The Presidents/ CEOs,

All Banks.

Dear Sirs /Madam,

Export Finance Scheme (EFS) - Clarifications on Export Overdue Proceeds

State Bank of Pakistan has received representations from various exporters’ associations that banks are not allowing export refinance facilities under the Scheme to exporters due to non-realization of export proceeds keeping in view the instructions issued to banks vide Para 3 of letter No.SMEFD/EFS/936-L/X/2008-1103 dated November 17, 2008.

2. To redress the exporters’ problems with a view to make them eligible for financing under the EFS, it has been decided as under:
   1. One time waiver for 90 days shall be allowed for the purpose of availing financing under EFS to all exporters whose export proceeds are overdue till date of issuance of this Circular letter. After expiry of 90 days period, export refinance facility under the Scheme will not be allowed to those exporters who failed to arrange repatriation of export overdue bills. However, the facility will be restored, automatically by the banks, if otherwise in order, as and when exporter subsequently realizes export overdue bills.
   2. The banks may allow the financing facility under EFS to exporters who could not arrange to repatriate export overdue bills due to bankruptcy/ liquidation and litigation involving foreign buyer, provided that the respective bank confirms having received all the supporting documents and is satisfied with the same. Where possible the financing bank may like to seek feedback from its correspondent banks in the country of importers, especially in cases where both the volume of export overdue and the financing request are for large amounts. While allowing the facilities in such cases the financing bank will be under obligation to record the reasons for continuation of the EFS facilities to the exporter concerned. The information relied upon by the bank for continuation of the export finance facilities shall be verified / examined by the verification teams of the SBP BSC as also our Banking Inspection Department as usual.
   3. The exemption of 90 days will not be available in case the exporter has subsequently shipped additional consignment to the same importer or its associated company, or where the payment in respect of shipments has been stuck up on account of discrepant documents, or failure of the exporter to ship the goods in accordance with the requirements of the importer, provided shipments so made and discrepant documents so sent have been accepted by the importer abroad.

3. The banks will also provide information of all such cases to SME Finance Department. Further in case the SBP or SBP BSC concludes that the facility of 90 days exemption or the financing facilities under EFS were provided without complying to above parameters or in contravention to instructions issued under the Export Finance Scheme, a fine @ paisa 37 per day per Rs.1000 or part thereof will be imposed on the finances availed under EFS. The SBP BSC would recover these fines from the account of the bank maintained with them. However, in case the information relied upon by the bank in allowing facilities under the scheme were incorrectly provided by the exporter the bank will have right to recover fine so imposed by the SBP or SBP BSC (Bank) from the exporter concerned.

4. It may be clarified that the method and payment of export proceeds has been defined in Para 6 of Chapter XII of F.E. Manual, 2002, which also provides a reasonable room for relaxation in period of realization of export proceeds. Accordingly, where the terms of sale provide for payment earlier than six months, Authorized Dealers may allow extension in the realization period if they are satisfied with the explanation given for delay in realization, provided such extension does not extend the period beyond six months from the date of shipment. In addition, in order to facilitate the exporters, Exchange Policy Department of SBP also considers such requests for extension on case to case basis in case of valid reasons for delay in repatriation of export proceeds.

Please acknowledge receipt.