Annexure to BSD Circular No. 09 dated 15th February, 2001

 

LMM-SCHEME -PROVISION OF FINANCING FACILITIES BY SBFC FOR LOCALLY MANUFACTURED AUTO / AIRJET /   SHUTTLELESS LOOMS

 

          Under the existing provisions of LMM-Scheme the financing facility under Part-A (Local Sales) of the Scheme for Financing Locally Manufactured Machinery are made available for purchase of the locally manufactured machinery to the investors / industry for their projects financed by the approved DFIs and commercial banks.  Likewise while the facilities are sanctioned by the financing banks to purchaser of locally manufactured machinery, the disbursements are released to the manufacturers directly preferably through an inland LC.  It has since been decided that for the purpose of Scheme for the provision of financing facilities by Small Business Finance Corporation (SBFC) for Locally Manufactured Auto / Airjet / Shuttleless Looms, the payment shall be released to manufacturers through inland LC.          Other covenants of the Scheme are as under :-

 

2.       The viability of the project shall continue to be appraised by SBFC.

 

3.      (a)          While the facility shall be sanctioned to the purchaser, who shall be primarily responsible to repay funds so disbursed, the finance shall be provided to the manufacturer to enable him to manufacture and supply the aforesaid machinery items, and accessories thereof, to be used by the purchaser for setting up of industrial units or for balancing modernization & replacements (BMR) of the conventional looms.

 

(b)            On being satisfied that the aforesaid machines are being financed against a valid inland LC  for manufacture and supply to the textile unit for increase in the production and quality of textiles the SBFC will disburse the funds to the manufacturers against inland LC as per the terms of delivery.

 

( c )            The SBFC should ensure that appropriate debt equity ratio, as also other Prudential Regulations are observed in all cases, regardless of the fact that financing under the Scheme is for new project or for balancing modernization replacement and expansion of the existing unit. The financing will be made as per the funding of SBFC.

 

( d )          The following procedure for procurement under the Scheme should be adopted:-

                   

                    ( i )          Competitive Prices

                   

                    The selection of machinery will be done on the competitive price basis subject to obtaining of three quotations/bids from the manufacturers of the machinery. The quotations must contain the following information :-

 

·                    Names of individual machine/accessories with specifications

·                    Price

·                    Names and landed cost of each imported components used/to be used in each individual machine

·                    Delivery schedule

·                    Payment terms

·                    Certificate of origin / warrantee

 

 

( ii )          Approval of quotations

 

The quotations/bids will be approved on price competitiveness. SBFC should exercise special care in case of acceptance of quotations other than lowest one and justifications and specific reasons should be recorded

 

( e )          SBFC would ensure that the manufacturer has the capability of manufacturing the machinery for which inspection report on the manufacturer would be prepared by the technical staff of the SBFC after conducting inspection of the manufacturing facilities of the manufacturers. The said reports must contain, at the minimum, information on their manufacturing capability of the machinery involved, adequacy of technical personnel, their know-how,  design facilities and the manufacturers' previous experience. Reference from previous users of machinery and equipment manufactured, and supplied by the same manufacturers, may also be called for. The State Bank reserves the right to have such certificate checked and in the event of negligence, to take appropriate action against borrower/SBFC. The concerned staff of SBFC including their top hierarchy shall be personally responsible for submission of reports contents of which are not found correct during the subsequent inspections of the manufacturer’s that may be conducted by SBP or its designated representatives, cost of which shall be borne by SBFC.

 

(  f )           The facility shall be available to local contents only.  However in case their value falls below 20% of the ex-factory show room price of the machinery, such machinery shall not qualify for the financing facilities under the Scheme.

 

( g )          SBFC shall be under obligation to ensure that both quantum and landed cost of the imported contents used in the locally manufactured machinery items have been correctly declared by the manufacturer. 

 

( h )           SBFC would also use their own expertise in ensuring that the individual machinery being manufactured is supported with a valid contract for supply and the buyer has the capability to install, operate and produce desired results. Triplicate Copy of the supply contract between buyer and manufacturer duly endorsed by SBFC, alongwith attested copy thereof should be submitted alongwith the application form for refinance. Likewise a report by the SBFC’s accredited representatives for assessing the capabilities of the purchaser should be submitted to SBP at the time of claiming refinance.  The State Bank shall reserve the right to have such certificate/ reports checked, at the cost of SBFC and in the event of negligence, to take appropriate action against the delinquents including the officials of SBFC.

 

4.       The reimbursement of the amount disbursed by the SBFC under the Scheme will be made as follows :-

 

a)                 State Bank may sanction a refinance limit to the SBFC on the basis of its estimated requirements.

 

b)                 The SBFC may receive refinance under the above limit upto 100% of the finance which it provides for purchase of the above said machinery / accessories eligible under the Scheme.

Application in this behalf shall be lodged to the Chief Manager, State Bank of Pakistan, Islamabad on the prescribed application form (copy enclosed).

 

c)                  The SBFC may grant finance for periods considered appropriate by them.  The period of refinance will be related to the terms of the finance sanctioned by SBFC to the purchaser, subject to a maximum of twelve and half years.  The SBFC shall have to ensure that the recoveries realized by them from their borrower, as per schedule or on accounts of pre-mature liquidation of the assistance, are deposited with the SBP within a period of three days, from the date of receipt by its concerned branch, failing which fine at the rate of sixty paisas per thousand or part thereof per day shall be levied.

