state bank of pakistan faisalabad RSU Report

8/12/2019 state bank of pakistan faisalabad RSU Report

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Refinance Scheme Unit RSU

SBP-BSC

Refinance Scheme Unit RSU 2014

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State Bank of Pakistan SBP-BSC

Report on Refinance Scheme Unit (RSU)

Submitted To: Mr. Nadeem Ahmad (Unit incharge)

Submitted By: HiraFayyaz& Muhammad Ihsan


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Introduction of this unit:

Refinance department works underBSC (Banking Services Corporation). It was introduced in

1973 to fulfill the emerging requirements for promoting the exports. Refinance department

provide funds at low interest. Certain terms and conditions are applied on the commercial banks

and the exporters by the department of refinance for sanctioning the loan E.g. EE limits and

credit limits. Refinance department provide loan only to those export products which are

approved by the Ministry of Finance. In short the major reasons for developing the refinance unit

are as follows:

1) Boosting the exports of value added items

2) Financing on the subsidized interest rates

3) Short-term financing

4) Manufacturing of the value added goods

5) Maximize the foreign exchange

Refinance scheme deals with:

Department of refinance deals with the four types of the functions which are discussed as follows

1. Granting loans2. Repayment and refund3. Fines charging4. Onsite verification


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Granting loans

Exports refinance schemes:

In fact these are the different ways under which this department provide loan to the export

business

These are categorized into two parts.

1) Shipment based refinance scheme (also called transaction based)It is further divided into two parts

i) Pre-shipment based refinance schemesii) Post-shipment based refinance schemes

2) Performance based refinance schemesPart 1 Shipment based refinance schemes:

It relates to the sanctioning of the loan before or after the shipment of the products involved into

the exports. Firstly we shalltake a look at pre-shipment based loans

Pre-shipment based refinancing:

Requirements

1) DP note

2) Form D

3) Certification (between exporter and the commercial bank)

4) Overdue certificate

Firstly we shall take a look at DP note.


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DP note:

DP note stands for Demand Promissory Note. It shows the total amount of loan and the date and

100 worth post tickets are used as legal requirement that may vary from province to province. It

is dually signed by all the parties.

Form D:

Form D contains the export information both the details of exporter and niceties of the product to

be exported.

In the detail of exporter following things are included

Name of the exporter, Address of the exporter, National tax number etc.

In the product details it is checked that the product which is going to be exported are from the

eligible. Type of product and its 8 digit harmonized code (HS code) which refers to the ministry

of finance issued code.

It also involve the details relating to the nature of contract of the exporter fixed rate on the loan

or the spot rate which is determined and the maturity period of the loan,those are 180 days. And

after 180 days refinance department debit the account of the bank weather it provides the

authority letter or not. The risk is associated with the commercial bank involved in this process.

Overdue certificate:

Overdue certificate showsthe unrealized payment of the exports. This is used for the

calculation of the credit limit. The process of determining the credit limit is as follows.

Firstly calculate the total amount of loan issued to the exporter then multiply it with 2 that will

provide the total Export Earnings. Credit limit is the 5 % of the EE that a party can outstand the 5


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% before taking the further loan.

Post-shipment Case:

It involves the taking loan after shipment. When the exporter makes shipment of the export

goods and realizes that there are not sufficient amount for further business than the exporter take

loan from bank.

Just like as pre-shipment case

The main difference between the pre-shipment and post-shipment is that in pre-shipment

exporter take loan first than shipments are made, but in post-shipment exporter make shipment

than take loan for other work.

Part 2 (performance based)

This section includes:

DP note Form D

Request Letter Execution Letter Schedule to Form EB Form DE (detail of exports) Undertaking

Like part 1 all the transactions are same for granting loan. First of all DP note issued in which

amount of loan is written. Than Form D (name, address, NTN of exporter etc.) and then the

Request letter isissued by the exporter to bank for the request of loan. After that Execution

Letterissued in which the amount of loan is executed to the exporter, date of contract must be

within the financial year. In this letter Section 17 4(C) of SBP-BSC Act indicates all the terms in

which loans are granted.


