFSD, SBP BSC shall scrutinize credit loss subsidy claim of EAs within 15 working days after receipt of complete information from EAs and ascertain that calculations of EAs loss claim are correct.

Thereafter, DFSD will forward admissible claims of EAs to Finance Division, GoP, for release of funds. After receiving funds from Finance Division, DFSD will advise SBP BSC Karachi office for crediting the approved subsidy claim in respective EAs account maintained at SBP BSC Karachi Office.

EAs will return excess amount arising, if any, to DFSD, in case movement in their PMKJ-YES portfolio causes amount of credit loss to be less than/falls below 50 percent in case of T1 loans and 10 percent in case of T2 loans of total disbursed portfolio of EA at the end of reporting Quarter.

January 3, 2020
Pakistan’s foreign exchange reserves increase to $18.081 billion

KARACHI: The liquid foreign exchange reserves of the country increased by $486 million to $18.081 by week ended December 27, 2019 as compared with $17.595 billion a week ago, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves held by the central bank increased by $582 million to $11.489 billion by week ended December 27, 2019 as compared with $10.907 billion a week ago.

The SBP attributed the increase to bilateral and multilateral inflows including proceeds of US$ 452.4 million received from IMF under EFF program.

The foreign exchange reserves held by commercial banks however declined by $95 million to $6.592 billion by week ended December 27, 2019 as compared with $6.687 billion a week ago.

January 2, 2020
Tax amendments to generate great interest in govt securities: SBP

KARACHI: State Bank of Pakistan (SBP) on Thursday said that the tax amendment for foreign investors to generate great interest in government securities.

In a statement the central bank said that the tax amendments will help to deepen the capital market, generate greater interest in the longer-dated government securities, diversify the investor base, and reduce the cost of debt for the government.

Amendments in the Income Tax Ordinance, 2001 have been issued to simplify the tax regime for non-resident companies investing in debt instruments and Government securities.

The SBP said that these amendments aim to deepen our capital markets, support availability of long term rupee financing sources, support competition in the local currency debt market, and diversify the source of funding for the government.

The existing foreign exchange framework allows non-residents to invest in debt instruments and Government securities through Special Convertible Rupee Account (SCRA) maintained with banks in Pakistan.

However, the tax structure for non-residents investing in debt securities was historically complex. Different rates applicable for the withholding tax on profit on debt and capital gains tax, penal transaction charges for non-filers, a complex tax-filing process and uncertainty about tax applicability were the key impediments to foreign investment into the local debt market, particularly in the long-term debt instruments.

In this context, the recent amendment in the tax laws has simplified Pakistan’s tax regime for investment in the local debt market.

Specifically, the above Ordinance has implemented the following changes in Income Tax Ordinance, 2001 to simplify the tax regime for non-resident companies, having no permanent establishment in Pakistan, investing through SCRA in debt instruments and government securities (including Treasury Bills and Pakistan Investment Bonds):

The capital gains tax shall be subject to withholding at the rate of ten percent and shall constitute final discharge of the tax liability;

No deduction of 0.6% banking transaction tax under section 236P on transactions in SCRA;

No advance tax payment under section 147 on capital gains;
Dispensation from the requirement of registration under section 181, filing of return under section 114 and filing of statement of final taxation under section 115 in respect of income solely from capital gains or profit on debt from investment in debt securities;

No distinction shall be made in terms of filer or non-filer;

Many non-resident investors currently benefit from tax treaties and already enjoy reduced rates of taxation around 10 percent. The key provision in the ordinance is to simplify the tax structure and process for international investors.

January 2, 2020
SBP directs biometric verification of branchless banking accounts by March 31

KARACHI: State Bank of Pakistan (SBP) has directed financial institutions to ensure biometric verification of branchless banking customers by March 31, 2020.

In a circular issued on Tuesday directed all banks and microfinance banks to complete biometric verification of all level-1 accounts by March 31, 2020. In case biometric verification is not performed, the financial institutions shall convert all these accounts to Level – 0 with effect from April 01, 2020.

