KARACHI: More than 700 companies have applied for concessional loans worth Rs65 billion from banks under State Bank of Pakistan’s (SBP) refinancing scheme.

The SBP on Thursday said that in the first two weeks of this scheme, over 700 applications from companies are being processed in banks and DFIs that will protect jobs of more than half a million employees.

To protect the country’s economy from the disastrous impact of Covid-19 lockdown, the central bank has taken a series of steps.

The challenges of coronavirus have compelled the government to support millions of daily wagers through direct supply of cash as well as announcement of several schemes to support trade and industry.

“There has been a significant take-up in the refinance scheme introduced by the SBP as it provides concessional loans at 3 per cent to any company that commits to not laying off workers for the next three months,” a tweet by the SBP read.

The State Bank has given 15 days to banks for approving applications under the scheme.

On April 22, the SBP introduced further incentives for businesses under the refinance scheme for payment of wages and salaries to the workers and employees to prevent layoffs.

“To address the issue of providing security or collateral for small vendors and distributors, financing has been allowed against corporate guarantees of companies in value or supply chain relationship with the borrowers,” said the SBP.

“Banks have also been encouraged to provide loans without any collateral i.e. taking clean exposure of up to Rs 5 million,” said the SBP.

The SBP will provide incentives to companies which are active tax payers by reducing the mark up rate to 3pc from 4pc. Also, the central bank will provide refinance to banks at zero per cent.

This also increases the gap between the rates charged to active tax payers and non-tax payers businesses, as the latter can be charged an end user markup rate of up to 5pc, said the SBP.

Businesses have also been given flexibility to avail loan under SBPs refinance scheme for wages from any bank and they will not be limited to avail loans from the bank that manages their payroll. Small and medium enterprises can apply for the financing on a simplified loan application form prescribed by SBP for this scheme. Also, banks’ exposure under the scheme has been exempted from per-party or per-group exposure limits. This will enable banks to lend to borrowers that have exhausted their exposure limits.

Published in Dawn, May 1st, 2020