Banks sanction Rs23bln loans to avoid layoffs

KARACHI: Banks have sanctioned more than Rs23 billion in concessional loans to various companies for payment of wages and salaries to their workers and employees, the central bank said on Friday, preventing layoffs as a

result of the coronavirus lockdown.

The State Bank of Pakistan (SBP) said banks are further processing over Rs90 billion worth of applications under its refinance scheme to support employment and avoid layoffs. The applications were filed from more than 1,100 companies and “that will protect

jobs of around 850,000 employees,” the SBP said in a tweet.

“Up till 30 April, banks have sanctioned more than Rs23 billion to 209 companies, which will protect jobs of around 220,000 employees,” the SBP added.

The refinance scheme introduced by the central bank provides concessional loans at 3 percent to any company that commits not to lay off workers for the next three months.

In April, the SBP introduced a temporary refinance scheme for businesses to support the employment of workers in the face of economic challenges posed by the spread of the novel coronavirus (COVID-19). Its core objective is to incentivise businesses to not lay off their workers during COVID-19.

The scheme is available to all businesses in Pakistan through banks and covers all types of employees, including permanent, contractual, daily wages as well as outsourced workers.

Since the lockdown imposed by the government in March, the SBP took a number of measures to mitigate the impact of COVID-19 on the economy, including an extension in repayment of loan principal amounts by one year, concessional financing for businesses to procure equipment.

It’s earmarked at least Rs100 billion for emergency measures.

The scheme would provide financing for wages and salaries expenses for three months from April to June 2020 for businesses.

The SBP designed the scheme to give preference to smaller businesses. Businesses with a 3 month wage and salary expense of up to Rs200 million are able to avail the full amount of their expense in financing while those with a 3 month wage and salary expense of greater than Rs500 million are able to avail up to 50 percent of their expense. Businesses in the middle category are able to avail up to 75 percent of their 3 months’ salary and wage expense.

SBP asked banks not to charge any loan processing, credit limit fee or prepayment penalties for loans under the new scheme.

Under the scheme, a grace period of six months would be allowed to the borrowers while the repayment of the principal amount would be made in two years.