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  • LTF Eop

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    M. Adnan
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    LTF-EOP aims to encourage technological upgradation of Export Oriented Projects (EOPs) by provision of finance for import of machinery. The facility shall not be admissible in case of machinery already imported as also for commercial importers or trading houses etc. Borrowers having export overdue bills of more than 365 days shall not be entitled for the scheme.

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    LTF-EOP

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    LTF-EOP aims to encourage technological upgradation of Export Oriented Projects (EOPs) by provision of finance for import of machinery. The facility shall not be admissible in case of machinery already imported as also for commercial importers or trading houses etc. Borrowers having export overdue bills of more than 365 days shall not be entitled for the scheme.

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    41 views19 pages

    LTF Eop

    Uploaded by

    M. Adnan
    LTF-EOP aims to encourage technological upgradation of Export Oriented Projects (EOPs) by provision of finance for import of machinery. The facility shall not be admissible in case of machinery already imported as also for commercial importers or trading houses etc. Borrowers having export overdue bills of more than 365 days shall not be entitled for the scheme.

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    of 19

     " 

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    3
      
    3 The objective is to encourage technological
    upgradation of Export Oriented Projects
    (EOPs) by provision of finance for import of
    machinery; and,
    3 Finance Export Oriented Projects (EOPs) for
    incentives announced by the government
    under in Trade Policy 2003- 2003-0404::
    3 banks/DFIs to
    Under LTF, banks/DFIs to provide
    provide financing
    financing
    facilities to the
    facilities the eligible
    eligible borrowers
    borrowers projects
    projects for
    for
    the import
    the import of plant
    plant machinery
    machinery  equipments
    equipments and
    and
    accessories thereof
    accessories not manufactured
    thereof not manufactured locally 
    locally
    |
    D 
    

    Preference for
    3 Preference for provision
    provision of financing to to SME
    SME
    sector. At
    sector. At least 50%
    50% of of the
    the amount
    amount shall
    shall be
    utilized for
    utilized for financing
    financing to borrowers
    borrowers under
    under SME
    SME
    sector .
    The borrower
    3 The borrower shall
    shall be
    be required
    required to
    to deposit
    deposit the
    the
    required equity
    required equity before
    before opening
    opening of L C intointo an
    an
    ³Escrow Account´
    ³Escrow Account´ with
    with bank
    bank providing
    providing the
    facility under
    facility under the Scheme.
    The facility
    3 The facility shall
    shall not
    not be
    be admissible
    admissible in
    in case
    case of
    of
    already imported
    machinery already imported as
    as also
    also for
    for
    commercial importers
    commercial importers or or trading
    trading houses etc.
    etc. or
    or
    for establishment
    for establishment BMR
    BMR of of new
    new projects
    projects in
    in
    spinning weaving
    spinning weaving sectors
    sectors in the
    the Textile
    Textile Group. 
      
    3 The projects/units
    The projects/units which
    which export
    export at
    at least
    least 50
    50% % ofof
    their annual
    their annual production directly or or indirectly
    indirectly
    3 Borrowers having
    Borrowers having export
    export overdue
    overdue bills
    bills of
    of more
    more
    365 days
    than 365 days shall
    shall not
    not be entitled for the
    scheme
    scheme
    3 †ew entities
    †ew entities having
    having nono previous export,
    export, the
    the
    sponsoring
    sponsoring directors/partners/sole
    directors/partners/sole proprietor
    proprietor
    must
    must have export related
    have export related performance
    performance at at their
    their
    credit either
    credit either as
    as an
    an employee
    employee or
    or partner
    partner or
    or paid
    director of
    director of any other existing
    existing exporting entity
    entity in in
    the relevant
    the relevant field.
    field.
    3 Financing bank / DFI DFI shall
    shall have
    have discretion
    discretion to to
    evaluate and
    evaluate and decide
    decide about
    about the
    the potential of
    of the
    the G
    borrowing entity to to export.
     m 
    "  m    
    3 The financing
    The financing is is available
    available on
    on C&F
    C&F basis
    basis and is
    is
    considered by
    considered by banks
    banks atat a maximum
    maximum debt/equity
    debt/equity
    ratio of
    ratio of 80
    80::20. The financing
    20. The financing bank
    bank can
    can ask for
    for
    higher contribution
    higher contribution of of equity from
    from the
    the borrowers.
    3 Sponsor is
    Sponsor is required
    required toto contribute
    contribute his
    his equity
    equity share
    share
    in an
    in Account as
    an Escrow Account as a subordinated
    subordinated loanloan to
    to
    the borrowing company
    the company  which
    which shall remain
    remain
    subordinated to
    subordinated to the
    the bank
    bank for
    for the
    the entire
    entire period
    period for
    for
    the loan
    the loan
    3 The loan
    The loan shall
    shall be
    be repayable
    repayable in a a maximum
    maximum period
    period
    of 7.5 years
    of years including
    including a maximum
    maximum grace
    grace period
    period
    of 1.5 year
    of year
    ^
     m D  
    D  m
    3 The borrower
    The borrower shall
    shall be
    be under
    under obligation
    obligation toto make
    repayment of
    repayment of the
    the facilities
    facilities in
    in equal
    equal half
    half yearly
    yearly or
    or
    quarterly installments.
    quarterly

