Handbookon

LongTermFinancingFacilities
ofStateBankofPakistan

(February2014)

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

Foreword

State Bank of Pakistan is continuously in process of designing medium and long term refinancing
facilities/schemes for the investment sector to boost long term growth through capacity
development of industries. Until now numbers of facilities/schemes have been formulated with
specialfocusongrowthofexportorientedsectors.Further,StateBankhadbeentakingnumberof
steps to facilitate the business community through its credit Schemes. These Schemes have been
playing vital role in offsetting the impact of global financial crises, economic development in the
country, enhancing fixed industrial investment and easing the issue of liquidity squeeze faced by
banksinrecentpast.

Presently four longterm refinancing schemes i.e. Long Term Financing Facility (LTFF);
ModernizationofSMEs;FinancingFacilityforStorageofAgricultureProduce(FFSAP);andScheme
forFinancingPowerPlantsUsingRenewableEnergyareavailableforcapacitydevelopmentofthe
industrial sector. Keeping in view recent pick up in overall economic activity in the country
necessitating positive growth in banks credit, these facilities/schemes will play vital role in
streamlining the flow of credit to private sector as against ongoing trend wherein public sector
emergedaleadinguserofbankscredit.

Thishandbookdescribesthementionedfacilities/schemesindetailbutkeepinginmindthatthese
guidelines are the minimum conditions for financing prescribed by SBP. The banks/DFIs may take
appropriate modus operandi to ensure that the process of allowing financing is undertaken in a
prudent manner. The guidelines contained in this handbook will not supersede the instructions
issuedbySBPfromtimetotimewithregardtofinancingfacilitiesextendedbybanks/DFIs.SBPwill,
as always, keep a close liaison with banks/DFIs / other stakeholders and will modify and update
thesefacilities/schemes,whenevernecessary.

For further information / clarification in this regard, the borrowers / banks / DFIs may visit our
websitewww.sbp.org.pk

(SyedSamarHasnain)
Director
I.H.&SMEFinanceDepartment

ii

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

Team

TeamLeader

SyedSamarHasnain,

samar.husnain@sbp.org.pk

Director,
Ph:+922199221979

TeamMember

MuhammadIshfaq,
SeniorJointDirector,
Ph:+922132453518

AbdulGhani,
JointDirector,
Ph:+922132455502

AmnaRehman,
DeputyDirector,
Ph:+922132453568

muhammad.ishfaq1@sbp.org.pk

a.ghani@sbp.org.pk

amna.rehman@sbp.org.pk

Disclaimer:
Thisdocumentispreparedasgeneralinformationforthestakeholdersonly.Theinformationprovidedinthis
documentissubjecttochange,fromtimetotime.Further,thisdocumentshouldnotbeusedasasubstitute
forterms&conditionsissuedbytheSBPthroughcirculars/circularlettersinrespectofeachScheme.

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StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

TableofContents

1
2

Introduction............................................................................................................................................1
LongTermFinancingFacility(LTFF)forPlant&Machinery....................................................................2

i).
ii).
iii).
iv).
3

ScopeandEligibility......................................................................................................2
RatesofServiceCharges...............................................................................................2
SectorsEligibleForFinancingUnderLTFFScheme......................................................3
Terms&Conditions......................................................................................................4

RefinanceFacilityforModernizationofSMEs........................................................................................6

i).
ii).
iii)
4

ScopeandEligibilityCriteria.........................................................................................6
RatesofServiceCharges...............................................................................................6
IllustrativeListofSMEClusters/Sectors.......................................................................7

SchemeforFinancingPowerPlantsUsingRenewableEnergy...............................................................8

i).
ii).
iii).
5

EligibilityCriteria...........................................................................................................8
RatesofServiceCharges...............................................................................................8
Terms&Conditions......................................................................................................9

FinancingFacilityforStorageofAgriculturalproduce(FFSAP)............................................................10

i).
ii).
6

ScopeandEligibilityCriteria.......................................................................................10
RatesofServiceCharges.............................................................................................10

CommonProcedures&RequirementsUnderLongTermFacilities/Scheme.......................................12

i).
ii).
iii).
iv).
v).
7
8

AvailabilityofFunds/SanctionofLimitstoBanks/DFIs..............................................12
GrantofRefinance......................................................................................................12
RepaymentoftheLoans.............................................................................................13
GeneralTerms&Conditions.......................................................................................13
Fines............................................................................................................................15

Terms&ConditionsAtAGlance...........................................................................................................16
Annexures.............................................................................................................................................17
I.
ListofParticipatingFinancialInstitutions(PFIs)UnderLTFF......................................................18
II.
ListofCirculars/CircularLetters................................................................................................19

(i)
(ii)
(iii)
(iv)
(v)

CircularsLTFF...........................................................................................................19
CircularLettersLTFF.................................................................................................20
CircularsModernizationofSMEs:.............................................................................21
Circulars/CircularLettersSchemeforFinancingPowerPlants.................................21
Circulars/CircularLetterFinancingFacilityforStorageofAgricultureProduce.......22

iv

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

1 Introduction

Thishandbookfocusesonthefourlongtermrefinancingfacilities/schemenamely
Long Term Financing Facility (LTFF); Refinance Facility for Modernization of SMEs;
Financing Facility for Storage of Agriculture Produce; and Scheme for Financing
PowerPlantsUsingRenewableEnergy,developedforcapacitybuildingofindustrial
units. The formulation of this handbook was necessitated to facilitate the
stakeholders by consolidating the guidelines of each facility and to ease the
disseminationprocess.

TofacilitateexportledgrowththroughsettingupexportorientedprojectsLTFFwas
introduced to provide funds on long term basis (up to 10 years) for import of
machineryandpurchaselocallymanufacturedplants.

Similarly, focusing on development of SME sector, Refinance Facility for

Modernization of SMEs was launched to encourage the sponsors of SMEs to
modernizetheirmills/unitstoproducequalityproducts.UndertheFacilitylongterm
financing(upto10years)isprovidedforprocurementofplantandmachinery.

