KARACHI, Nov 12: The State Bank of Pakistan has waived the cash margin requirement on opening of letters of credit (LCs) for importing of 19 products mostly related to textile industry.
The central bank in a circular issued here on Wednesday announced that it had exempted the 19 products most of them were consumed by the textile industry except one for the sports industry from the 35 per cent cash margin condition.
Meanwhile, the SBP governor informed a press briefing on Wednesday that the central bank would provide 100 per cent financing under the EFS Part II as it had already been providing cent per cent financing under EFS Part I.
In a separate circular, the SBP said that modifications were made in procedure for refinance under the Export Financing Scheme Part I and Part II.
It said in order to facilitate Participating Financial Institutions (PFIs) to provide financing facilities to the exporters it had been decided to amend the Long Term Financing Facility (LTFF) Scheme.
The SBP would provide 100 per cent refinancing to PFIs against LTFF facility provided by them to exporters subject to fulfillment of the terms and conditions of the scheme.
Financing facility already provided by PFIs from own sources at the ratio of 30 per cent and outstanding as on the date of issuance of this circular would 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 per cent for the remaining period.
The PFIs would 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.
The PFIs will not be entitled to recover prepayment penalty and cost of hedging interest rate risk from the borrowers.
“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 utilisation of these funds for the purposes as specified under the facility,” said the circular.
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, it added.
“Banks are advised in their own interest to ensure that all parameters prescribed by the State Bank are adhered to.”