    ·
      
        
    3 The financing
    The financing is is provided on first first--come- first
    come-first
    served basis
    served basis within
    within limits
    limits allocated
    allocated byby SBP.
    SBP.
    3 The cost
    The cost of Insurance,
    Insurance, transit
    transit insurance
    insurance andand
    other import
    other import incidentals
    incidentals etc shall
    shall be
    be borne by by the
    the
    borrower.
    3 There
    There will
    will be no
    be no maximum
    maximum limit for
    limit
    for
    borrowing
    borrowing by the
    by the prospective entrepreneurs
    prospective entrepreneurs
    under this
    under this Scheme.
    Scheme.
    3 In case
    In case of
    of large
    large financing requirements
    requirements i.e. i.e. over
    over
    300 million,
    Rs. 300 million, it it would
    would bebe prudent
    prudent for
    for banks /
    to provide
    DFIs to provide the the facilities
    facilities under
    under consortium
    consortium
    arrangements to
    arrangements to diversify
    diversify risk
    o
      p 
    r 
    3 This is preceded by by verification
    verification of of credit
    credit reports
    reports
    on suppliers
    on suppliers of of machinery/plant etc etc as is
    as is also
    also
    required.
    3 This
    This process
    process also includes
    also includes appraisal
    appraisal of
    of the
    manufacturer/supplier prepared
    manufacturer/supplier prepared by by the
    the technical
    technical
    staff of
    staff of the
    the Banks/DFIs on on the
    the
    basis
    basis of
    of the
    the
    information
    information available
    available from
    from the existing
    the existing users
    users
    of the
    of machinery supplied by
    the machinery by the
    the same
    same
    manufacturers/suppliers.
    3 Sanction is
    Sanction is linked
    linked to
    to risk
    risk profile
    profile of
    of borrower
    borrower 
    3 The Bank/DFI
    The Bank/DFI shallshall not,
    not, take
    take more
    more than
    than two
    two
    months to
    months to evaluate
    evaluate the request
    request of
    of the
    the borrower.
    ë
    º    p 
    3 Disbursement is
    Disbursement is released
    released by
    by financing
    financing bank
    bank DFI
    DFI
    against LC after
    against after ensuring
    ensuring that
    that all
    all formalities
    formalities have
    have
    been completed
    been completed in in accordance
    accordance with the the terms
    terms of
    of
    agreement
    agreement between
    between the supplier
    the supplier and the
    and
    the
    purchaser of
    purchaser of the machinery (borrowers).
    the machinery

