Circulars/Notifications / Infrastructure, Housing & SME Finance Department  


 SMEFD Circular No. 04 of 2008
November 12, 2008 

The Presidents/ CEOs,
All Banks/DFIs

Dear Sirs /Madam,

Long Term Financing Facility (LTFF) for Plant & Machinery:
Modifications in Procedure for Refinance

           Please refer to MFD Circular No. 07 dated December 31, 2007 on the captioned subject.

2.        In order to facilitate Participating Financial Institutions (PFIs) to provide financing facilities to the exporters, it has been decided to amend the Long Term Financing Facility (LTFF) Scheme as under:

  1. SBP shall henceforth provide 100% refinancing to PFIs against LTFF facility provided by them to exporters subject to fulfillment of the terms & conditions of the Scheme.
  2. Financing facility already provided by PFIs from own sources at the ratio of 30 percent and outstanding as on the date of issuance of this Circular shall be refinanced by the State Bank, for the remaining period of individual loan. For this purpose, the PFIs will have to approach the respective field offices of the SBP BSC along-with a list of cases under the Scheme for release of refinance against share of PFIs of 30% for the remaining period.
  3. PFIs shall henceforth not be entitled to deduct the funds provided under the LTFF Scheme from the Time and Demand Liabilities determined for the purpose of computation of both Cash Reserve Requirement and Statutory Liquidity Requirement.
  4. PFIs shall not be entitled to recover prepayment penalty and cost of hedging interest rate risk from the borrowers.

3.        As the funds provided under LTFF are provided to the borrowers at substantially lower rates and for a longer tenor, banks are strongly advised to ensure legitimate utilization of these funds for the purposes as specified under the facility. In case SBP subsequently concludes that refinance was availed by the banks on disbursements released to the borrowers which were not covered in accordance with the instructions of the facility, the refinance so granted would be recalled along with fine as prescribed under the facility. Banks are, therefore, in their own interest advised to ensure that all parameters prescribed by the State Bank are adhered to.

4.        All other instructions on the subject shall remain unchanged.


Yours faithfully,

Sd/-

(Mansoor H. Siddiqui)
Director


       
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