Home Business State Bank Enhances Refinance Limits to Help Middle, Large Businesses

State Bank Enhances Refinance Limits to Help Middle, Large Businesses

by Staff Report

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Central bank to finance up to 100% of salaries of businesses with average 3-month wage bill up to Rs. 500 million

The State Bank of Pakistan on Monday announced that it was enhancing the scope and financing limits under its Refinance Scheme to Support Employment and Prevent Layoff of Workers to facilitate middle- and large-scale businesses that employ large numbers of people.

In a circular, the central bank said it would now finance up to 100 percent of salaries for businesses that have an average 3-month wage bill of up to Rs. 500 million for payment of salaries for the months of April, May and June 2020. Earlier, the 100 percent financing was only available for salary bills up to Rs. 200 million.

Similarly, businesses with 3-month wage bills exceeding Rs. 500 million can now avail financing of up to 75 percent, with maximum financing of Rs. 1 billion. Earlier, 75 percent financing was only available up to Rs. 375 million, while Rs. 500 million only yielded financing of 50 percent.

The State Bank of Pakistan said the changes would be applicable “with immediate effect,” adding that any business that had already availed the lower financing could now avail additional financing on the basis of revised criteria.

According to the central bank’s statement, the changes to the refinancing scheme designed to prevent layoffs during the COVID-19 pandemic were implemented after considering feedback from various stakeholders. It said that earlier measures had targeted small- and medium-enterprises, including risk-sharing and allowing corporate guarantees to be used as collateral, to incentivize banks into lending to organizations that lacked collateral.

“Now taking another step further to facilitate middle and large businesses, which employ large numbers of people, to ensure payment of wages and salaries under this scheme, SBP has decided to enhance its refinance limits announced earlier,” it added.

The central bank hoped that the latest increase to financing limits, coupled with the risk-sharing facility for collateral-deficient SMEs and small corporations, would help all manner of businesses benefit from the ‘Rozgar Scheme’ and prevent mass layoffs.

“Further, State Bank has also extended the availability of its refinance scheme to non-deposit taking financial institutions as well,” it said.

According to the State Bank, from the start of the scheme on April 10 till May 8, over 1,440 businesses have requested to avail the refinancing scheme from various banks for around Rs. 103 billion to provide salaries to around 1 million employees. Of this amount, it said, banks have already approved Rs. 47 billion in financing for 500 companies, covering over 450,000 employees.

It urged anyone requiring further information, or facing issues with commercial banks, to contact a dedicated COVID-19 SBP team by email or by phone (111-727-273).

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