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Schedule to Form EBstands for export borrower. Name of the exporter, amount of loan and

date of granting loan is same as written in DP note. Form DE includes the detail of exports

which shows the amount utilize and amount due.

Undertakingincludes the following information:

Amount of finance and the rate charged that is 9.4 % Mode of finance Exporter promise that during or before the shipment he will not obtain loan from any

other bank.

Exporter tells that he is a direct exporter. Exporter indicates that the commodities are eligible (under finance scheme) Exporter indicates that the loan will be used for export or manufacturing purposes. If the exporter does not pay the loan within the time limit than he will be liable to pay

fine which is imposed on non-payment or delay payment as the case may be.

REPAYMENTS & REFUNDS

After the expiry of loan the systems automatically debit the account of the particular bank to

deduct the amount of loan. These systems are automated. For this purpose Debit Authority is

necessary. The approval from the bank is necessary for the deductions of amount at maturity

date. If there is no sufficient amount than tell the particular bank to update their accounts.

In case of early payments :If the bank repay the loan before the maturity date or 180 days than the interest rate is calculated

on the basics of actual days due.

In case of partial repayment:If the bank repay loan in partial payments,some amount of loan is repay and some is due than the

interest rate charged on other payment only.


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Repayment rate is fixed at 8.4% (up to 1.5% spread of bank).

In ISLAMIC BANKING, monthly rate decided by Shariahthan intimate to banks

Refund Case

(Performance under refinance part 2)

Performance based Markup Refund

Refund Rate

Double performance no refund

Performance up to 3 times 0 %

Performance up to 4 times 0.5%

Performance up to 5 times 1 %

Performance above 5 times 1.5 %

How to Calculate Performance:

Borrowing product:

Amount of loan * no of days

Performance product:

Actual amount * no of days

Performance =(performance product/borrowing product)* 2

Answer in (Times)


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Loans for Boosting up Textile Industry:

This scheme starting from 2009-14 in which banks take loans especially for textile. In case of

purchasing machinery textile industry takes loan but not a refinance than bank provide them the

subsidiary of refund at 2.5%.

Fine charging:

Refinance department was developed for the purpose of promoting the exports business and the

loan is granted with certain terms and conditions that must be followed by the exporter and the

commercial banks both. State bank has a proper follow up to point out these problems. This

department has its own team who goes into the field and verifies all the information provided by

the client. Fine charging ratios can be shown as follows:

Access limit fine42p

Non shipment fine37p

Delayed shipment28p

Short shipment fine28p


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Late repayment fine42p

Misreporting fine 1 mistake =100 maximum 1000 each form

Default fine 2000 + number of days*100

Number of days refers to the days by which the shipment is delayed from the original time.

These fines are also refundable when the mistakes are removed. A certain time period is given to

the customer in which if he cover up that mistake for which it was charged fine and after that if

client is successful then by taking a specified amount and remaining amount is is returned.

Returning period criteria by the BSC is fixed up to three years. And no refund will be after that

time period. Each fine is charged per 1000 rupee.

On sight verification:

On sight verification is very necessary to avoid fraudulent activities by the clients. A special

team by the refinance department is given the task of on sight verification. On sight verification

is done on the basis of the following documents.

1) New contract or the old contract or letter of credit

2) E-form

3) Commercial invoice

4) Bill of lading

These documents must be checked in the above mentioned order first of all the contract between

the exporter and the importer or the latter of credit then the E-form is verified and then the

commercial invoice that all the items included in to eligible items list by the ministry of finance

like yarn or white cloth is not approved and loan is not sanctioned for that export. In the end bill

of lading to verify the shipment dates

Problems:


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As whole the environment is very good and conducive towards achieving maximum efficiency

but we have seen two major problems

1) IT is still at the developing phase and at some places very out dated technology is being still

used

2) Working environment is not as comfortable as the private or commercial banks provide to

their employees.

state bank of pakistan faisalabad RSU Report

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