SBP unveils new scheme for cotton

Saturday, September 05, 2009

KARACHI - State Bank of Pakistan on Friday announced a new financing facilities scheme for cotton ginners with a view to modernize their factories to produce quality ginned cotton for the textile value chain and to minimize electricity consumption. This scheme is only available for SME borrowers, as defined in Prudential Regulations for SMEs. This scheme has been effective from September 04, 2009 (Friday) and shall remain valid only up to December 31, 2010 on first come first served basis and subject to availability of funds under the Scheme. In a circular issued by central bank, it was stated that financing under the scheme would be available for a maximum period of seven years including a maximum grace period of six months. Financing facilities under the scheme shall be provided through all commercial banks and Development Finance Institutions (DFIs). According to SBP, financing shall be available only for Balancing, Modernization and Replacement (BMR) of Cotton Ginning Factories. SBP further said cotton seeds crushing machinery installed in the premises of ginning factories shall also be eligible to avail financing facilities under the scheme. Financing shall be available for purchase of only new locally manufactured plant, machinery & equipment. Financing for purchase of new generators up-to a maximum capacity of 500 KVA shall also be eligible. The capacity of generator shall, however, not be in excess of the ginning factory s in-house energy requirements or upto 500 KVA, whichever is less. As per details, SBP announced different mark-up rates for different periods for financing this scheme, for instance, for the tenure of 3 years, banks will charge 6 per cent rate of refinance, 2 per cent spread with 8 per cent end users rate while over 3 years and up-to 7 years period, this facility will be available on paying 6.50 per cent rate of refinance, 2.5 per cent bank spread and 9 per cent end user rate from the borrowers. Over 5 years and up-to 7 years rate of refinance will be 7 per cent, spread 3 per cent and 10 per cent end users rate respectively. It is important t note that financing rates shall be revised on annual basis effective from July each year and mark-up shall be paid on quarterly basis.

Want to read full story? visit finance.kalpoint.com now!