Inordertodevelopagriculturalproducemarketing&enhancestoragecapacity,SBP
hasintroducedlongtermrefinancingScheme(upto07years)toencouragePrivate
SectortoestablishSilos,Warehouses&ColdStorages.

TomeetthegrowingdemandofpowersupplyinthecountryaschemeforFinancing
PowerPlantsUsingRenewableEnergyonlongtermbasis(upto10years)wasalso
introduced. Funds will be provided for establishment of new Power Projects Using
Renewable Energy with a capacity of upto 20 Mega Watts. Sponsors of power
projectscanavailfinancingfacilitythroughbanks/DFIsfornewimportedandlocally
manufacturedplant,machineryandequipment.However,preferenceshallbegiven
toprojectsbeingestablishedinthelessdevelopedareasofthecountry.

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

2 LongTermFinancingFacility(LTFF)forPlant&Machinery

i).

ScopeandEligibility
a)

b)

c)

d)

Under this facility, Participating Financial Institutions (PFIs) can provide long
termlocalcurrencyfinanceforimportedandlocallymanufacturednewplant
andmachinerytobeusedbytheexportorientedprojects(seelistofsectors
eligibleforfinancingunderthisfacility).
The facility shall be available to the export oriented projects only if their
annual export is equivalent to US $5 million or at least 50% of the sales
whicheverislower.
Financing shall be available through banks / DFIs approved as PFIs; list of
whichisgiveninAnnexureI.Otherbanks/DFIscanalsolodgetheirrequests
toI.H.&SMEFinanceDepartmentofSBPforseekingthestatusofaPFIwhich
shall be processed as per SBPs criteria. Further, for the provision of facility
through Islamic Banks SBP will issue separate instructions regarding Shariah
CompliantProductofLTFF.
MaximumborrowinglimitforasingleexportorientedunitisRs1.5billionunder
LTFF.

e)

Financing shall be available for a maximum period of 10 years including a

maximumgraceperiodof2years.

ii).

RatesofServiceCharges
a)

The rate of service charge at which SBP will provide refinance to the
banks/DFIsshallbedeterminedonthebasisof/referencetotheaverageof
weightedaverageyieldsoflasttwoauctionsof3,5and10yearsPIBssubject
tothefollowing;

1.

2.

b)

The rate of service charges once fixed shall remain lockedin for the entire
durationoftheloan,providedtheborrowerscontinuetorepayallscheduled
installmentsattherespectiveduedates.
In cases where the loan amount has not been disbursed in full during the
validity of an applicable rate, the undisbursed amount shall attract the new
rate of finance/refinance applicable on the date of its disbursement by the
bank/DFI.

Currentratesareasunder:

Periodoffinancing
RateofRefinance

PFISpread

Upto3years

8.80%

1.50%

EndUsersrate
10.30%

35Years

8.40%

2.50%

10.90%

510Years

8.40%

3.00%

11.40%

StateBankofPakistan

iii).

HandbookonLongTermFinancingFacilitiessofSBP

SectorsEligibleForFinancingUnderLTFFScheme

Onlynewplant,machinery&equipmentstobeusedbytheexportorientedprojects
in following sectors for producing exportable goods shall be eligible for financing
undertheFacility:

CoreCategories
1.
Textile&Garments
a.
Fabrics
b.
Garments
c.
Madeup
d.
Towels
e.
Artsilk&synthetictextiles
2.
RiceProcessing
3.
Leather&Leatherproducts
4.
Sportsgoods
5.
Carpets&Wools
6.
SurgicalInstruments

DevelopmentalCategories

1.

Fisheries

(Plant & machinery used for boat manufacturing / modifications including chilling
equipment).

2.

Poultry&Meat

(Plant & machinery used for hatching purposes and equipments for preservation /
packing/canningchicken&meat).

3.

Fruits/Vegetable&Processing,Cereals
(Plant & machinery used for setting up of units for the purpose of preservations/
packaging / canning of fruits / vegetables & producing cereals as well as plant &
machinery required for producing material exclusively used in packaging /
preservationoffooditems).

4.

I.T.Software&Services
(Hardware&equipmentsforIT&Servicessectorexports).

5.

Marble&Granite

(Plant&equipmentsusedforcuttingandpolishingofMarble&Graniteproductsfor
exportandmanufacturingofhandicraftsthereof).

6.

Gems&Jewellery

(Plant & equipments used for cutting and polishing of Gems and machinery for
makingjewellery).

StateBankofPakistan

7.

HandbookonLongTermFinancingFacilitiessofSBP

EngineeringGoods
(Plant&machineryrequiredforproducingengineeringproducts/goods).

8.

Generators/CaptivePowerPlants
(Importofgenerators/captivepowerplants,tobeusedintheeligiblesectors/sub
sectors).

9.

Ethanol
(Plant & machinery to be used by the export oriented projects for producing
exportableEthanol).

10.

FurnitureandPharmaceutical
(Plant & machinery to be used by the export oriented projects in Furniture and
PharmaceuticalSectorsforproducingexportablegoods).

11.

SixSubSectorsOfSpinningSector
(Refinancing to the extent of fifty percent of financing provided for plant &
machinery used in six export oriented subsectors of Spinning Sector including
doubling,twisting,combing,slubbing,lycra,andyarndyeing).

12.

RegenerationOfTextileWaste
(Refinancing to the extent of fifty percent of financing provided for plant &
machinery used in export oriented projects for regeneration of textile waste into
usablefiberforproducingvalueaddedexportableproducts).

13.

GlassSector
[Plant,machinery&equipmenttobeusedbytheexportorientedprojectsinGlass
Sectorforproducingexportablegoods]

14.

DairySector
[Plant,machinery&equipmentusedforstorage,chilling,processingandpackaging
ofDairyProductsincludingmachineryusedintheconversion/preservationofmilk
intopowderedform]

15.

SodaAsh
[Plant, machinery & equipment to be used by the Export Oriented Projects for
producingSodaAsh].

iv).

