Circulars/Notifications  

 DMMD Circular No. 09 of 2013

May 07, 2013 




The Presidents/ Chief Executives,
All Scheduled Banks

Dear Sirs/ Madam,

Competitive Auctions of Chinese Yuan Loan Facility

 

Please refer to the FE regulations governing Trade Loans against FE25 deposits; and the Currency Swap Arrangement executed between State Bank of Pakistan (SBP) and the People’s Bank of China (PBoC) on 23Dec2011. In this regard, following instructions are issued with immediate effect:

  1. All Authorized Dealers are allowed to take FE25 deposits and extend FE25 loans in Chinese Yuan (CNY) for financing of Imports / Exports in accordance with our prevailing instructions on FE25 loans / deposits vide FE Circular No.4 dated 04Sep2012.

  2. In order to provide CNY funding to scheduled banks, so that they can on-lend the CNY to importers / exporters with underlying Trade documents in CNY, SBP will conduct competitive auctions of Chinese Yuan loan facility using proceeds of the Currency Swap Arrangement with PBoC.

  3. SBP will conduct ‘uniform price’ competitive CNY auctions in 3 and 6 month tenors. Only Scheduled Banks  (Authorized Dealers) will be eligible to participate in these auctions.

  4. SBP’s lending to banks in CNY will be on execution of a Demand Promissory Note by the bank in favor of SBP and backed by an L/C or a firm trade contract denominated in CNY.

  5. This demand promissory note will be signed each time a lending transaction is executed with a bank. An agreement will also be executed once with each bank, which will define the overall broad terms and conditions governing the lending transaction and the execution of the promissory note. Standard Formats of the Demand Promissory note and the Agreement will be issued separately.

  6. Participation in auctions will be dependent on the submission of documentary evidence of:

     

    a. Underlying Import or Export bills denominated in CNY.

    b. Tenor of the Trade documents should be equal or more than the tenor of the CNY loan request from SBP.


  7. On the maturity date of the CNY loan, bank will be liable to repay the loan to SBP.

  8. Pricing of the CNY loan auction will be benchmarked to the ‘reference rate’ which will be announced by SBP along with the auction details. Participation in CNY loan auction will be based on spread over / under the ‘reference rate’. Minimum participation amount will be CNY 25 million and in multiples thereof.

  9. Details of auction dates, announcement of the auction results, settlement dates and corresponding cut off timings will be announced on Reuters pages SBPK24 and SBPK25. Tender form will be issued separately.

  10. In case of pre-payments from the customer, banks will be liable to repay CNY to SBP within 2 working days from the pre-payment from the customer. There will be no penalty charged by SBP for pre-payment. Accrued interest will be charged by SBP.

  11. CNY borrowings from SBP, as described above, will not be subject to maintenance of CRR in Cash Reserve Account (CRA) and Special Cash Reserve Account (SCRA).

All Banks are advised to bring the above to the notice of their constituents, for strict compliance.

 

Yours Sincerely

Muhammad Ali Malik
Director



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