    M
    A      A 
    3 Yhere financing
    Yhere financing isis availed
    availed for
    for a maximum
    maximum
    period of
    period of 7.5 years
    years the repayment
    repayment of of loan
    loan is to be
    be
    made in
    made in 12
    12 equal
    equal half
    half yearly
    yearly or
    or 24
    24 equal
    quarterly
    quarterly installments,
    installments, commencing
    commencing after aa
    after
    grace
    grace period
    period of 1
    of 1.5 years;
    3 If the
    If the financing
    financing isis availed
    availed for
    for a maximum
    maximum period
    period
    of 5 years,
    of years, the repayment
    repayment is to be be made
    made in
    in 8
    equal half
    equal half yearly
    yearly installments
    installments or or |o equal
    |o equal
    quarterly installments,
    quarterly installments, commencing
    commencing afterafter a grace
    grace
    period of 1 year.
    period
    3 For financing
    financing availed
    availed for 3 years, repayment
    repayment
    shall be
    shall be made
    made in
    in 5 equal
    equal half
    half yearly installments
    installments
    or 1010 equal
    equal quarterly installments, commencing
    after a grace period
    after period of of 6 months. 
    D      
    3 For financing
    For financing is is availed
    availed for
    for 2 years, repayment
    repayment is
    to be
    to be made
    made inin 4 equal
    equal half
    half yearly
    yearly or
    or 8 equal
    equal
    quarterly installments
    quarterly installments without
    without any grace period.
    3 The banks/DFIs
    The banks/DFIs shall shall not
    not take
    take more
    more than
    than two
    two
    months to
    months to examine
    examine the feasibility
    feasibility of
    of any
    any
    project
    project where
    where finance
    finance is required.
    is required.
    *   
    3 This is not complicated. For Part-
    Part-I, the exporter presents
    the irrevocable L/C to his bank and finance is sanctioned
    within days.
    3 For Part-
    Part-II, the exporter has already a SBP verified
    export performance (this is done within a week, if not
    verified). Finance is sanctioned within days.
    3 However, The credit worthiness of client may be verified
    by bank at discretion depending on the following factors:
    Management Capability of the Relationship with other
    borrower financial institutions
    Market Reputation of the borrower. Security Analysis
    Customers profitability Past Track Record.
    Risk Analysis / Sensitivity Industry Trade Outlook.
    Analysis.
    Financial condition / health.
    ||
    p r 
    3 Finances are made available for purchase of the
    locally manufactured machinery to the investors /
    industry for their projects by the approved DFIs
    and commercial banks.
    3 Yhile the facility is sanctioned to the purchaser,
    responsible to repay funds so disbursed, the
    finance is provided to manufacturer.
    3 It is ensured that appropriate debt equity ratio and
    other Prudential Regulations are observed in all
    cases.
    |
    p r     
    3 Finances are made available for purchase of the
    locally manufactured machinery to the investors /
    industry for their projects by the approved DFIs
    and commercial banks.
    3 Competitive Prices:
    Prices: Selection of machinery is
    done on competitive price basis by obtaining 3
    quotations/bids from manufacturers.
    3 Approval of quotations:
    quotations: The quotations/bids are
    to be approved on price competitiveness.
    3 In case of acceptance of quotations other than
    lowest one, Banks should exercise special care.
    Justifications and specific reasons should be
    recorded |G
    D      
    3 Ñ   A  :: Banks have to ensure that
    manufacturer has the capability of manufacturing
    the machinery. For this, Inspection Report on the
    manufacturer has to be prepared by the Bank after
    conducting inspection facilities of manufacturers.
    3 The reports contain information on manufacturing
    capability of machinery involved, adequacy of
    technical personnel, their know-
    know-how, design
    facilities and the manufacturers' previous
    experience.
    3 There is no maximum limit for borrowing. If the
    borrowing demands exceed Rs. 300 million it is
    provided through consortium financing.
    |^
    D      
    3 The facility is be available only to the local
    content of machinery. Yhere this value falls
    below 20%,
    20%, it shall not qualify for the financing
    facilities.
    3 Banks have to ensure that the machinery being
    manufactured is supported with a valid contract
    for supply and the buyer has the capability to
    install, operate and produce desired results.
    3 The repayment period ranges from six months to
    two years for the manufacturers and up to a
    maximum of seven-
    seven-and-
    and-a-half years for the
    purchasers of LMM.
    3 Financing facilities under the scheme are not
    available for trading purposes. |·
    A      r*
    3 SBP will reimburse the amount disbursed by
    banks. It will sanction a refinance limit to
    individual banks.
    3 The banks can receive refinance upto 100%
    100% of
    the finance which it provides for purchase of
    machinery.
    3 Application for this is submitted to the Chief
    Manager, State Bank of Pakistan, Islamabad.
    3 Banks deposit the recoveries realized by them
    with the SBP within 3 days.
    3 The banks are not allowed to take more than
    one month to examine the feasibility of any
    project seeking financial facilities.
    |o
    D     
    3 The bank has to decide about approval or
    disapproval of the borrowers¶ request within 60
    days.

    |ë
     Ñ  
    3 The list of eligible industries includes: Fisheries
    /dairy and livestock products; light engineering;
    marble and granite; gems & jewellery; leather
    manufacturers & garments; boat manufacturing;
    local vendors manufacturing parts of automobile;
    powerlooms/auto/ airjet for powerloom clusters
    in different parts of Pakistan; units to be set up in
    the ceramic clusters being established in the
    country; equipments for cutting and polishing
    marble & granite and manufacturing of
    handicrafts.

    |M
    D 
    !"! # 
    3 Financing under the scheme can also be availed
    of for setting up of units for preservations /
    packaging of fruits and vegetables; wooden
    furniture & handicrafts; machinery for knitwear
    and hosiery industries; machinery/equipments
    used in the thermal/hydro power projects;
    machinery for setting up of flour mills (for SMEs
    only); machinery for rice husking units (only in
    the SME sector); agriculture equipments
    including water sprinklers; transport equipments
    excluding cars but including commercial vehicles
    for business use, manufactured/assembled in
    Pakistan with at least 50%
    50% deletion; and
    machinery for manufacturing of the pulp board.
    |

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