Terms&Conditions
a)
b)

c)

d)

All LCs (sight as also usance) established after December 31, 2007 shall be
eligibleforfinancing.
Thecostofinsurance,transitinsurance,erectionandcommissioningcharges
and other incidentals (including transportation charges, in case of locally
manufacturedmachinery)etc;shallnotbefinancedunderthefacility.
The PFIs can also consider the requests of new export oriented projects on
the basis of projected exports. A criterion in this regard is given in SMEFD
Circular Letter No 05 dated February 14, 2011 read with SMEFD Circular
LetterNo05datedApril22,2010.
Further,incaseofnewprojects,sponsorwillberequiredtocontributetheir
equityshareinanescrowaccountmaintainedwiththePFI.Theproceedsin
4

StateBankofPakistan

e)

HandbookonLongTermFinancingFacilitiessofSBP

thesaidaccountshallbeusedbythesponsorsonlyforthepurposeofsetting
upoftheproject/paymenttothesupplieretc;representinghisequitysharein
theproject.However,wheresponsor(s)oftheprojecthavealreadyinvested
theirentireshareofequityintheprojectintheformofland,constructionof
building etc., the same shall be treated as equity of the sponsor and the
condition of maintaining an escrow account may not be required provided
overalldebt/equityratioismet.ThelendingPFIshouldplaceacertificateon
record in this regard in the relevant credit file for subsequent inspection by
ourBID.
Export oriented SME borrowers (as defined in Prudential Regulations for
SMEs),maypurchaseimportedmachineryfromthecommercialimportersor
authorized dealers of the foreign manufacturers in Pakistan and authorized
suppliersincaseoflocallymanufacturedmachineryandplant.

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HandbookonLongTermFinancingFacilitiessofSBP

StateBankofPakistan

3 RefinanceFacilityforModernizationofSMEs

i).

ii).

ScopeandEligibilityCriteria
a)

Financing shall be available to wide range of SME Clusters / Sectors. An

illustrativelistisgivenatPara(iii)below.

b)

Only SME borrowers, as defined in Prudential Regulations for SMEs, shall be

eligibletoavailfinancingfacilitiesundertheScheme.

c)

Financing shall be available for purchase of new imported/local plant &

machineryforBMRofexistingunitsandsettingupofnewSMEunits.

d)

Financing shall also be available for import/ local purchase of new generators
upto a maximum capacity of 500 KVA under the Scheme. The capacity of
generator shall, however, not be in excess of SME Units inhouse energy
requirementsorupto500KVA,whicheverisless.

e)

Financing facilities shall be available through all commercial banks and

DevelopmentFinanceInstitutions(DFIs).

f)

Financing shall be available for a maximum period of ten years including a

maximumgraceperiodofsixmonths.

g)

FinancingundertheFacilitywillbeavailabletillfurtherinstructions.

RatesofServiceCharges
a)

TherateofservicechargeatwhichSBPwillproviderefinancetothebanks/DFIs
shall be determined on the basis of / reference to the average of weighted
average yields of last two auctions of 3, 5 and 10 years PIBs subject to the
following:
1. The rate of service charges once fixed shall remain lockedin for the entire
duration of the loan, provided the borrowers continue to repay all scheduled
installmentsbytherespectiveduedates.

2. Incaseswheretheloanamounthasnotbeendisbursedinfullduringthevalidity
of an applicable rate, the undisbursed amount shall attract the new rate of
finance/refinanceapplicableonthedateofitsdisbursementbythebank/DFI.

b)

Currentratesareasunder:
Tenor

Upto3years
Over3yearsandupto
5years
Over5yearsandupto
10years

5.50%

Banks/DFIs
Spread
2.50%

6.25%

2.75%

9.00%

7.00%

3.00%

10.00%

RateofRefinance

EndUsersRate
8.00%

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

iii)

IllustrativeListofSMEClusters/Sectors

(i)
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
(xi)
(xii)
(xiii)
(xiv)

RiceHusking,
CottonGinning,
PowerLooms,
Dairy&Livestock,
Cutlery&StainlessUtensils,
SurgicalInstruments,
Marble&Granite,
EngineeringGoods,(Electronic),
Fisheries,
Packaging/ProcessingofFruits/Vegetables,
Furniture,
Gems&Jewellery,
SportsGoods,
AgrobasedIndustry

*******************

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

4 SchemeforFinancingPowerPlantsUsingRenewable
Energy

i).

EligibilityCriteria

a)

Financingshallbeavailabletotheprospectivesponsorsdesirousofsettingup
of Power Projects with a capacity of upto 20 MW, who have completed
prescribed requirements of Alternative Energy Development Board (AEDB),
the concerned regulatory authority and other relevant Government
Department/Authority,incompliancewiththeprevalentRenewableEnergy
PolicyoftheGovernmentofPakistan.

b)

Financing shall be available only for purchase of new imported and locally
manufacturedplant,machineryandequipmenttoestablishnewPowerPlants
of upto 20 MW installed capacity using alternative / renewable energy
sources(wind,hydel,biogas,biofuels,bagassecogeneration,solarpowerand
geothermalasfuel).

c)

Financing shall be available for a maximum period of 10 years including a

maximumgraceperiodof2years.

d)

Financing facilities shall be available through all commercial banks and

DevelopmentFinanceInstitutions(DFIs).

e)

Refinancemay be provided upto 100% of financing provided by banks/DFIs

totheeligibleborrowersfortheimport/localpurchaseofplant,machinery&
equipmentsubjecttoadherenceofotherrules&regulations.

f)

MaximumBorrowingLimitforasingleRenewablePowerProjectisRs3billion
undertheScheme.

g)

LCs established upto June 30, 2014 shall beeligible for financing under the
Scheme.

ii).

