SBP introduces additional incentives for businesses, employees to avoid layoffs

• Banks have also been encouraged to provide loans without any collateral i.e. taking clean exposure of up to Rs5 million.
• SBP has enhanced the incentive to business which are active taxpayers by reducing the markup rate for them to 3 percent that was set as 4pc earlier.

The State Bank of Pakistan (SBP) on Wednesday announced further incentives under the recently announced scheme, to support employment and avoid layoffs in the country.

Pakistan central bank on April 10 announced an incentive scheme, which enables the provision of concessional credit for payroll finance to businesses that commit to not lay off workers for the next three months.

Meanwhile, SBP  additional incentives include relaxations in collateral requirements, further reduction in end-user rate, reimbursement of wages, special accounts for employees to receive wages, borrowing from banks other than maintaining payrolls, simplification of application form for SMEs and bank’s exposure limits. These additional incentives are effective as of today.

SBP informed that SMEs including vendors and distributors were particularly facing the problem of providing security/collateral. To address this issue, the central bank has now allowed banks for providing financing against corporate guarantees of companies in value/supply chain relationships with the borrowers. Moreover, banks have also been encouraged to provide loans without any collateral i.e. taking clean exposure of up to Rs5 million.

Secondly, the SBP has enhanced the incentive to business which are active taxpayers by reducing the markup rate for them to 3 percent that was set as 4pc earlier. Now the SBP will provide refinance to banks at 0pc. This also increases the gap between the rates charged to active taxpayers and the non-tax payers businesses, as the latter can be charged an end-user markup rate of up to 5pc.

Thirdly, in order to facilitate employees for receiving wages under the scheme directly, banks have been allowed to open their accounts on the information and documents provided by the employers along with an undertaking stating that these persons are bonafide employees/workers.

SBO has directed the banks to ensure verification of the employees using NADRA Verisys before the activation of such accounts. These accounts, however, could be used solely for salary disbursement and withdrawal purposes only.

Furthermore, businesses have also been given the flexibility to avail loans 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. Further, businesses will also be able to get reimbursement of salaries pertaining to the month of April 2020 that have been disbursed through their own sources, provided they have applied for financing under the scheme before disbursement and the same is subsequently approved by the banks. SMEs can apply for financing on a simplified loan application form prescribed by SBP for this scheme.

To facilitate the banks further for lending under the scheme, Banks’ exposure under the scheme has been exempted from the per-party or the per-group exposure limits. It will enable them to lend to borrowers that have exhausted their exposure limits.

SBP added that all these benefits will also be available to businesses availing financing under the scheme from Islamic Banking Institutions.

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