COVID19 is challenging human life globally and straining economic activity. Governments as well as central banks are taking extraordinary measures to address the challenges associated with this situation. Pakistan is no exception. SBP is taking a range of measures to protect the safety of public and address the economic impact. In line with our mandate, we are focused on ensuring that inflation remains contained, reducing the impact of COVID-19 on economic growth and employment, and overseeing that the banking and payments system remains healthy. In this context, we have taken a number of policy measures already, as described below. We are working with stakeholders to continuously assess the situation and stand ready to take additional measures as the situation related to COVID-19 and its impact on the economy become clearer.

This page will be regularly updated to include measures undertaken to combat COVID-19


   Relief Package for households and businesses (Updated on 29 March, 2020) 

Key highlights of the package are as follows:

Banks' overall pool of loanable funds has been increased.

To support the banking sector to supply additional loans to businesses and households, SBP has reduced the Capital Conservation Buffer (CCB) from its existing level of 2.50% to 1.50%. This will enable banks to lend an additional amount of around Rs. 800 billion, an amount equivalent to about 10% of their current outstanding loans. The reduced CCB level will remain applicable till further instructions by SBP.

The regulatory limit on extension of credit to SMEs has been permanently increased.

SMEs typically bear the brunt of credit supply contractions during periods of heightened risk aversion and economic downturn. Therefore, as a tool to incentivize banks to provide additional loans to retail SMEs, the existing regulatory retail limit of Rs. 125 million per SME has been permanently enhanced to Rs. 180 million with immediate effect. This measure will facilitate banks to provide more loans to SMEs, which currently stand at around Rs. 470 billion

Borrowing limits for individuals have been increased for one year.

The capacity to borrow from banks for individuals is limited by their capacity to bear the burden of debt, defined in terms of a percentage of their income and known as a Debt Burden Ratio (DBR). SBP has relaxed the DBR for consumer loans from 50% to 60%. This measure will allow about 2.3 million individuals to borrow more from banks in this time of need.

Payment of principal on loan obligations will be deferred by banks.

Banks and DFIs will defer the payment of principal on loans and advances by one year. To avail this relaxation, borrowers should submit a written request to the banks before 30th June 2020. They will, however, continue to service the mark-up amount as per agreed terms and conditions. The deferment of principal will not affect borrower's credit history and such facilities will also not be reported as restructured/rescheduled in the credit bureau's data. The total amount of principal coming due over the next year is about Rs. 4,700 billion.

Regulatory criteria for restructuring/rescheduling of loans have been temporarily relaxed till 31st March 2021.

For borrowers whose financial conditions require relief beyond extension of principal repayment for one year, SBP has relaxed the regulatory criteria for restructuring/rescheduling of loans. The loans that are re-scheduled/restructured within 180 days from the due date of payment will not be treated as defaults. Banks would also not be required to suspend the unrealized mark-up against such loans. In addition, the timeline for classification of "Trade Bills" has been extended from 180 days to 365 days.

Margin call requirements against bank financing have been reduced.

Keeping in view the steep decline in share prices, margin call requirement of 30% vis-a-vis banks' financing against listed shares has been significantly reduced to 10%. Banks have also been allowed to take exposure on borrowers against the shares of their group companies. Banks have currently extended loans in excess of Rs. 100 billion against listed shares.

Circulars:

http://www.sbp.org.pk/bprd/2020/CL12.htm

http://www.sbp.org.pk/bprd/2020/CL13.htm

http://www.sbp.org.pk/bprd/2020/CL14.htm

http://www.sbp.org.pk/bprd/2020/CL14.htm

http://www.sbp.org.pk/smefd/circulars/2020/CL3.htm

http://www.sbp.org.pk/smefd/circulars/2020/CL4.htm

http://www.sbp.org.pk/acd/2020/CL1.htm

http://www.sbp.org.pk/acd/2020/CL2.htm

   Reducing Interest Rates (Updated on 24 March, 2020) 

At its last meeting on 17th March 2020, the Monetary Policy Committee (MPC) noted considerable uncertainty about how the Coronavirus outbreak would impact the global economy and Pakistan. In the statement issued following that meeting, the MPC "emphasized that it stood ready to take further actions if and when needed as more information becomes available on the outlook for inflation and growth."