RatesofServiceCharges

a)

The rate of service charge at which SBP will provide refinance to the
Banks/DFIsshallbedeterminedonthebasisofaverageofweightedaverage
yieldsoflasttwoauctionsof5and10yearsPIBs,subjecttothefollowing:
1)

The rate of service charges once fixed shall remain lockedin for the
entire duration of the loan, provided the borrowers continue to repay
onduedatesasperrepaymentschedule.
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HandbookonLongTermFinancingFacilitiessofSBP

StateBankofPakistan

2)

b)

In cases where the loan amount has not been disbursed in full during
thevalidityofanapplicablerate,theundisbursedamountshallattract
the new rate of finance/refinance applicable on the date of its
disbursementbythebank/DFI.

CurrentRatesareasunder:
Tenor
Upto5years
Over5yearsandupto10years

Rateof Banks/DFIs
Refinance
Spread
8.40%
2.50%
8.40%
3.00%

EndUsers
Rate
10.90%
11.40%

iii).

Terms&Conditions
a)

Captive power projects which have already availed financing facilities under
LTFFSchemeshallnotbeeligibleforfinancingunderthisScheme.

b)

Fixed term loans which have been extended prior to the announcement of
thisSchemeshallnotbeeligibleforrefinance.

c)

The sponsors of the project shall be under obligation to ensure that the
benefitsoftheconcessionaryfinanceearnedthroughtheschemearepassed
ontotheconsumersintermsofcompetitiverates.

d)

Banks/DFIs may impose any specific condition(s), considered appropriate by

theminsuchtypeoftransactions,whilesanctioningloanundertheScheme
toprotecttheirinterests.

e)

Banks/DFIsmayalsoensurethatfirmcommitmentsfortheportionoffunding
nottobefinancedbySBP(intheformofequity,conventionalbankfinance
etc.)areavailablefortheprojectbeingfinancedbythemundertheScheme,
so that the project does not eventually suffer due to any funding gap. Firm
equity commitment from the sponsors may be made in the form which is
satisfactoryfor the financing bank/DFI. The State Bank would, however, not
insist on fulfillment of this condition by a specified mode but would let the
bank/DFItosatisfyitselfinthisregard.

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StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

5 FinancingFacilityforStorageofAgriculturalproduce
(FFSAP).

i).

ScopeandEligibilityCriteria
a)

SBP has introduced the FFSAP to encourage Private Sector to establish Silos,
Warehouses&ColdStoragesinordertoenhancestoragecapacityanddevelop
agriculturalproducemarketing.

b)

Financingisavailableforestablishment/expansion/BMRofSilos,Warehouses
&ColdStoragesfacilitiesforstoringagriculturalproduce.

c)

Financing is available for local purchase/import of new machinery, equipment

andaccessoriesthereofusedinSteel/metal/ConcreteSilos,warehousesandcold
storages.Purchaseofnewgeneratorsalsoeligible,formeetinginhouseenergy
requirements of Silos/Warehouses / Cold Storages. Further, upto 65% cost of
entirecivilworksisalsoeligibleundertheFacility.

d)

MaximumfinancingofBanks/DFIstoasingleprojectisRs.500millionunderthe
Facility.

e)

Financing is available through all commercial banks and Development Finance

Institutions(DFIs).

f)

Financingisavailableforamaximumperiodofsevenyearsincludingamaximum
grace period of six months. In case financing is provided on staggered basis,
maximum period of financing shall start from the date of disbursement of 1st
installment.

g)

Incaseoffinancingforcivilworksthebank/DFIconcernedshallmonitorasper
its own mechanism that the funds are utilized strictly for the construction
purposeasperapprovedplan.Banks/DFIsmayopenanescrowaccountwhere
borrowers share is deposited for making matching disbursements for civil
works.

h)

FinancingisavailableonlyagainstLCsincaseoffinancingagainstimportedplant
& machinery / raw material to be used for construction of the Silos/Cold
Storage.

i)

FinancingundertheFacilitywillbeavailabletillfurtherinstructions.

ii).

RatesofServiceCharges

a) TherateofservicechargesatwhichSBPwillproviderefinancetothebanksshall
be determined on the basis of average of weighted average yields of last two
auctionsof3,5and7yearsPIBs,subjecttothefollowing:

1)

Theratesoncefixedshallremainlockedinfortheentiredurationofthe
loan, provided the borrowers continue to repay on due dates as per
10

HandbookonLongTermFinancingFacilitiessofSBP

StateBankofPakistan

repayment schedule. In case new rates are lower, then benefit will be
passedontotheborrowers.
2)

Where financing to a project is provided on staggered basis, each

installmentshallattracttherateoffinance/refinanceapplicableonthe
dateofdisbursementofinstallmentbythebank.

b) Currentratesareasunder:
Tenor
Upto3years
Over3yearsandupto5years
Over5yearsandupto7years

Rateof
Refinance
5.50%
6.25%
6.50%

Banks/DFIs
Spread
2.50%
2.75%
3.50%

EndUsers
Rate
8.00%
9.00%
10.00%

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11

StateBankofPakistan

HandbookonLongTermFinancingFacilitiessofSBP

6 CommonProcedures&RequirementsUnderLong
TermFacilities/Scheme

i).

AvailabilityofFunds/SanctionofLimitstoBanks/DFIs
a)

b)

c)

UnderLTFF,SBPsanctionyearlylimits(JulyJunebasis)infavourParticipating
FinancialInstitutions(PFIs),keepinginviewtherequestsmadebythePFIs,in
linewithinternalcriteriaofSBP.PFIsmaylodgetheirrequeststoI.H.&SME
Finance Department of SBP for allocation of annual limits in June each year
alongwith details of cases being sanctioned; application(s) in process under
LTFF;detail(s)ofLC(s)establishedandtheirexpecteddate(s)ofretirement(s).
Limits sanctioned under Refinance Facility for Modernization of SMEs and
Financing Facility for Storage of Agriculture Produce (FFSAP) in favour of
selectedbanks/DFIsshallremainvalidtillfurtherinstructions.Theycanapply
for enhancement of limits after utilization of their existing limits. Further,
otherinterestedbanks/DFIs,mayalsoapplytoIH&SMEFinanceDepartment
forsanctioningoffreshlimitsundertheFacilities.
UnderSchemeforPowerPlants,financingshallbeprovidedbythebanks/DFIs
onfirstcomefirstservedbasiswithintheoverallamountearmarkedforthe
purpose. While adequate funds have been earmarked for the Scheme the
banks/DFIs shall, however, be required to approach I.H. & SME Finance
Department,StateBankofPakistan,aftertheirinternalapprovaloffinancing
to each unit/project for confirming the availability of funds. State Bank will
respondtotheconcernedbank/DFIwithacopytotheconcernedofficeofthe
SBPBSC(Bank)fromwhereitwillavailrefinance.Incasebanks/DFIshavenot
disbursed 1st installment / opened LC / made firm contract with down
payment,theconfirmation/approvalofavailabilityoffundsfromSBPshould
lapsewithinaperiodofthreemonths.

ii).