The transaction limits for Level – 1 accounts are as follow:

a. Rs. 50,000 per day [This limit shall not be applicable on: (i)credit from employers for salaried persons against proof of employment and (ii) payment to trusted merchants including schools and hospitals etc.]

b. Rs. 200,000 per month

The transaction limits for Level-0 accounts are as follow:

a. Rs. 25,000 per day

b. Rs. 50,000 per month

c. Rs. 200,000 per year

d. Rs. 200,000/- maximum balance limit

The financial institutions operating branchless banking are required to follow regulations related to Know Your Customer (KYC)/Account Opening requirements and conditions:

For Level-0 accounts:

a) Verification of customer identity from NADRA

b) Pre-screening the name and CNIC against proscribed/designated persons and entities as per the Statutory Notifications issued by Federal Government from time to time.

c) Call Back Confirmation or generation of One-Time Password (OTP) for verification in remote account opening.

For Level-1 accounts:

a) Biometric Verification of customer from NADRA

b) Pre-screening the name and CNIC against proscribed/designated persons and entities as per the Statutory Notifications issued by Federal Government from time to time.

c) Call Back Confirmation or generation of One-Time Password (OTP) for verification in remote account opening.

The SBP said that financial institutions shall keep all necessary record obtained through CDD measures, account files and business correspondence and results of any analysis undertaken, for at least ten years following the termination of the business relationship.

The central bank further said that the financial institutions shall ensure that documents, data or information collected under the CDD process is kept up to date and relevant, by undertaking reviews of existing records.

December 31, 2019
SBP updates guidelines related to UNSC resolutions

KARACHI: State Bank of Pakistan (SBP) on Tuesday updated guidelines for banks related compliance on notification issued under United Nations Security Council (UNSC) Resolutions.

The SBP issued circular addressing chief executives and presidents of banks, development financial institutions and microfinance banks, referring to the guidelines on Compliance of Government of Pakistan’s Notifications issued under United Nations Security Council (UNSC) Resolutions, issued vide BPRD Circular No. 03 of 2015 as amended from time to time.

The SBP said that in order to further enhance the understanding of Targeted Financial Sanctions regimes for Terrorism Financing and Proliferation Financing, under UNSC Resolutions, and to further align said regimes with the requirements embodied in FATF Recommendations, SBP has decided to update the subject guidelines.

December 31, 2019

SBP directs MFBs to ensure verification of customers

KARACHI: State Bank of Pakistan (SBP) on Tuesday issued orders to microfinance banks (MFBs) to ensure verification of customers in order to mitigate various risks arising from money laundering and financing terrorism.

A circular issued by the central bank referred it previous instructions issued through Circular No. 02 dated October 05, 2018 to mitigate various risks arising from money laundering and financing of terrorism.

As stipulated under Regulation M-1, ongoing Customer Due Diligence (CDD) is an essential aspect of effective KYC/CDD procedures and applies to all customers to whom the MFB is offering any type of service(s).

Accordingly, it is reiterated that MFBs must ensure strict observance of all applicable instructions including identification and verification of customers and their beneficial owner(s) and obtain information on the purpose and intended nature of business relationship.

The monitoring mechanism in place at MFBs should be adequately resourced and strengthened to ensure that the transactions being conducted in the accounts are consistent with the MFB’s knowledge of their customer, business, risk profile and the source of funds.

With the objective to know the ultimate beneficial ownership of accounts/ transactions, the MFBs shall enhance their efforts to obtain relevant information and examine background and purpose of all complex, unusual large transactions and unusual patterns of transactions, which do not commensurate with customer profile or have no apparent economic or visible lawful purpose.

MFBs are also advised to refer to the SECP Circular No. 16 of 2018 dated August 29, 2018 (https://www.secp.gov.pk/laws/circulars/) through which the Commission has directed all companies to enhance their efforts to obtain and maintain up-to-date information relating to their ultimate beneficial owners, i.e. natural persons or individuals who ultimately own or control the company.

Therefore, MFBs may also seek such ultimate beneficial ownership information from their relevant customers during the CDD process.

