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'Mark-up & Investment' to support Pakistan textile sector

31 Aug '12

4 min read

The State Bank of Pakistan (SBP) has issued instructions to banks/ development finance institutions (DFIs) regarding processing of claims for provision of “Mark-up Support” and “Investment Support” to textile industry under the Technology Up-gradation Fund (TUF) Scheme of the Federal Government. This scheme, which has been notified by the Ministry of Textile Industry (MINTEX), will encourage investment for up-gradation of machinery and technology in textile industry.

Banks/DFIs shall process the claims for “Mark-up Support” and “Investment Support” from Textile Industry, duly registered with Ministry of Textile Industry (MINTEX). However, they have been instructed to forward the eligible claims after their scrutiny along-with Certificate of Commissioning of machines and commercial operations issued by MINTEX, separately for each Support, strictly in compliance with the terms and conditions prescribed in ministry’s notifications / TUF Scheme, to the offices of SBP-BSC.

Under the scheme, the claims for ‘Mark-up Support’ may be submitted on ‘Form TUF-I’ along-with the documents / papers prescribed in claim form. Only Loans disbursed on or after 01-09-2009, are eligible for Mark up Support. Maximum amount of loan eligible for calculating subsidy will be up to C&F value of eligible machinery/technology mentioned in LC retired through bank loan.

Under the scheme, the Federal Government may reimburse 50% of mark-up subject to a maximum of 5% p.a., whichever is less. However, one company registered as a separate legal entity will be eligible for a maximum mark-up support of Rs 50 million per annum for each subsector.

Mark-up Support shall be admissible on the principal amount of loans outstanding on reducing balance on daily product basis, as per Original Repayment Schedule. The Support shall not be extended to the borrowers having non-performing loans, classified under SBP Prudential Regulations unless the same are rescheduled / restructured by the financing bank(s).

Further it will also make the borrowers ineligible for availing the support during remaining period of the loan if any of their loans (long /short term) are classified after introduction of this support.

Similarly, the claims for Investment Support may be submitted on ‘Form TUF-II’ alongwith the documents / papers mentioned in the claim form. Federal Government may provide up-to 20% investment support to SMEs (as defined under SBP’s Prudential Regulations for SMEs) for import of new plant & machinery up-to Rs 10 million, through loans or from their own sources. Further, Federal Government may also provide 5% investment support to Non2 SMEs / other eligible projects, against imported new plant & machinery, through their own sources. However, maximum support to one company will be Rs 50 million only for each subsector.

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