Four commercial banks submitted bids to provide Rs30 billion in loans under Kamyab Pakistan Program (KPP).
The four banks comprise of National Bank of Pakistan, Askari Bank, the Bank of Punjab, and Habib Bank Limited submitted their quotations to the Ministry of Finance. It has been speculated that the aforementioned banks have participated owing to their management’s involvement in designing KPP.
The bids are to open on 28 October. The Ministry of Finance has been on the lookout for bids from commercial banks, Pakistan Mortgage Refinance Company (PMRC), and development finance institutions (DFIs) that are under the regulation of the State Bank of Pakistan (SBP) to participate as wholesale lenders. Banks that bid the lowest interest rate above or below the three-month Karachi Interbank Offered Rate (Kibor) will qualify as successful bidders. The government further set the maximum cap on the interest rate to be paid to these banks at three-month Kibor plus 9% per annum. However, no DFI or Islamic banks submitted bids for providing loans for a three-month period.
Ever since, the change in the policy rate to 7.25% by the SBP and the central bank’s hinting at the further tightening of monetary policies, the financial sector has been on edge.
The Ministry of Finance on Wednesday had planned on borrowing Rs100 billion via fixed-rate Pakistan Investment Bonds (PIBs), however, the banks offered high rates, leading to the rejection of all bids for three, five, and ten-year papers.
The government can provide a maximum monthly guarantee of Rs5 billion and a monthly loan disbursement of Rs10 billion in adherence to the agreement with the IMF.
Earlier this month, Prime Minister Imran Khan initiated the Kamyab Pakistan Programme to disburse interest-free or highly concessionary loans amounting to Rs228 billion among 738,000 borrowers for the remaining time period of the government’s tenure. The program is aimed at lifting people out of poverty and low-income cycles by granting them interest-free loans of up to Rs500,000 for carrying out businesses and purchasing inputs and machinery.
A subsidy worth Rs37 billion will be provided from the budget to pick the 15% interest cost. The estimated cost of housing loans is at 15%, out of which 2% will be tolerated by the borrower and the rest 13% will be picked by the government, in accordance with a decision of the cabinet. The government initially wanted to pay nearly 7.5% of the cost to banks and another 8% to microfinance institutions. Now, the commercial banks will be bearing the cost of microfinance out of the cost collected from the government. The government will pick 50% of the losses sustained by the banks, which is half of what the cabinet had initially approved. The limit has been lowered owing to the IMF’s objections.
A significant portion of Rs152 billion or 67% of the total loans will be provided to 152,100 people to facilitate them in purchasing low-cost housing units during fiscal years 2021-22 and 2022- 23.
Under KPP, the government will be distributing Rs52.3 billion, or 23% of the loans, among 348,480 beneficiaries in the remaining two years of its tenure. Loans of up to Rs500,000 will be provided. Similarly, Rs23.8 billion, or one-tenth of the total loans, will be disbursed among 237,000 farmers during the two years. In terms of loans of Rs228 billion, the government will disburse Rs37 billion in subsidies to pick the interest cost.
