KARACHI: The State Bank of Pakistan (SBP) announced another incentive package on Wednesday to help companies avoid layoffs while ordering banks to provide zero percent refinancing.
"These additional incentives include relaxation of collateral requirements, further reduction in the end-user rate, refund of wages, special accounts for employees to receive wages, loans from non-payroll banks, simplification of the application form for small and medium-sized and bank exposure limits, "said the SBP.
Earlier on April 10, the central bank announced an incentive scheme entitled Refinancing Scheme for the payment of wages and salaries to workers and employees of commercial affairs, which allows the provision of credit on favorable terms for the financing of payroll to companies that promise not to fire workers for the next three months.
"These additional incentives are effective as of today," said the SBP.
The SBP has now allowed banks to provide financing against corporate guarantees of companies in value and supply chain relationships with borrowers. "Banks have also been encouraged to provide unsecured loans, that is, to take a clean exposure of up to Rs 5 million," he said.
Banks stopped distributing dividends for two quarters
The SBP also improved the incentives for active companies that pay taxes by reducing the surcharge rate for them to 3% which was previously established as 4%. "Now, the SBP will provide 0 percent refinancing to banks," he said, adding that this also widens the gap between the rates charged for active tax payments and non-tax businesses, as the latter are They can charge you an end user dialing fee of up to 5pc.
To make it easier for employees to receive wages under the scheme directly, banks have also been allowed to open accounts on information and documents provided by employers along with a company that establishes that these people are employees or workers.
Banks will guarantee the verification of employees using the National Database and the Verisys Registration Authority before activating such accounts. These accounts, however, may only be used for disbursement and withdrawal purposes only.
"Businesses have also been given flexibility to take out loans under the SBP refinance scheme for wages from any bank and they will not just take advantage of loans from the bank that manages their payroll," the SBP said.
Companies may also obtain reimbursement of salaries corresponding to the month of April that have been disbursed through their own sources, provided that they have requested financing under the scheme before disbursement and the banks approve it later.
The SBP said that SMEs can apply for financing on a simplified loan application form prescribed for this scheme.
"To further facilitate lending to banks under the scheme, banks' exposure under the scheme has been exempted from exposure limits by party or by group," the SBP said. He said the measure will allow banks to lend to borrowers who have exhausted their exposure limits.
All these benefits will also be available to companies that have financing under the scheme of Islamic banking institutions.
Meanwhile, the SBP through a separate circular on Wednesday suspended the distribution of dividends by banks during the two quarters to keep them more liquid to extend loans.
The central bank said it sees no immediate signs of systemic capital fragility across the banking industry.
"However, banks and DFIs have been advised to suspend the distribution of dividends for the next two quarters." These measures are primarily aimed at guaranteeing the security and soundness of the banking sector while improving its lending capacity to support economic activities in the country, he said. The circular.
Banks and DFIs in Pakistan have capital levels much higher than the global or minimum levels recommended by the State Bank. "Banks and DFIs that have approved the declaration of dividends for the quarter ending March 2020 before April 22, have been advised to suspend the distribution of dividends for June and September quarters 2020," the SBP said.
All other banks have been advised to suspend the distribution of dividends for the quarters of March and June 2020.
Posted in Dawn, April 23, 2020