All Banks/ DFIs/Leasing Companies/Investment Banks/Modarabas.
Dear
Sir/Madam,
Scheme for Financing Locally Manufactured Machinery
Modifications thereof
It
Please refer to the instructions contained in ICD Circular
No1 dated 27th April 1987 and subsequent instructions issued
from time to time on the above subject.
2.
In view of a number of changes in the financial sector during
the past decade, the scheme for financing Locally Manufactured
Machinery have been revisited by SBP in consultation with
all the stakeholders. A copy of the revamped scheme is attached
at Annexure-A
3.
The salient features of the revamped Scheme are hereunder
given: -
A.
The financial assistance shall be available to the prospective
borrowers through approved Participating Financial Institutions
(PFIs), which may include a bank, DFI, Leasing Company,
Investment bank or Modaraba. Their approval as a PFI shall
be linked with their equity base and rating assigned to
them by the rating agencies on approved panel of SBP. The
Scheme shall allow these PFIs to provide financing facilities
for all items of locally manufactured machinery, equipment
and accessories thereof used in the industries, mentioned
in the Scheme, for manufacturing, preserving or packaging
of items / commodities manufactured by them.
B.
The financing facility shall also be available to the manufacturers
of such machinery who have been awarded a contract for manufacture
and supply of the machinery items under the Scheme.
C.
The State Bank shall allow refinance to each PFI on service
charge basis in terms of Section 22 read with Section 17
(2) (d) of the SBP Act 1956. The rate of service charges
under the Scheme shall be announced on annual basis on 1st
July each year. These rates shall be determined as per the
following:
a)
For Manufacturers:
i.
For financing upto 6 month: Equivalent to the weighted average
yield on 6-months T-Bills.
ii.
For financing exceeding 6 month but upto 2 year: Equivalent
to the weighted average yield of last two auctions of 12
months T-Bills.
b)
For Purchasers:
·
On the basis of weighted average yields of the last two
auctions of PIBs of 5 years tenor.
The
PFIs shall be entitled to earn a maximum spread of 2% on
financing provided by them to their borrowers under the
Scheme.
D.
The repayment period, under the scheme has been kept flexible
ranging from 6 months to 2 years for manufacturers and upto
a maximum of 7 ½ years for purchasers of the locally
manufactured machinery.
E.
For the current year the service charges under the scheme
have been fixed as given below:-
| Tenor |
Rate
of refinance to be paid by each PFIs to SBP |
Maximum
Rate of Finance to be charged by PFIs to the borrowers |
| For
financing upto 6 month |
2.0% |
4.0%p.a |
| For
financing exceeding 6 month but upto 2 year |
2.5% |
4.5%
p.a |
| For
borrowers requiring financing over two years upto maximum
period i.e. 7 ½ years. |
5.0% |
7.0%
p.a
|
The
above rates shall remain effective until June 30, 2005.
4.
The requests for approval as PFI of the Islamic Banks, Islamic
Branches of the existing banks or their subsidiaries undertaking
Islamic banking as also modarbas who are engaged in Sharia
compliant financing activities, shall be considered by SBP
separately, on the basis of Sharia Compliant products. Such
proposal shall have to be approved by their Sharia Advisor
/ Board and consented by the Sharia Board of the State Bank
of Pakistan, with regard to it’s compliance with Sharia
Principles.
5.
Each PFI is requested to kindly apprise the contents of
this Scheme to its constituents
6.
The above instructions shall be effective immediately and
shall supersede instructions concerning Part-A Local Sales
of LMM-Scheme as contained in ICD Circular No. 1 of 1987
read with subsequent amendments made from time to time.
Please
acknowledge receipt.