SBP evolves mechanism for payment of service charges subsidy, portfolio loss under PMKJ-YES

The State Bank of Pakistan (SBP) has issued mechanism for payment of service charges subsidy and portfolio loss sharing with banks under Prime Minister's Kamyab Jawan Youth Entrepreneurship Scheme (PMKJ-YES).

SBP has advised banks working as Executing Agencies (EAs) to submit their claims to Development Finance Support Department, SBP BSC, Karachi as per payment mechanism within 15 working days of the end of each Quarter. In this respect, EAs will be required to submit their first claim within 15 working days of end December 2019.

Payments of service charges subsidy to EAs will be made through SBP's operational arm viz Development Finance Support Department (DFSD), SBP BSC Head Office Karachi.

AS per mechanism, EAs will prepare and submit claims to DFSD for receiving government service charges subsidy on outstanding principal amount of their regular PMKJ-YES portfolio upto expiry of each individual loan.

In case of a loan becoming non-performing, no service charges subsidy will be paid after being classified as 'Loss' as per SBP PRs for SME Financing.

The EAs claims must contain particulars of each individual loan along with calculations of subsidy based on relevant six months KIBOR used. The service charges subsidy claim should be duly vetted by internal audit department of the EA.

The audited claim along with a certificate from EA relating to eligibility of borrower for PMKJ-YES and correctness of the subsidy amount will be submitted to DFSD within 15 working days after the end of respective quarter for payment of service charges subsidy.

DFSD, SBP BSC will scrutinise subsidy claim of EAs within 15 working days after receipt of complete information from EAs and it will also will ascertain that calculations of EAs subsidy claim are correct and applicable KIBOR rate has been used by the EAs. Thereafter, DFSD will submit scrutinised claims to Finance Division for release of funds. After receiving funds from government of Pakistan, DFSD will advise SBP BSC Karachi for crediting the subsidy amount in respective EA's account maintained at SBP BSC Karachi.

Banking Inspection Department (BID) of State Bank during regular inspection of the EAs will conduct inspection of their PMKJ-YES portfolio on sampling basis using its own sampling techniques.

SBP inspectors will randomly select credit files and review them from the perspective of eligibility of borrowers under the Programme, status of loan (regular or NPL) and GOP subsidy claim.

The BID inspection report section on PMKJ-YES will be used as an important input for reviewing the Scheme and assessing its effectiveness in fulfilling the Government objective of promoting youth entrepreneurship in the country.

On behalf of government of Pakistan, payment of credit losses subsidy to EAs will be made upto 50 percent in case of Tier-1 loans and upto 10 percent in case of Tier-2 loans on their disbursed portfolio under the Scheme on quarterly basis through DFSD, SBP BSC Head Office Karachi.

EAs will prepare claims for submission to DFSD, SBP BSC for receiving payment on account of credit losses subsidy from the government on their disbursed PMKJ-YES portfolio.

The list containing details of individual loans classified as loss as per SBP SME Prudential Regulations and calculation of credit loss subsidy based on total disbursed PMKJ-YES portfolio of EAs at the end of respective quarter will be submitted to DFSD.

EAs claim in this respect should be duly vetted by their internal audit department. The audited claim along with a certificate from EA relating to correctness of the claimed amount will be submitted to DFSD within 15 working days after the end of respective quarter.

DFSD will scrutinise credit loss subsidy claim of EAs within 15 working days after receipt of complete information from EAs and ascertain that calculations of EAs loss claim are correct. Thereafter, DFSD will forward admissible claims of EAs to Finance Division, GoP, for release of funds.

After receiving funds from Finance Division, DFSD will advise SBP BSC Karachi office for crediting the approved subsidy claim in respective EAs account maintained at SBP BSC Karachi Office.

EAs will return excess amount arising, if any, to DFSD, in case movement in their PMKJ-YES portfolio causes amount of credit loss to be less than/falls below 50 percent in case of T1 loans and 10 percent in case of T2 loans of total disbursed portfolio of EA at the end of reporting Quarter.

It may be mentioned here that PMKJ-YES was launched to provide concessional loans to youth for establishing or extending business enterprises thereby promoting entrepreneurship and reducing unemployment and poverty in Pakistan.