Financing schemes: SBP reduces interest rate

The State Bank of Pakistan (SBP) on Tuesday announced reduction and introduction of a flat 7.5 percent p.a interest rate for various financing schemes to facilitate the domestic industry and exporters. According to SBP, end-user rates for financing for power plants using renewable energy have been fixed at 7.5 percent p.a down from 11.40 percent p.a.
It has been decided that the rates of service charges for banks/DFIs and rates for end-users under the scheme for financing of power plants using renewable energy will be 7.5 percent p.a (including 5 percent rate of refinance and 2.5 percent bank/DFIs spread) for up to 5 years. End-user rate under the same scheme for financing over 5 years to up to 10 years will remain 7.5 percent p.a, comprising 4.5 percent rate of refinance and three percent bank/DFIs spread.
End-user financing rate for Modernisation of SMEs has also been fixed at 7.5 percent p.a. Previously, borrowers were paying three different rates from 8 to 10 percent p.a varying on the tenure of the financing. Under the scheme up to 3 years, rate of refinance will be 5 percent and bank/DFIs spread 2.5 percent. Over 3 years and up to 5 years rate of refinance will be 4.75 percent, besides 2.75 spread of bank/DFIs. Rate of refinance for financing over 5 years to up to 10 years will be 4.5 percent and bank/DFIs can get a maximum three percent spread on it.
End-user rate for Export Finance Facility for Locally Manufactured Machinery (EFF-LMM) and the Financing Facility for Storage of Agricultural Produce (FFSAP) has been fixed at 7.5 percent p.a. The SBP has also decided that with effect from February 23, 2015, refinance for financing of Revival of SMEs & Agricultural Activities in Flood Affected Areas of 2014 will be provided to banks at 4.50 percent p.a. The banks will be permitted to charge a maximum spread of 3.0 percent p.a. from the borrowers. Therefore, financing to SMEs/farmers will be available at 7.50 percent p.a. Other instructions for these financing schemes will remain unchanged, the SBP said.