GrantofRefinance
a)

b)

The State Bank shall provide refinance to each bank/DFI on service charge
(markup) basis in terms of Section 17 (2) (d) read with section 22 of State
BankofPakistanAct1956.
RefinanceshallbeallowedtotheBanks/DFIsbytheconcernedofficesofSBP
BSC(Bank)onsubmissionoffollowingdocuments:
i)
RefinanceApplication
ii)
RepaymentAgreement
iii)
DPNoteofBank/DFI
iv)
DPNoteofBorrower
v)
UndertakingofBorrower
Note:Documentsmentionedat(ii)&(iii)willbesubmittedonlyoncetotheextentof
the amount sanctioned to the bank/DFI. Formats of above documents are attached
witheachschemewhichareavailableatSBPswebsite.
12

StateBankofPakistan

iii).

HandbookonLongTermFinancingFacilitiessofSBP

RepaymentoftheLoans
a)
b)

c)

d)

e)

Principal amount of loans shall be repayable in equal quarterly / half yearly

installmentsafterprescribedgraceperiod,ifany.
Ifaborrowerwillrepaytheloanamountoritsinstallment,inpartorinfull,
beforetheduedate(s),thebanks/DFIsshallbeunderobligationtorepaythe
amount(s) so received within three working days to the concerned office of
SBPBSC(Bank)failingwhichfineforlateadjustmentofloanwillberecovered
fromtheconcernedbank/DFI,attheratespecifiedbytheStateBank.
TherefinancegrantedbySBPBSCofficestotheBanks/DFIsshallberecovered
on the due dates as reported in the original repayment schedule from the
account of the banks/DFIs maintained with the respective office of the SBP
BSC(Bank).
Incasetheborrowersfailtomakerepaymentoftheamountofinstallmentas
pertheoriginalrepaymentschedule,thebank/DFIwillbeentitledtocharge
normal rate of mark up on such overdue principal amount besides taking
other actions to recover the same as are incidental to such defaults. In no
casetheliabilityofbanks/DFIstopay/repaytoSBPBSCtheprincipalamount
of refinance, or mark up or any other charges or penalty thereon shall be
dependent upon the recovery from the borrower nor shall such liability be
affectedbyanydefaultonthepartoftheborrower.
Markupshallbepaidonquarterlybasis.

iv).

GeneralTerms&Conditions
a)
b)

c)
d)

e)

f)

FinancingundertheFacilitiesshallbesubjecttocompliancewithallrulesand
regulationsincludingPrudentialRegulationsforeachtypesofborrowers.
Financing shall be available to the extent of the C&F value and ex
factory/showroompriceofthenewimportedandlocallymanufacturedplant
&machineryrespectively.
Advancepaymentshallbeeligibletotheextentof20%oftheC&Fvalue/ex
factory/showroompriceofplant&machinery.
DisbursementsbyPFIsshouldnotbemadetotheborrowerdirectly;instead
payments shall be made to the manufacturers / suppliers of plant &
machinery through Letter(s) of Credit(s) as per payment/delivery schedule
agreedtobetweenthemanufacturerandthepurchaser.
PFIs shall consider financing based on the debt to equity requirements as
prescribedinapplicablePrudentialRegulationsforeachtypeoftheborrower.
The financing PFI may, however, ask for higher contribution of equity from
theborrowerskeepinginviewindividualriskprofile.
Financing banks/DFIs shall ensure fulfillment of requisite predisbursement
formalities by the borrower through due diligence as per their own internal
arrangementstoavoidmalpracticesandmisutilizationoffacilities

13

StateBankofPakistan

g)

h)

i)

j)

k)

l)

m)
n)

o)

HandbookonLongTermFinancingFacilitiessofSBP

In case of consortium financing, the payment to the importer / supplier of

plant&machineryshallbemadebytheleaderoftheconsortium,whoshall
therefore,beunderobligationtocertifytheshareofeachmemberbank/DFI
andtheamountdisbursedbyit,toenabletheconsortiummemberstoavail
refinance from State Bank to the extent of their share subsequent to the
actualpaymentmadebytheconsortiumleader.
Banks/DFIsshallmakenecessaryarrangementstoensurethattheamountof
refinanceavailedbythemfromStateBankandoutstandingasonthedateof
preparation of their financial statements is shown separately in Annual
Audited Accounts, under appropriate heads, visvis their claims (principal
amountsonly)againsttheirconstituenttowhomthefinancialfacilitieswere
sanctionedbythem.
StateBankshallhavetherighttoappointindependentconsultantstoverify
theuseoftherefinancefacilities.Incasethereportoftheconsultantpoints
outirregularityonthepartofthefinancingbank/DFIortheborrower,State
Bank reserves the right to recover the amount of refinance granted to the
bank/DFI alongwith fine at the prescribed rates including the cost of such
verification.
In case of the import of plant and machinery,the foreign currency required
formakingpaymenttothemachinerymanufacturerorthesuppliersabroad,
against LC, shall be purchased by the bank/ DFI of the borrower from the
interbank market at prevailing rates. The quantum of the loan amount in
equivalent Pak rupees shall be determined on the basis of the rupees
resourcesrequiredforpurchaseoftheforeigncurrencyontheactualdateof
retirementofLCandshallbereleasedinaccordancewiththepaymentterms.
Banks/DFIsshallevaluateapplicationsforfinancing,withintwo/threemonths
(as prescribed under each Scheme) from the date of receipt of complete
informationfromtheborrower.Wheretherequestisdeclined,thebank/DFI
will explicitly apprise the reasons for rejecting the application to the
prospectiveborrower.
RefinanceshallbeprovidedonthebasisofcertificationbytheInternalAudit
ofthefinancingbank/DFIwithregardtoconfirmationthattheloaniswithin
the terms and conditions laid down in the Facilities. A copy of the said
Internal Audit Certificate shall also be submitted to the concerned office of
SBP BSC at the time of availing the refinance facility. However, condition
InternalAuditsCertificateisnotrequiredinthecasesofLTFF.
SecondhandmachineryshallnotbeeligibleundertheFacilities.
Financing shall not be available for the purpose of acquisition of land,
constructionofbuildingetc.However,upto65%costofcivilworksisallowed
underFFSAP.
Financing shall be checked/verified by SBPs Banking Inspection Department
(BID)duringinspectionofthebanks/DFIstoensurethatthesamehavebeen
allowedasperthetermsandconditionsoftheFacilities.
14