Substantial new information on global and domestic developments has become available since the last MPC meeting. Globally, the Coronavirus has severely increased in reach. This has caused major disruptions to economic activity and the IMF has also significantly downgraded its global growth outlook for 2020 from 3.3 percent growth previously to below zero. These global developments have also led to a sharp fall in international trade. On the domestic front, since the last MPC, the number of COVID-19 cases has increased considerably, prompting social distancing and curtailment of activity. This is expected to lead to noticeable slowdown in domestic demand.

The developments discussed above imply that the outlook for growth and inflation in Pakistan is likely to be revised down further. In the wake of this new information, the MPC agreed at its emergency meeting today, to take further action. Accordingly, the MPC has decided to cut the policy rate by a further 150 basis points to 11 percent. This brings the cumulative easing over the past one week to 225 basis points. The MPC was of the view that this cumulative easing would cushion the growth slowdown while protecting inflation expectations.

Read the full Monetary Policy Statement issued on 24 March 2020

http://www.sbp.org.pk/m_policy/2020/MPS-Mar-24--03-2020-Eng.pdf

Earlier on 17th March 2020, MPC of the SBP cut its policy rate by 75 basis points. As noted in the Monetary Policy Statement, the dominant development since the last MPC meeting has been the outbreak of the Coronavirus pandemic. This has precipitated a slowdown in world demand and volatility in global financial markets, as well as a steep fall in global oil prices. Together with the domestic deceleration in food prices and significant decline in consumer price expectations, the outlook for inflation in Pakistan has therefore improved, paving the way for a rate cut.

The current market volatility being experienced in Pakistan is externally driven and the strengthening in the fundamentals of Pakistan's economy that drove the improvement in Pakistan markets before the Coronavirus outbreak remains intact. As a result, volatility is likely to subside as global risk aversion reduces. The SBP stands ready to take whatever additional actions that may be necessary to safeguard price and financial stability and support economic growth.

Read the full Monetary Policy Statement issued on 17 March 2020

http://www.sbp.org.pk/m_policy/2020/MPS-Mar-2020-Eng.pdf


   Supporting the Health Sector to Combat the Virus (Updated on 25 March, 2020)

SBP announced a 'Refinance Facility for Combating COVID-19 (RFCC)' and its Shariah compliant version to support hospitals and medical centers in combating the spread of COVID-19. Under this scheme, the SBP will refinance banks to provide financing at a maximum end-user rate of 3 percent for 5 years for the purchase of equipment to detect, contain and treat the Coronavirus. The SBP will provide this facility to banks at 0 percent. All hospitals and medical centers registered with federal or provincial health agencies and which are engaged in the control and eradication of COVID-19 will be eligible for this facility.

The total size of the scheme is Rs5 billion, with a maximum financing limit per hospital or medical center of Rs200 million. This scheme will help contain the spread of the Coronavirus and reduce its human toll. It is available until end-September 2020.


Circulars:

Conventional:
http://www.sbp.org.pk/smefd/circulars/2020/C3.htm

Islamic:
http://www.sbp.org.pk/smefd/circulars/2020/C4.htm

Advance Payments for medical equipment and medicines allowed.

SBP has allowed all federal and provincial government departments, hospitals in public and private sectors, charitable organizations, manufacturers and commercial importers to make Import Advance Payment and Import on Open Account, without any limit, for the import of medical equipment, medicines and other ancillary items for the treatment of COVID-19. Further, the banks have been allowed to approve Electronic Import Form (EIF) for import of the equipment, donated by international donor agencies and foreign governments to facilitate their seamless and speedy imports.

Circular:
http://www.sbp.org.pk/epd/2020/FECL9.htm

   Ensuring the Availability and Continuity of Financial Services (Updated on 29 March, 2020) 

SBP is continuously engaged with the industry to understand issues and challenges and formulate a policy response accordingly. In this vein, SBP conducted a flash survey covering all banks, Development Financial Institutions (DFIs) and Micro Finance Banks (MFBs). The survey results show that the industry has started to take preventive measures to limit the adverse repercussions of COVID-19. However, the results also indicate diversity among the industry participants in terms of their readiness to handle any worst-case scenario.