 

d)                 SBFC shall not be eligible to retain the amount of recoveries realized by it or repaid by its borrower during the overall grace period of four years as may be allowed by SBFC on a case by case basis to be spelt out in sanction letter for individual finance limit.

 

e)                 The finance shall be provided to the manufacturers only on the basis of any of the approved non-interest mode of financing as contained in BCD Circular No.13 dated 20th June, 1984 considered appropriate by the financial institution.

 

f)                   The maximum rate of profit to be earned by SBFC on such finance shall not exceed 14% on annual basis.  Where refinance is obtained from the State Bank, the State Bank will share in the overall profit (before tax) of the SBFC subject  to a maximum of 12% of the amount of refinance availed of  on annual basis.

 

g)                 The SBFC will make provisional payment of the State Bank's share in its profit at the annual rate of 12% on quarterly basis on 31st March, 30th June, 30th September and 30th December, each year.

 

h)                The State Bank shall have the right to inspect the book of accounts of SBFC and to take copies therefrom of any record required in connection with such inspection.

 

i)                   The SBFC shall execute necessary documents and agreements as may be prescribed by the State Bank.

 

j)                   The SBFC  shall not take more than one month to examine the feasibility of any project seeking financial facilities under the Scheme.

 

k)                 If a purchaser / manufacturer  of  locally  manufactured auto /airjet / shuttleless looms defaults in fulfilling any obligation under the Scheme, he will be subjected to a fine at the rate of paisa 37 per day per Rs 1000/= or part thereof, of the finance.

 

 

 

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APPLICATION FORM FOR CLAIMING REFINANCE

=======================

The Chief Manager,

State Bank of Pakistan,

____________________

 

Dear Sir,

 

PROVISION OF FINANCING FACILITIES BY SBFC TO THE MANUFACTURERS OF LOCALLY MANUFACTURED AUTO / AIRJET / SHUTTLELESS LOOMS

 

            With reference to the State Bank's PLS Finance Limit No.________ of  Rs._________ sanctioned to us for the year ____________vide SBP's letter No.___________________ dated _____________ we submit herewith our claim for the refinance facility amounting to Rs._____________________ against the finance disbursed by us on _____________________             (Date (s) of Disbursement)

to the manufacturers on behalf of the purchaser as per particulars given hereunder :-

 

(i)

Nature of the Manufacturing Industry

____________________________

 

 

 

(ii)

Name of Manufacturer

____________________________

 

 

 

(iii)

Name of Purchaser

____________________________

 

 

 

(iv)

Business address of Manufacturer.

 

 

____________________________

 

 

 

(v)

Business address of Purchaser.

____________________________

 

 

 

(vi)

Whether the machinery is required for a new project or for BMR /Expansion purposes ?

 

 

____________________________

 

 

 

 

(vii)

 

Broad type of machinery to be installed.

 

____________________________

 

 

 

(viii)

Amount of Finance as per Financing Agreement.

 

____________________________

 

 

 

(ix)

Date of Financing Agreement.

____________________________

 

 

 

(x)

Rate of Return / Profit.

____________________________

_________________________

 

2.         The contract (s) finalized by the above-named purchaser with the manufacturer in respect of the machinery purchased and details of payments made by us to the manufacturer against the aforesaid contract are attached.

 

3.         We have already submitted / submit herewith a Demand Promissory Note for Rs.____________________________(Rupees ______________________________only) signed by ____________________________________ (Name of Purchaser) and  endorsed  by  us  in  your  favour  and  request  you to reimburse  us Rs._______________________________ (Rupees_______________________________ _____________only)  being     mobilisation   advance / cost of  machinery  delivered  out of   our   above   referred  financing   limit   and   credit  our  Current  Account  with  you.

 

 

 

 

 

                                                                                                            Cont’d...........P/2.

 

 

 

We hereby certify that :-

 

(i)                 the terms & conditions contained in BSD's sanction letter referred to above have been complied with;

 

(ii)                that all the requirements of the Scheme including those at (iii) & (iv) below have been fully met;

 

(iii)              that the eligibility of machinery against which refinance is applied for has been properly determined by us in accordance with the prescribed criteria / conditions set out in the Scheme in force on the date of the Financing Agreement referred to above;

 

(iv)              that the procedure for procurement of the machinery purchased and the mode of payment are in accordance  with that laid down in the Scheme.

 

(v)               that the information / data given in the Application Form and the annexed details are complete and correct.

 

5.         We understand that the State Bank has a right to appoint independent consultants for verifying cases of refinance on random basis and agree to re-imburse the cost so incurred in case the report of consultants indicates any irregularities on our part.

 

6.         We agree to pay back any amount of refinance disbursed to us by the State Bank on the basis of this application if the State Bank subsequently concludes that such refinance was wrongfully claimed and also pay fine on such finance at the prescribed scale for the period for which such finance is availed by us immediately on demand made by the State Bank.

 

 

 

Yours faithfully,

 

 

 

(  AUTHORIZED  SIGNATURE  )

  Name & Designation