SBP reduces markup rate to 5% from existing 7% on two refinance schemes

SBP, reduces, markup rate, 5%, 7%, refinance schemes
08 Jul, 2020 5:48 pm

KARACHI (92 News) – Taking cognizance of the negative fallout of COVID-19 pandemic for the economy, State Bank of Pakistan (SBP) has decided to reduce the end user markup rate to five percent from seven percent.

According to a press release issued by the SBP on Wednesday, the end user markup rates have been curtailed on Temporary Economic Refinance Facility (TERF) to 5% from the existing 7% and on Long Term Financing Facility (LTFF) for non-textile sector to 5% from 6%.

The SBP has reduced the policy rate by 625 basis points since March 17, 2020 to 7 percent.

Temporary Economic Refinance Facility (TERF): SBP introduced this facility to provide stimulus to the economy by supporting new investment and balancing and modernization and restructuring (BMR) of the existing projects.

To further improve the incentive under the scheme, SBP has lowered the end user markup rates from existing 7% to 5%. SBP will now be providing refinance to banks at 1% with banks’ maximum margin of 4%. Further, SBP has also allowed the TERF facility in cases where LCs/Inland LCs were opened prior, but retiring after the introduction of the scheme on March 17, 220.

These measures, in the backdrop of earlier policy action of allowing BMR under TERF, are expected to further support the economic activity, new long term investment and employment generation. Under this scheme, up till July 2, 2020, Rs10.5 billion have been approved by banks for 21 projects.

Long-Term Financing Facility (LTFF): LTFF is one of the oldest refinance schemes of SBP under which financing is available for export-oriented projects for purchase of imported and locally manufactured new plant and machinery. In March, 2020 SBP opened the LTFF to all sectors across the board.

Earlier, the end user markup rate under this scheme was 5% for textile sector and 6% for non-textile sectors.

On the other hand, the gold rate increased by Rs2,400 to Rs108,300 per tola. The price of 10g gold has reached Rs92,850.

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