Banks/DFIs/MFBs were advised to adopt the following measures to help fight the spread of COVID-19 to ensure availability of uninterrupted financial services:

  1. Create awareness amongst the banks/DFIs/MFBs' staff and customers regarding COVID-19;

  2. Implement the guidelines issued by the World Health Organization, the Government of Pakistan and the Provincial Governments, in letter and spirit, to ensure the safety and health of employees and cleanliness at the workplace;

  3. Take precautionary measures such as enhanced usage of cash counting machines, encouraging customers to use Alternate Delivery Channels (ADCs) etc. to reduce contact with currency notes and other financial instruments. Further, make elaborative arrangements to provide uninterrupted financial services through ADCs (e.g. ATMs, online banking, transactions through call centers etc.);

  4. Reassess Business Continuity Plans (BCPs) in the existing situation and develop suitable remedial plans, including allocation of human and other resources, for their effective implementation;

  5. Carry out an impact analysis to assess the consequences on business and operations and enhance the monitoring frequency of key risk areas like credit, capital market and foreign exchange exposures; and

  6. Reach out to the key payment and settlement system partners such as NIFT, 1Link, NCCPL and CDC to ensure continued availability of their services.

In order to implement the above instructions and take other necessary measures, banks/DFIs/MFBs' have been advised to form a senior level committee to ensure that the responses towards risks arising out of COIVID-19 are robust and adequate.

Circular:
http://www.sbp.org.pk/bprd/2020/CL6.htm

Continuous availability of ATMs

will be ensured by keeping them up and running 24/7 by the banks. Banks' call centers and helplines must also be operative 24/7 and timely resolution of the complaints shall be ensured.

Critical functions and systems of banking will remain available.

All critical functions and systems required to provide banking services, including Real Time Gross Settlement System (RTGS) will remain available as usual even during the lock downs. Large scale closure of branches may cause rush and congestion in the operative branches, which may be counterproductive to efforts to contain the spread of the disease. The banks may, however, close branches where staff is infected and for which requisite human resource is not available. The situation will be reviewed again in couple of days based on the customers' visit to branches during lock downs.

Minimal staff at Banks.

SBP, from 24th March 2020, has invoked a scenario wherein minimal staff will be present at its premises to undertake critical functions, whereas the rest of the staff has been allowed to work from home. The Banks can also make such arrangements both in their branches and Head/Regional offices. Further, the banks may start their branch operations from 10 a.m. if needed to better facilitate their clients.

Circulars:
http://www.sbp.org.pk/bprd/2020/CL8.htm
http://www.sbp.org.pk/bprd/2020/CL16.htm

NADRA Verisys in place of Biometric Verification (BMV) will be used along with other measures for verification purpose until June 30, 2020. However, after the lapse of this timeline, MFBs shall resume biometric verification with revised timelines of July 31, 2020 and September 30, 2020 for customers assigned medium and normal priorities, respectively.MFBs are encouraged to introduce as early as possible electronic account opening forms/ other forms along with electronically acquiring and keeping on record information required under AML/ CFT Regulations for MFBs.Moreover, it is apprised that NADRA has extended the validity period of the National Identity Cards with expiry date after September 01, 2019, and these shall be deemed valid till July 01, 2020. MFBs are advised to disseminate the contents of NADRA's notification down the line to all relevant staff.

Circular:
http://www.sbp.org.pk/acd/2020/CL3.htm

Clearing of Cheques made easier and faster. In a bid to limit person-to-person interactions and to provide ease of services to the customers, in the backdrop of COVID-19, Banks and MFBs are allowed to provide Direct Cheque Deposit Facility under which a crossed cheque may be presented by payee/beneficiary directly into paying/drawee bank, instead of their bank branches as per existing practice. In this way funds may be transferred by the paying/drawee bank either through RTGS of Interbank fund transfer functionality. Moreover, Banks/MFBs may also make arrangements to collect cheque from registered addresses of their customers upon their request or customers may drop their cheques in drop boxes of their Banks, installed in selected branches.

In case of complete lock down, Corporates/Priority customers of banks may send the scanned image of their cheque along with relevant details of the beneficiary either through registered emails or through mobile applications of their banks to push funds from their accounts to the payee bank. However, banks are encouraged to implement additional risk mitigation measures as per their internal policies while offering these services to their customers. Banks/MFBs may also make arrangements with the Clearing House (NIFT) for clearing their cheques through Image Based Clearing (IBC) functionality as per the agreed SOPs between NIFT and banks.


