SBP Steps Up To Boost Infrastructure Financing

The State Bank of Pakistan (SBP) has taken a step to boost the infrastructure financing in the country in collaboration with private organizations. The SBP has included Infra Zamin Pakistan Limited, a commercial credit enhancement facility company, in its regulations on corporate and commercial banking, in a bid to develop the infrastructure financing market in the country. In this regard, it amended its corporate and commercial banking prudential regulations to facilitate the private sector’s role in uplifting the country’s infrastructure Accordingly, para 1(C) of annexure-I of prudential regulations for corporate/commercial Banking is revised as under: “85 percent of the unconditional financial guarantees accepted as collateral and payable on demand by banks/development finance institutions, (rated at least ‘A’ or equivalent by a recognized rating agency) shall be deducted,” the SBP said in a circular. “Same weightage to the guarantees of similar nature issued by the International Finance Corporation (IFC), Commonwealth Development Corporation (CDC) Deutsche Investitions-und Entwicklungsgesellschaft mbH (DEG), Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V (FMO), GuarantCo Limited, Asian Development Bank (ADB) and Infra Zamin Pakistan Limited shall also apply.” However, it added that in respect of the above-mentioned banks, development finance institutions (DFIs), and entities whose guarantee had been accepted as collateral, the beneficiary bank/DFI would immediately report to the SBP. If any instance where the guarantee issuing bank/DFI or entity fails to honor the claim within 20 working days of the date on which the guarantee is invoked, the banking regulator said.