StateBankofPakistan

p)

HandbookonLongTermFinancingFacilitiessofSBP

Whereabank/DFIconsiderstherequestsoftheirborrowersforrescheduling
ofloansgrantedundertheFacilities,theprincipalamountofrefinanceshall
onlyberescheduledinawaythattotaltenorofrefinancingdoesnotexceed
maximum period prescribed under each Facility from the date of original
disbursement made by the banks/DFIs. Further, the borrower shall be liable
to make payment of markup at the rate applicable on the date of such
rescheduling,ortheoriginalratewhicheverishigher.

v).

Fines

a)

b)

c)

Incaseofviolationoftheterms&conditionsoftheFacilities,theStateBank
shall reserve the right to recover the amount of refinance granted to the
banks/DFIs alongwith fine at the rate of Paisa 60 per day per Rs 1,000/ or
partthereof.
In case, a borrower will make early repayment(s) of the amount of loan/
installment(s) and bank/DFI fails to repay the same to concerned office of
SBPBSCwithinthreeworkingdays,lateadjustmentfinewillbechargedfrom
theconcernedbank/DFIattherateofPaisa60perdayperRs1,000orpart
thereof [Paisa 70 per day per Rs 1,000 or part thereof in case of LTFF] or
prospectivelyatsuchrateasmaybeannouncedbytheStateBankfromtime
totime.
Fine shall be recovered through bank/ DFI who availed refinance under the
Facilities.Therefore,itwillbetheresponsibilityofthebank/DFItosecureits
interestinthisregard,however,innocasefineimposedonbank/DFIdueto
its negligence shall be passed on to the borrower. In case they pass on the
fine so recovered from them to the borrower, the bank/ DFI shall be under
obligationtojustifythesametoensurethatthefineisnotpassedontothe
borrowermerelyonthestrengthoftheactionofSBP.

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15

HandbookonLongTermFinancingSchemesofSBP

StateBankofPakistan

7 Terms&ConditionsAtAGlance
Sr
#

LongTermFinancingFacility
(LTFF)forPlant&Machinery

Features

1. Scope&
Coverageof
theSchemes

2. Tenors

Financing for procurement of

new local and imported
machinery used in export
oriented projects pertaining to
EligibleSectors[listgiveninPara
2 (iii) Pages 34 and other
sectors to be approved from
timetotime].
Projects with annual export of
USD 5 million or 50% of total
sales,whicheverislower.
Maximum Borrowing Limit Rs
1.5billionforasingleproject.
Financing available through
approvedbanks/DFIs(Listgiven
atAnnexureI)
upto3
35Yrs
510Yrs
Yrs

3. GracePeriod
Markup(End
4. Userrates)
Repaymentof
5.
Loans

1year
10.30%

Mechanismto
ExtendFunds

FinancingFacilityForStorage
ofAgriculturalProduce(FFSAP)

available
for
Financing is available for Financing for procurement Financing
local purchase/import of of new local & imported establishment of Silos, Ware
newmachineryforBMRof machinery to be used in houses & Cold Storages to
existing SME units and NewPowerProjectswitha enhance storage capacity and
setting up of new SMEs capacity of upto 20 MW develop agricultural produce
units and for purchase of using renewable energy marketing.
newGeneratorsupto500 sources (wind, hydel, Financing available for local
biogas, biofuels, bagasse purchase /import of new
KVA.
cogeneration, solar power machinery,
equipment
&
SMEs as defined in
andgeothermalasfuel).
Generators.
Prudential Regulations for
Financing
available Furtherupto65%costofentire
SMEs.
throughallbanks/DFIs.
civil works is also eligible under
Financing
available
Maximum financing Rs 3 theFacility.
throughallbanks/DFIs.
billionforasingleproject.

upto3
Yrs

2years
11.40%

SchemeforFinancing
PowerPlantsUsing
RenewableEnergy

35Yrs

510Yrs

6months
8.00%

9.00% 10.00%

Upto5Yrs

510Yrs

upto3Yrs

2years
10.90%

11.40%

35Yrs

57Yrs

6months
8.00%

9.00%

10.00%

SemiAnnuallyorQuarterly.

6.

10.90%

RefinanceFacilityfor
ModernizationofSMEs

Banks/DFIs to evaluate financing requests of their borrowers [within lending policiesterms & conditions of respective
Facilities/Schemes]
Banks/DFIstoprovidefundstotheeligibleborrowers.
Financingbanks/DFIsapproachconcernedofficeofSBPBSCforavailingrefinancealongwithdocumentsprescribedinrespective
Facilities/Scheme.

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16

StateBankofPakistan

HandbookonLongTermFinancingFacilitiesofSBP

8 Annexures

17

HandbookonLongTermFinancingFacilitiesofSBP

StateBankofPakistan

AnnexureI

I.