Circular:
http://www.sbp.org.pk/psd/2020/C4.htm

Banks to adopt more robust Cybersecurity measures. Only authorized users of financial institutions will access internal IT resources. They will also ensure that their cybersecurity policies cater to risks of spying, interception, and modification.Banks have also been tasked to establish dedicated Cyber Threat Intelligence Units (CTI-U) and Emergency Response Teams (ERTs) to minimize and control the damage resulting from cybersecurity incidents. They will also exercise caution in handling emails with suspicious/work-related subject line, attachment, or hyperlink especially those related to recent phenomenon related to COVID-19.

Circular:
http://www.sbp.org.pk/psd/2020/C3.htm

   Promoting Digital Payments (Updated on 24 March, 2020) 

Given the pivotal role of financial sector in providing services to the general public and particularly the businesses, SBP after consultation with stakeholders has instructed banks to take specific measures to provide their services seamlessly taking due care of reducing the risk exposure amid corona virus. The objective of these measures is to reduce the need for visiting bank branches or the ATMs and to promote use of Digital Payment Services such as internet banking, mobile phone banking etc.

Charges on fund transfers waived.

SBP has instructed banks to waive all charges on fund transfers through online banking channels such as Inter Bank Fund Transfer (IBFT) and SBP's Real Time Gross Settlement System for customers. Thus people can transfer money through mobile phones or internet banking avoiding the need to visit a bank branch or an ATM without incurring any cost. They will also not incur any cost in case of using ATMs or visiting bank branches for transferring large amounts and can avoid the use of cash. Banks have been advised to facilitate their customers in using online banking while taking all necessary precautions to ensure the safety and security of customer's funds. Further, they will also ensure that call centres/helplines are available 24/7 for instant customer support.

Banks to facilitate education fee and loan repayments.

Financial industry has been instructed to immediately facilitate education fee and loan repayments through internet banking or mobile devices. Financial institutions shall also run awareness campaigns through different channels to educate customers to use internet banking or mobile phones, limit use of currency notes and restrict branch visits. Anticipating any frauds in the wake of digital transactions, SBP has advised financial industry to increase vigilance on digital channels and increase monitoring on cyber threats.

Circular:
http://www.sbp.org.pk/psd/2020/C2.htm

   Relaxing Credit Requirements for Exporters and Importers (Updated on 24 March, 2020) 

SBP has a strategic objective to support exports for sustained improvement in Pakistan's balance of payments and growth. To this end SBP provides refinance to banks to provide cheap credit at interest rates that vary between 3 to 6 percent to exporters for working capital and new projects under Export Finance Schemes (EFS) and Long Term Financing Facility (LTFF) schemes. The total subsidized credit to exporters outstanding under both these schemes is currently approximately Rs. 660 billion. Due to the COVID-19 pandemic Pakistan's exporters are facing declining demand in overseas markets and problems in executing existing orders. To support exporters in these circumstances and to prevent current liquidity problems from turning into solvency problems amongst exporters, SBP has announced following several measures today.

Relaxation in matching amount.

Availing cheaper credit under EFS is linked with the export performance. Currently, exporters are required to export twice the amount of borrowed funds. In case of failure in meeting the requirement penalties are imposed and the credit limit for the next year is also reduced accordingly. SBP has reduced the performance requirement from twice to one-and-a-half times that will be effective for the current year as well as for FY21.

Extension in time period to meet performance requirements.

Exporters were required to show performance under the EFS schemes by end-June 2020. This period has been extended by 6 months to end Dec. 2020. Since the additional period will also be counted towards setting new limits, this will help the exporters in availing higher limits for FY21.

Extension in time period to ship goods.

Exporters availing the subsidized credit schemes are required to ship their goods within 6 months of availing credit under EFS. In case of failure, penalties are imposed. This period has been extended from six to twelve months. Therefore, exporters will not be liable to pay penalties due to breach of this condition during January to June 2020.

Relaxation in conditions for Long Term Financing Facility.

Exporters who want to avail credit under Long Term Financing Facility (LTFF) are required to have exports worth 50 percent, or USD 5 million, of the total sales to become eligible. This limit has been reduced to 40 percent or USD4 million for all the borrowings under LTTF during the period January 01, 2020 to September 30, 2020. Moreover, under the requirement of annual projected exports performance for four years to avail LTFF for new or BMR projects has been extended by another one year. Now the projected exports performance will be measured in 5 years.

