Bank financing for PM FRP: Govt to provide 10pc first-loss credit guarantee

KARACHI: The federal government has announced that it will provide a 10 percent first-loss credit guarantee for financing banks under the Prime Minister’s Fan Replacement Program (PM FRP), a key initiative aimed at promoting energy conservation and improving power efficiency nationwide.

According to State Bank of Pakistan (SBP), the Ministry of Energy (Power Division), through a notification dated February 6, 2026, outlined the program’s framework and term sheet, stating that the government will absorb the first 10 percent of losses on financing provided by banks.

Under the financing structure of the PM FRP, the minimum financing limit has been set at Rs10,000 while the maximum ceiling is Rs300,000.

READ MORE: PM’s ‘Fan Replacement Programme’ launched

The repayment tenor ranges from 6 to 18 months. Pricing will be based on one-year KIBOR plus 2 percent per annum, along with an additional Musawama profit of Rs500 to be included in the first instalment. The applicable KIBOR rate will remain fixed for the entire financing period and will be determined in accordance with each bank’s standard practice.

The mechanism for settlement of credit guarantee claims will be issued separately. The SBP has advised the banks to complete necessary arrangements, including system integration with the National Energy Efficiency & Conservation Authority’s (NEECA) online portal, to ensure smooth implementation.

The NEECA will spearhead the nationwide rollout, overseeing governance, stakeholder coordination and operational efficiency under tripartite agreements involving power distribution companies (DISCOs), participating banks and fan manufacturers.

The program will be implemented through a web portal hosted by the Punjab Information Technology Board and integrated with banks, the Power Information Technology Company (PITC), DISCOs including K-Electric, and registered manufacturers. Awareness campaigns will also be launched to encourage consumer participation and financing uptake.

Under the implementation framework, DISCOs shall provide API-based data access to NEECA’s Portal based on approved term sheet for consumer eligibility assessment and facilitate use of its data by participating banks for customer solicitation in accordance with applicable policies and supplementary roles and responsibilities with reference to tripartite agreement.

The SBP will circulate the features of the program to all commercial banks and facilitate the on boarding of participating banks. SBP will also devise payment mechanism for processing of claims of the participating banks (including claims against financing by banks during the soft launch) against first loss credit guarantee of the NEECA/Federal Government and obtain concurrence of NEECA/Power Division and Ministry of Finance.

The Ministry of Finance will ensure budgetary allocations for the scheme and facilitate settlement of credit guarantee claims. Stakeholders have been directed to take immediate steps to operationalize the program and report progress to the Power Division in accordance with the Rules of Business, 1973.

The PM’s Fan Replacement Program is designed to replace inefficient fans with energy-efficient models, helping reduce electricity consumption, ease pressure on the national grid and lower consumer energy costs.

Copyright Business Recorder, 2026