ListofParticipatingFinancialInstitutions(PFIs)UnderLTFF

Banks

1. AlliedBankLimited
2. AskariBankLimited
3. BankAlfalahLimited
4. BankAlHabibLimited
5. TheBankofPunjab
6. TheBankofKhyber
7. BarclaysBankPLC
8. Citibank,N.A.PakistanOperations
9. FaysalBankLimited
10. HabibBankLimited
11. HabibMetropolitanBankLimited
12. HSBCBankMiddleEastLimitedPakistanOperations
13. KASBBankLimited
14. MCBBankLimited
15. NationalBankofPakistan
16. NIBBankLimited
17. SambaBankLimited
18. SILKBANKLimited
19. SoneriBankLimited
20. StandardCharteredBank(Pakistan)Limited
21. SummitBankLimited
22. UnitedBankLimited
23. SindhBankLimited

DevelopmentFinanceInstitutions(DFIs)

24. PakOmanInvestmentCompanyLimited
25. SaudiPakIndustrial&AgriculturalInvestmentCompanyLimited
26. PakLibyaHoldingCompanyLimited
27. PakKuwaitInvestmentCompanyLimited
28. PakBruneiInvestmentCompanyLimited
29. PakChinaInvestmentCompanyLimited

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18

StateBankofPakistan

HandbookonLongTermFinancingFacilitiesofSBP

AnnexureII

II.

ListofCirculars/CircularLetters

(i)

CircularsLTFF

Sr.
CircularNo.&date
No.
1. MFD Circular No. 07
dated31122007
2. MFD Circular No. 04
dated24062008
3. MFD Circular No. 05
dated02072008
4. SMEMFDCircularNo.04
dated12112008
5.

SMEFD Circular No. 01

dated22012009

6.

SMEFD Circular No. 02

dated23012009
SMEFD Circular No. 07
dated16032009
SMEFD Circular No. 08
dated21042009

7.
8.

9.

SMEFD Circular No. 09

dated21042009

Brief
Introduction of Long Term Financing Facility LTFF) for
Plant&Machinery.http://10.0.100.190/mfd/2007/C7.htm
Eligibility of generators / captive power plants under LTFF.
http://10.0.100.190/MFD/2008/C4.htm
RefixationofRatesunderLTFF
http://10.0.100.190/MFD/2008/C5.htm
Reinstatementof100%refinancingunderLTFF.
(Earlieritwasrestrictedtotheextentof70%ofbanks/DFIsfinancing)
http://10.0.100.190/smefd/circulars/2008/C4.htm
Instructions on One Year Grace Period Facility under LTF
EOP/LTFF).(ThisfacilitywasavailableuptoMay11,09).
http://10.0.100.190/smefd/circulars/2009/C1.htm
Eligibility of Ethanol Industry under the Facility.
http://10.0.100.190/smefd/circulars/2009/C2.htm
EligibilityofFurnitureandPharmaceuticalSectorsunderthe
Facility.http://10.0.100.190/smefd/circulars/2009/C7.htm
Eligibility of six value added subsectors of Spinning (viz.
doubling, twisting, combing, slubbing, lycra, and yarn dyeing) under
the Facility. (Refinance will be restricted to the extent of 50% of
banks/DFIsfinancing)
http://10.0.100.190/smefd/circulars/2009/C8.htm
Instructions about One Time Opportunity to the exporters
(excluding Textile & Garments) to refinance their outstanding
longtermcommercialloans,forimport/purchaseofplant&
machinery,withloansunderSBPsLTFF.
(This facility was available upto 30th
http://10.0.100.190/smefd/circulars/2009/C9.htm

June

2009).

10. SMEFD Circular No.11 Instructionsabout50%refinancingagainstLCsestablished

dated26062009
before the announcement of the LTFF; and eligibility of
plant/machineryusedforregenerationoftextilewasteinto
usablefiber.
http://10.0.100.190/smefd/circulars/2009/C11.htm
11. SMEFDCircularNo.16
RefixationofRatesunderLTFF.
dated311009
http://10.0.100.190/smefd/circulars/2009/C16.htm
12 SMEFDCircularNo.06
RefixationofRatesunderLTFF.
dated310310
http://10.0.100.190/smefd/circulars/2010/C6.htm
13
SMEFDCircularNo.14
RefixationofRatesunderLTFF.
19

HandbookonLongTermFinancingFacilitiesofSBP

StateBankofPakistan

14
15
16

dated30092010
IH&SMEFDCircularNo.
06dated01072011
IH&SMEFDCircularNo.
05dated10092012
IH&SMEFDCircularNo.
02dated01012013

http://10.0.100.190/smefd/circulars/2010/C14.htm
RefixationofRatesunderLTFF.
http://10.0.100.190/smefd/circulars/2011/C6.htm
RefixationofRatesunderLTFF.
http://10.0.100.190/smefd/circulars/2012/C5.htm
RefixationofRatesunderLTFF.
http://10.0.100.190/smefd/circulars/2013/C2.htm

(ii) CircularLettersLTFF

Sr.
No.
1.

2.

CircularLetterNo.&Date

Brief

SMEFD Circular Letter ClarificationsonOneYearGracePeriod,whichwasallowed

No.01dated270209
videSMEFDCircularNo.01/09.
http://10.0.100.190/smefd/circulars/2009/CL1.htm
SMEFD Circular Letter Instructions about eligibility of second hand machinery
No.03dated11032009 undertheScheme.
(LCsestablisheduptoDecember31,2009wereeligibleforrefinancing).

3.

SMEFD Circular Letter

No.06dated27042009

4.

SMEFD Circular Letter

No.07dated08062009

5.

