KARACHI, Sept 10: State Bank of Pakistan on Monday slashed interest rates on refinance schemes by 1.5 per cent giving substantial relief to the export industry.

The reduced rates will be applicable with immediate effect, the central bank stated in a circular.

The rates for Export Finance Scheme (EFS), service charges under the Long Term Financing Facility (LTFF) and the Scheme for Financing Power Plants Using Renewable Energy have been reduced by 150 basis points, or 1.5 per cent, the SBP announced.

“Now the exporters can get financing from banks under EFS at 9.5 per cent per annum,” the SBP circular stated. Earlier, the exporters were getting the financing under this scheme at 11 per cent per annum.

Exporters said it was expected after the SBP slashed its policy rate (discount rate) by 1.5 per cent for August and September.

However, it would be a great support to the exporters as the cost of products would decline and exporters could get a better chance to improve their export capacity, they said.

The State Bank said the interest rate under the EFS would be 8.50 per cent per annum till further instructions.

The commercial banks will ensure that where financing facilities are extended by them to the exporters for availing financing facilities under the EFS, their maximum margin or spread does not exceed one per cent, said the SBP.

“The reimbursement of mark-up rate benefit to exporters, on excess performance under Part-II of the scheme, will be adjusted accordingly keeping in view the revised mark-up rates,” said the circular.

The rates of financing under LTFF will now be 9.50 per cent for financing up-to 3 years, 8.60 per cent for over 3 years and up to 5 years and 8.20 per cent for over 5 years and up to 10 years.

Participating Financial Institutions (PFIs) spread for these tenors will be 1.50 per cent, 2.50 per cent and 3 per cent respectively. The end users’ rates for these tenors have now been reduced to 11 per cent from 12.50 per cent, 11.10 per cent from 12.60 per cent and 11.20 per cent from 12.70 per cent respectively.

Similarly, the rates of service charges under the Scheme for Financing Power Plants Using Renewable Energy have been re-fixed at 8.60 per cent for financing up to 5 years and 8.20 per cent for over 5 years and up to 10 years with effect from September 10, 2012.

“Banks and DFIs will be allowed to charge 2.50 per cent and 3 per cent spread respectively for these tenors. The end users’ rates for these tenors have now been reduced to 11.10 per cent from 12.60 per cent and 11.20 per cent from 12.70 per cent respectively,” said the SBP circular.