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State Bank of Pakistan(SBP) Temporary Refinance Scheme

KARACHI: SBP introduces a temporary refinance scheme to incentivize businesses not to lay off their workers during the COVID-19 pandemic. The State Bank has introduced a scheme to prevent economic hardship and unemployment due to Corona.

The interest rate has been further reduced by 200 basis points and the central bank has reduced interest rates by 2%, after which interest rates have dropped from 11% to 9%.
The State Bank of Pakistan has introduced a scheme to prevent economic hardship and unemployment caused by Corona, under which businesses pay employees, outsourced workers, and outsourced employees of all sorts, including outsourced workers. You can get cheap loans.

SBP Refinance Scheme for Payment of Wages & Salaries to the  Workers and Employees of Business Concerns

The scheme will be available to all businesses in Pakistan through banks and will cover all types of employees including permanent, contractual, daily wages as well as outsourced workers. The scheme will provide financing for wages and salaries expense for three months from April to June 2020 for those businesses which do not layoff their employees for these three months.

SBP Temporary Refinance Scheme

Companies that do not dismiss their employees from April to June this month can avail 5% interest rate for three months’ salaries of employees. In order to give priority to small businesses, the scheme, which costs up to Rs 20 crore for three months’ wages and salaries, will be able to get the entire amount financed.

The construction of houses and the growth of the construction sector is crucial for the economy as it has links to a number of allied industries and has the potential to create jobs, as well as private sector credit and GDP in Pakistan compared to most peers. The ratio of P is low.

The employment of 1,427,097 employees has been provided so far under the SBP scheme for job security during the Corona epidemic. The SBP introduced a loan scheme to curb economic hardship and unemployment in Corona. Under the scheme, companies that do not fire their employees between April 2020 and September 2020 can get loans at 5% interest for 3 months’ salaries of employees.

It should be noted that the institutions included in the list of active taxpayers have been provided the facility to take loans at the rate of 4%.

Category Wage Bill for 3 months Loan Limit Maximum Loan Limit
(1) (2) (3) (4)
A Less than or equal to Rs. 200 million 100% of the actual 3 months wage bill Rs. 200 million
B More than Rs. 200 million and less than or equal to Rs. 500 million Rs. 200 million or 75% of 3 months wage bill, whichever is higher Rs. 375 million
C More than Rs. 500 million Rs. 375 million or 50% of the actual 3 months wage bill, whichever is higher Rs. 500 million

The mark-up on the loans under this scheme will be up to 5%. Borrowers that are on the active taxpayer’s list, will be able to get loans at a further reduced mark-up rate of 4%. The scheme has been designed to give preference to smaller businesses. Businesses with a 3-month wage and salary expense of up to Rs. 200 million will be able to avail the full amount of their expense in financing while those with a three-month wage and salary expense of greater than Rs. 500 million will be able to avail up to 50% of their expense. Businesses in the middle category will be able to avail up to 75 percent of their Three months’ salary and wage expense.

Pakistan’s gross national product growth this fiscal will be negative 1.5 percent this fiscal year, and DP is expected to rise 2 percent for the next fiscal year, while inflation this fiscal will be 11-12 percent, It will be 7 to 9 percent a year.

The banks will not charge any loan processing fee, credit limit fee, or prepayment penalties for loans under this scheme. A grace period of six months will be allowed to the borrowers while the repayment of the principal amount will be made in two years. Banks will provide weekly reporting to SBP on the take-up of the scheme and in particular the reasons for any denials of financing requests under this scheme.

The middle class will be able to receive up to 75% of the financing for the next three months’ wages and salaries; banks will not charge loan processing fees, credit limit fees, prepayment penalties, the actual amount of the loan. Payments will have to be made within two years, while the borrower will also be given a 6-month grace period.

SBP expects that one of the main benefits of the scheme is that employers that retain workers on their payroll will be able to restore or increase production quickly once the situation normalizes. The scheme will ease the liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements.

One of the major benefits of the scheme will be that employers who retain employees on their payroll will be able to recover their product as soon as the situation returns to normal. Use the resources to meet the needs of the working capital.

SBP has taken a number of other measures in recent weeks to mitigate the impact of covid19 on Pakistan’s economy including an extension in repayment of loan principal amounts by one year, concessional financing for hospitals to procure equipment to combat covid19 as well as other measures. SBP has been closely monitoring the credit conditions faced by businesses and households and will take every possible measure to perform its due role throughout this disruption phase.