Circular:
http://www.sbp.org.pk/smefd/circulars/2020/C5.htm

Realization of export proceeds.

Another major relaxation has been provided to the exporters on foreign exchange side. Keeping in view the difficulties faced by the exporters, SBP has also allowed banks to enhance the time period for realization of exports proceeds from existing requirement of 180 days to 270 days on a case by case basis where the delay is related to COVID-19. This would help exporters to provide extended time to their buyers in making payment due to above pandemic. Likewise, to facilitate importers, SBP has extended the time period for import of goods into Pakistan against advance payment from existing requirement of 120 days to 210 days.

Circular:
http://www.sbp.org.pk/epd/2020/FECL7.htm

Exporters can directly dispatch the shipping documents.

SBP has allowed exporters to directly dispatch the shipping documents of their exports' consignment to their foreign buyers without any limit, subject to condition that the exporter's export over-dues are less than one percent and the exporter has exports of at least USD 5 million during the previous three years. Earlier, exporters could dispatch the shipping documents directly to their foreign buyers for export consignments of up to USD 100,000/, or equivalent in other currencies. This limit was in place since 2017.

Circular:
http://www.sbp.org.pk/epd/2020/FECL5.htm

Limits on advance payments for imports increased.

Moreover, SBP has enhanced the existing limit of USD 10,000/, or equivalent in other currencies, per invoice allowed to banks to make advance payment on behalf of manufacturing & industrial concerns and commercial importers for import of raw material, spare parts and machinery, to USD 25,000/.

These measures are in continuation of facilitating export-oriented industries and manufacturing concerns in the backdrop of ease of doing business and promoting exports' growth and will further contribute in improving economic outlook of the country.

It is pertinent to mention here that in January 2020, SBP had taken certain measures to facilitate export-oriented industries and manufacturing concerns. These included:

  1. Extending the facility to make advance payment up to USD 10,000/, or equivalent in other currencies, per invoice, for import of raw material, spare parts and machinery to commercial importers as well in addition to manufacturing & industrial concerns, allowed earlier.

  2. Allowing Authorized Dealers to effect import advance payment against irrevocable letter of credit, up to 100% of the value of letter of credit, for import of plant, machinery, spare parts and raw material etc. on behalf of manufacturing concerns for their own use only.

  3. Extending the facility allowed to manufacturing & industrial concerns for import of raw materials and spare parts on open account basis to commercial importers as well.


Circular:
http://www.sbp.org.pk/epd/2020/FECL4.htm

   Facilitating New Investment (Updated on 24 March, 2020) 

SBP announced a 'Temporary Economic Refinance Facility (TERF)' and its Shariah compliant version to stimulate new investment in manufacturing. Under this scheme, the SBP will refinance banks to provide financing at a maximum end-user rate of 7 percent for 10 years for setting up of new industrial units. The total size of the scheme is Rs 100 billion, with a maximum loan size per project of Rs 5 billion. It can be accessed by all manufacturing industries, with the exception of the power sector, where an SBP refinance facility for renewable energy projects already exists.

In line with the SBP's other refinancing schemes, the credit risk will be borne by banks and the selection of projects to finance will also be determined by them. This scheme will help counter any possible delays in the setting up of new projects that investors were planning prior to the Coronavirus outbreak. It will be available for one year only, requiring a letter of credit (LC) to be opened by end-March 2021.


Circulars:

Conventional:
http://www.sbp.org.pk/smefd/circulars/2020/C1.htm

Islamic:
http://www.sbp.org.pk/smefd/circulars/2020/C2.htm

   Provision of disinfected currency notes by banks (Updated on 24 March, 2020) 

Recognizing the need for issuance of fit, authenticated and disinfected cash by the banks. Detailed instructions have been provided by SBP to ensure to clean, disinfect, seal and quarantine all cash being collected from hospitals and clinics and to block circulation of such cash in the market. The banks shall report daily collection of cash from hospitals to SBP, which shall credit bank's accounts for the amounts so quarantined by them. Further, arrangements are being made to provide sufficient fresh or disinfected cash to banks enabling them to issue fresh cash or the re-issuable cash that remained in quarantine for at least fifteen (15) days to their clients. Banks have been ensured that SBP has sufficient quantity of such cash, and it would meet all demands for such cash.

Circular:
http://www.sbp.org.pk/acc/2020/C1.pdf

 
       
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