SMEFD Circular letter

No.09dated20062009
SMEFD Circular Letter
No.13dated14092009

6.

http://10.0.100.190/smefd/circulars/2009/CL3.htm
FurtherclarificationsonOneYearGracePeriod,whichwas
allowedvideSMEFDCircularNo.01/09.
http://10.0.100.190/sme/circulars/2009/CL6.htm
Instructions about 50% refinancing against imported
generators, used in export oriented units / projects
otherwisenoteligibleunderLTFF.
http://10.0.100.190/sme/circulars/2009/CL7.htm
ExtensioninPFIslimitsforthefinancialyear200910.
http://10.0.100.190/smefd/circulars/2009/CL9.htm
Clarifications were issued about refinancing of LCs
establishedbeforeintroductionofLTFF.
(ThisfacilitywasavailableuptoDecember31,2009only)

SMEFD Circular Letter

No.03dated06042010

SMEFD Circular Letter

No.04dated12042010
SMEFD Circular Letter
No.05dated22042010
SMEFD Circular Letter
No.08dated16062010

9
10

http://10.0.100.190/smefd/circulars/2009/CL13.htm
ExtensionindateforfinancingSecondHandMachineryup
to30062010.
http://10.0.100.190/smefd/circulars/2010/CL3.htm
MaximumborrowinglimitofRs1billionperunit.
http://10.0.100.190/smefd/circulars/2010/CL4.htm
Ratesoffineonshortfallinprojectedexport.
http://10.0.100.190/smefd/circulars/2010/CL5.htm
Extensioninlimits.
http://10.0.100.190/smefd/circulars/2010/CL8.htm

20

StateBankofPakistan

11.
12.

13.
14.

15.

16

17.
18.
19.

HandbookonLongTermFinancingFacilitiesofSBP

SMEFDCircularLetter
No.02 dated20012011
SMEFDCircularLetter
No.04dated14022011

EligibilityofGlassSectorunderLTFF
http://10.0.100.190/smefd/circulars/2011/CL2.htm
Revised Maximum Borrowing Limit from 1 billion to 1.5
billionperUnit.
http://10.0.100.190/smefd/circulars/2011/CL4.htm
SMEFDCircularLetter
RequirementofProjectedExports
No.05 dated14022011 http://10.0.100.190/smefd/circulars/2011/CL5.htm
IH&SMEFDCircular
ExtensioninAnnualLimit
http://10.0.100.190/smefd/circulars/2011/CL11.htm
letterNo.11dated21

062011
IH&SMEFDCircular
EligibilityofPackaging/PreservationsofFoodItems
LetterNo.12dated27
http://10.0.100.190/smefd/circulars/2011/CL12.htm
062011

IH&SMEFDCircular
EligibilityofDairySectorunderLTFF
LetterNo.04dated16
http://10.0.100.190/smefd/circulars/2012/CL4.htm
032012
I.H.&SMEFDCircularletter ExtensioninAnnualLimits
No.08dated22062012
http://10.0.100.190/smefd/circulars/2012/CL8.htm
IH&SMEFDCircularLetter
InclusionofSodaAshunderLTFF
No.10dated19072012
http://10.0.100.190/smefd/circulars/2012/CL10.htm
IH&SMEFDCircularletter ExtensioninAnnualLimits
No.07dated21062013
http://10.0.100.190/smefd/circulars/2013/CL7.htm

(iii) CircularsModernizationofSMEs:

Sr.
CircularNo.&date
No.
1 SMEFD Circular No.07
dated 06052010 read
with SMEFD Circular No.
14 & 17 dated 0409
2009 & 02112009
respectively.
2 IH&SMEFD
Circular
Letter No. 16 dated 05
122012

Brief
Refinancing Facility for Modernization of SMEs.
Consolidated instructions available at SBPs website at
followinglink:
http://www.sbp.org.pk/incentives/ltfeop/ConsolidatedScheme.pdf

Refinance Facility for Modernization of SMEs Extension in

ValidityPeriodoftheFacility.
http://www.sbp.org.pk/smefd/circulars/2012/CL16.htm

(iv) Circulars/CircularLettersSchemeforFinancingPowerPlants

Sr.
No.
1

CircularNo.&date
SMEFDCircularNo.19
dated01122009

Brief
Introduction of Scheme for Financing Power Plants Using
RenewableEnergywithacapacityofupto10MW.
http://10.0.100.190/smefd/circulars/2009/C19.htm
21

StateBankofPakistan

5
6

HandbookonLongTermFinancingFacilitiesofSBP

IH&SMEFD Circular No. RefixationofRatesofServiceCharges.

07dated1072011
http://10.0.100.190/smefd/circulars/2011/C7.htm
IH&SMEFD
Circular Enhancement in Financing Limit upto 20 MW for the
Letter No.01 dated 18 ProjectsofBiomass/Biogas.
012012
http://10.0.100.190/smefd/circulars/2012/CL1.htm
IH&SMEFD
Circular ExtensioninValidityPeriodoftheScheme
Letter No.06 dated 06 http://10.0.100.190/smefd/circulars/2012/CL6.htm
062012
IH&SMEFD Circular No. RefixationofRatesofServiceCharges
06dated10092012
http://10.0.100.190/smefd/circulars/2012/C6.htm
IH&SMEFD
Circular EnhancementinFinancingLimitupto20MW&Fixationof
Letter No.11 dated 30 MaximumBorrowingLimitforaSingleProject.
072012
http://10.0.100.190/smefd/circulars/2012/CL11.htm
IH&SMEFD Circular No. RefixationofRatesofServiceCharges
03dated01012013
http://10.0.100.190/smefd/circulars/2013/C3.htm

(v) Circulars/CircularLetterFinancingFacilityforStorageofAgriculture
Produce

Sr.
No.
1

CircularNo.&date
SMEFDCircularNo.08
dated04062010
IH&SMEFDCircular
LetterNo.15dated05
122012
IH&SMEFD
Circular
Letter No. 02 dated
February04,2014

Brief
Introduction of Scheme for availing Financing facility for
enhancingthestoragecapacityofagriculturalproduce.
http://10.0.100.190/smefd/circulars/2010/C8.htm
ExtensioninValidityPeriodoftheFacility.
http://10.0.100.190/smefd/circulars/2012/CL15.htm
Extension in the Validity of Financing Facility for Storage of
Agricultural Produce (FFSAP) and Refinance Facility for
ModernizationofSMEs
http://www.sbp.org.pk/smefd/circulars/2014/CL2.htm

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22