The State Bank of Pakistan (SBP) has allowed debt swap facility to banks/DFIs against short-term outstanding loans of rice millers and grain traders, which have been disbursed from own sources since November 02, 2010. Debt swap facility is called an exchange of financial obligations with somebody or something in order to gain profit or a more convenient repayment schedule.
According to H & SMEFD Circular No 09, loans disbursed to rice millers and grain traders after the issuance of SBP''s Refinance Scheme for Revival of SMEs and agricultural activities in flood-affected areas, will be eligible to avail debt swap facility. Refinance facility under the above arrangements, is a one-time opportunity and will remain valid up to September 15, 2011 and no case will be received after the prescribed deadline, the circular said.
Banks/DFIs should expeditiously process the debt swap cases to be received by them, otherwise eligible under above scheme/arrangements, and approach the concerned offices of SBP BSC (Bank) for obtaining refinance well ahead of the given deadline. To accommodate eligible borrowers for debt swap facility, banks/DFIs can approach SBP for enhancement in their existing limits or sanctioning of fresh limits, if required, SBP mentioned. The State Bank has also set strict conditions for the debt swap facility and according to the circular only rice millers and grain traders of Sindh and Balochistan''s flood-affected areas will be eligible for debt swap facility from August 3, 2011 under the refinance scheme.
In addition, only principal of outstanding loans that have been disbursed as fresh loans and loans renewed after full adjustment of principal and mark-up of existing loans, since November 02, 2010 will be eligible for the said facility. Mark-up under the scheme will be applicable from the date of disbursement of refinance by SBP. Mark-up up to the date of refinance will be paid by the borrowers to the concerned banks as per terms and conditions of the existing loan agreements.
State Bank has also clarified that debt swap facility will not be available against non-performing loans (NPLs) classified under SBP''s Prudential Regulations. The refinance provided under these arrangements will be subject to the terms and conditions laid down in the initial refinance scheme for revival of SMEs and agriculture activities in the flood-affected areas.
Similarly, refinance will be allowed to the banks/DFIs by the concerned offices of SBP BSC (Bank), on submission of Refinance Application along with Consolidated Statement for Refinance and DP Notes of the borrowers, against the limits sanctioned by SBP in their favour under the scheme.
SBP has also warned that side facility will be checked by Banking Inspection Department (BID) during inspection of the banks/DFIs to ensure that this has been allowed as per laid down criteria. Any discrepancy/delinquency pointed out by BID shall be subject to penal action, as per provisions of Banking Companies Ordinance. SBP has clarified that all other terms and conditions of the Scheme remain unchanged.
It may be mentioned here that on November 2, 2010, in line with the Government of Pakistan policy for revival of agriculture activities and SBP relief measures for improving access to financing in flood-affected areas, SBP launched a concessional financing scheme through banks for agricultural production/working capital finance to farmers and Small and Medium Enterprises (SMEs) in districts affected by floods as notified by National Disaster Management Authority.
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