Moreover, with the view to further strengthen the measures already in place and mitigate the money laundering and terrorist financing risks, MFBs are advised to immediately take following steps:

a) Ensure optimal utilization of biometric technology and carry out biometric verification of the existing customers (if already not done) as per following timelines and thresholds:

Priority	Category of Customers	Threshold	Timeline
High Priority	Listed /Public Limited Companies	Account turnover exceeding PKR 1,000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.	31st January, 2020
Private Limited Companies	Account turnover exceeding PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
All customers except Public/Private Limited Companies	Account turnover exceeding PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
Medium Priority	Listed /Public Limited Companies	Account turnover from PKR 500 million to PKR 1000 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.	31st March, 2020
Private Limited Companies	Account turnover from PKR 250 million to PKR 500 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
All customers except Public/Private Limited Companies	Account turnover from PKR 100 million to PKR 250 million for any of the calendar year 2017, 2018 or for a period since January 1, 2019 to September 30, 2019.
Normal	All other accounts not covered in the above categories	30th June, 2020

Note

Biometric verification of persons authorized to open and operate the account of legal entities or legal arrangements shall be conducted.

In case of customers whose eligible identity documents are other than biometrically verifiable documents, re-validation/ verification of identity shall be done based on documents, data or information obtained from customer and/or from reliable and independent sources having regard to MFB’s own assessment of materiality and risk.

Submit compliance status in respect of biometric verification of their existing/legacy portfolio of customers within 15 days of aforesaid timelines.

Furthermore, MFBs are advised to adhere to the following instructions regarding biometric verification of existing customers presently outside Pakistan:

	Type of Customer	Treatment
a)	Non-resident Pakistanis (NRPs) As defined in Income Tax Ordinance, 2001 – Chapter 5, Division II, Section 82	For customers who fall under the definition of NRP, the MFB may obtain a signed undertaking from the customer invariably containing the following: • Customer’s NRP status along with proof (i.e. copy of valid passport, visa, exit stamp, resident permit, etc.). • Copy of valid identity document. • Account number(s) of the customer’s account(s) maintained with the bank as per customer record. • Undertaking by the customer to inform the bank of any change in residency status. The MFB, after verification of the customer’s signature from its record, shall accordingly update/ reflect the NRP status in the customer profile. For such customers, as an alternative to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer.
b)	Resident Pakistanis temporarily outside Pakistan	For customers who do not qualify under the definition of NRP, but are currently/ temporarily outside Pakistan for any reason, the MFB may obtain reasonable evidence/ proof from the customer regarding his/ her absence from the country (i.e. copy of valid passport, visa, exit stamp, resident permit, etc.) and the expected date of return. For such customers, as an alternate to biometric verification, the MFB may conduct fresh NADRA Verisys using the information provided by the customer. The MFB may retain the NADRA Verisys in place of biometric verification until the customer returns, subject to reasonable time limit (not more than six months) to be defined by MFB. Biometric verification of such customers shall be done immediately upon the customer’s return to the country.
c)	Joint Accounts where one account holder is outside Pakistan (NRP/ temporarily)	For joint account holders, treatment of biometric verification should be done according to the status of respective individual. Biometric verification should be conducted for the joint account holder who is resident Pakistani, while for other joint account holders, the relevant procedure described at (a) and (b) above should be adopted.

Moreover, MFBs may operate accounts on the basis of NADRA Verisys in genuine cases, in line with Frequently Asked Questions (FAQ No. 8, Annexure – I) on Use of Biometric Technology, provided MFBs are satisfied and proper reason/ proof is recorded/ retained by them.

For such cases in line with Para-7 above, in the absence of biometric verification, MFB may ensure that requisite identification document has been obtained, marked as ‘original seen’ by their staff and verified through NADRA Verisys.

Moreover an undertaking should be obtained from the customer declaring that the particulars provided to the MFB are correct and that their staff has verified the same. The declaration should be endorsed by the Branch Manager and should be available in the bank’s centralized record.

December 31, 2019

SBP abolishes fee on tax payment through alternate delivery channels

KARACHI: The State Bank of Pakistan (SBP) has announced to abolish the fee on payment of government taxes and duties through Alternate Delivery Channels (ADCs) and Over-the-Counter (OTC) from January 1, 2020.

