In pursuance of Prime Minister’s announcement of Fiscal Relief Package to rehabilitate the economic life in Khyber Pakhunkhwa, FATA and PATA and subsequent release of budgetary allocation by the Ministry of Finance, Government of Pakistan on account of interest / mark-up rate differential for first six months (from 01-01-2010 to 30-06-2010) following procedure has been devised for payment of mark up rate differential to the borrowers of above areas:-

Reduced Mark-up Rate on Existing Business Loans @ 7.5% p.a. or KIBOR whichever is lower:

A) Scope & eligibility criteria
i) Effective January 1, 2010, Banks, Development Finance Institutions (DFIs) and Micro Finance Banks (MFBs) shall charge mark-up rate on all business loans (Corporate, SMEs, Agriculture & Microfinance) outstanding as on 31-12-2009 of the borrowers of Khyber Pakhtunkhwa, FATA, PATA @ 7.5% p.a. or six month KIBOR-offer side, whichever is lower, for next two years (i.e. up-to 31-12-2011) except loans extended to Cigarette, Textile, Cement, Sugar and Beverages Sectors.

ii) Loans disbursed on or after January 1, 2010 shall not qualify for said relief. However, loans rolled over / renewed after said date, to the extent of outstanding balance as of 31-12-2009, shall qualify for availing subsidy

iii) Loans booked outside the Khyber Pakhunkhwa, FATA and PATA on behalf of businesses operating /located in these areas shall also qualify.

iv) Banks/DFIs shall charge maximum rate of 7.5% p.a. on principal amount of outstanding loans of the borrowers of Kyber Pakhtunkhwa, FATA and PATA and differential between 7.5% p.a. and applicable six month KIBOR would be borne by Government of Pakistan as subsidy.

v) Loans having fixed mark up rates equivalent to or less than 7.5% p.a., shall not qualify for subsidy. Similarly no subsidy will be applicable, if at any stage six months KIBOR is determined equivalent to or less than said rate.

B) Reimbursement of Subsidy
i) Mark up rate differential shall be reimbursed to banks/DFIs / MFBs on six monthly basis in January and July each year subject to release of necessary budgetary allocation by the Federal Government for relevant fiscal year.

ii) Amount of subsidy payable in July 2010 shall be calculated, on the basis of amount outstanding as on December 31, 2009 on reducing balance basis for all scheduled repayments by the borrowers during six months period, on daily product basis. However, dates for payment of Support in the next periods shall be announced separately on receipt of budgetary allocations from Government of Pakistan for the respective periods.

iii) To calculate Mark-up Rate differential for six months period ending June 30, 2010, average of the six month KIBOR of 31-12-2009 & 31-03-2010 shall be used. Similarly to calculate the Mark up Rate differential for six month ending December 31, 2010 average of the six months KIBOR of 30-06-2010 & 30-09-2010 shall be used.

iv) In case a borrower had transferred its debt from one bank to another bank, then the cost of mark up rate differential shall be borne proportionately by both the banks, however, final claim shall be submitted by the later bank and both banks shall proportionately share subsidy to be received from SBP-BSC. However, concerned banks/DFIs/MFBs should have to ensure that the facilities are not availed in duplication.

v) Banks, DFIs and MFBs shall seek reimbursement from SBP-BSC (Bank), Peshawar as per these guidelines and on submission of claim, certified by the Compliance or Internal Audit, as per attached Claim Form (Annex-I).

vi) In cases where the amount of mark up rate has already been recovered, the bank, DFIs and MFBs shall allow refund or adjustment of mark up rate charged over and above 7.5% p.a. to the borrowers concerned before approaching SBP-BSC (Bank), Peshawar for reimbursement of mark up rate differential.

vii) Claims duly completed in all respects shall be processed by SBP-BSC (Bank), Peshawar subject to the condition that documents as mentioned in Claim Form have been enclosed with the applications, which shall be subject to subsequent detailed scrutiny. Eligible amount of subsidy shall be reimbursed to the bank / DFI / MFB through credit to their account maintained with the office of SBP-BSC (Bank).

viii) The amount reimbursed by SBP-BSC (Bank) shall be subject to on-site inspection and if any amount claimed found ineligible, the same shall be required to be refunded by the banks / DFIs / MFBs along-with prescribed fine.

ix) No claim for six months ending on June 30, 2010 shall be entertained after July 31, 2010. Banks, DFIs and MFBs are, therefore, advised to ensure that all eligible cases are submitted as per schedule.

2. Banks, DFIs and MFBs are advised to promptly circulate these instructions to their respective offices / branches for meticulous compliance.

Encl: As above