A statement issued on Saturday said that presently, the taxpayers pay Rs.10 to Rs.50 per transaction for payment of taxes through ADCs depending on the amount of tax paid, and Rs.50 per transaction for the payments through OTC.

This fee will be borne by SBP instead of taxpayers from January 1, 2020. The change has been notified through SBP FD Circular No.4 of 2019 dated December 27, 2019.

The decision is part of SBP efforts to promote digital payments and is likely to attract larger number of taxpayers towards digital payment of government taxes and duties.

The mechanism for online collection of taxes and duties was introduced in March 2018 in collaboration with Federal Board of revenue (FBR) with the primary objective of taxpayers’ facilitation. The tax payers can pay their taxes from the convenience of their homes or offices using internet/mobile banking facilities, through 14000 plus ATMs or any of the 15000 plus branches of commercial banks across the country. So far Rs.346 billion has been collected through this mechanism. The collections through the ADCs/OTC modes are likely to grow exponentially as the awareness about the mechanism improves.

SBP is also running an awareness campaign to familiarize the taxpayers, tax bar associations, chambers of commerce, clearing and forwarding agents and business community at large about the ADC and OTC payment mechanisms.

Seminars and awareness sessions are being arranged across the country through the field offices of SBP Banking Services Corporation. The first such seminar was held in Karachi on December 26, 2019, which was attended by corporate taxpayers, representatives from chamber of commerce, trade associations, commercial banks, tax bars and audit firms.

The participants appreciated SBP efforts for promotion of digital payments and said that such sessions are critically important for enhancing public awareness and allaying their fears and apprehensions about digital payments.

December 28, 2019
Bank holiday announced on January 01

KARACHI: The State Bank of Pakistan (SBP) on Friday declared bank holiday on January 01, 2020 on account of financial close of banking companies.

In a circular issued to presidents and chief executives of all banks, development financial institutions and microfinance banks, the SBP informed that the central bank will remain closed for public dealing on Wednesday, January 1, 2020, which will be observed as ‘Bank Holiday’.

All banks / DFIs / MFBs shall, therefore, remain closed for public dealing on the above date. However, all employees of banks / DFIs / MFBs will attend the office as usual, the SBP said.

December 27, 2019
Banks to observe extended working hours on Dec 31 to facilitate taxpayers

KARACHI: State Bank of Pakistan (SBP) on Friday announced that banks will observed extended working hours to facilitate taxpayers in payment of duty and taxes on December 31, 2019.

In order to facilitate the collection of government receipts / duties / taxes, it has been decided that authorized branches of National Bank of Pakistan (NBP) as well as field offices of SBP Banking Services Corporation (SBP-BSC) will observe extended banking hours up to 9:00 PM on December 31, 2019 (Tuesday).

Accordingly, NBP branches will settle their transactions with respective SBP-BSC field offices on the same day i.e. December 31, 2019 for which purpose a special clearing has been arranged at 7:00 P.M. by the NIFT.

All banks are, therefore, advised to keep their concerned branches open on December 31, 2019 (Tuesday) till such time that is necessary to facilitate the special clearing for Government transactions, the SBP said.

December 27, 2019
Pakistan’s weekly foreign exchange reserves slip by $60 million

KARACHI: The liquid foreign exchange reserves of the country slipped by $60 million to $17.595 billion by week ended December 20, 2019, State Bank of Pakistan (SBP) said on Thursday.

The foreign exchange reserves of the country were at $17.655 billion by week ended December 13, 2019.

The foreign exchange reserves held by the SBP increased by $15 million to $10.907 billion by week ended December 20, 2019 as compared with $10.892 billion a week ago.

The SBP said that on December 23, 2019, it received $452.4 million from International Monetary Fund (IMF) as second tranche under EFF program.

These funds will be part of SBP weekly reserves data as of December 27, 2019, to be released on January 02, 2020.

The foreign exchange reserves held by commercial banks fell by $75 million to $6.688 billion as against $6.763 billion a week ago.

December 26, 2019