SBP launches scheme to protect Pakistani workers from COVID-19 layoffs

The Central Bank launched a special loans scheme launched to incentivize employ retention

The State Bank of Pakistan will offer a temporary loan refinancing scheme to businesses that do not lay off employees during the current economic conditions due to COVID-19.

The scheme, which is called as Refinance Scheme for Payment of Wages and Salaries to the Workers and Employees of Business Concerns, aims to incentivize businesses to not lay off their workers during COVID-19 pandemic.

It will also require businesses that they pay salaries of their employees between the months of April and June, 2020. All kinds of employees including permanent, contractual, daily wages as well as outsourced workers are covered.

Under the program, the loans will be offered at a 5% rate. The rate will be further lowered to 4% for those on the active taxpayers’ list. Smaller businesses will be given preference.

Businesses with a 3-month wage and salary expense of up to 200 million rupees will be able to avail the full amount of their expense through financing. Business with a 3-month wage and salary expense greater than 200 million rupees but less than 500 million rupees will be eligible for 75% financing of the aforementioned expenses. Businesses with wage and salary expenses in excess of 500 million rupees over a period of three months can avail up to 50% of their expense under the loan scheme.  

Borrowers will have a six month grace period and two years to settle the principal amount. The banks will not charge any loan processing fee, credit limit fee or prepayment penalties for loans under this scheme.

SBP will receive daily reports on the loans dispersed under the scheme. Any loan denials, and the reasons for these actions in individual cases, will also be spelled out in these reports.

Pakistan’s Central Bank that the scheme will have a positive impact on the businesses’ liquidity situation and will allow them to resume production once normalcy is restored.   

“One of the main benefits of the scheme is that employers that retain workers on their payroll will be able to restore or increase production quickly once the situation normalizes. The scheme will ease the liquidity constraints of the businesses and they can use their available financial resources to meet other working capital requirements,” according to an official press release.

The Central Bank also reiterated that it will continue to bring look into the credit situation of households and businesses, and will take measures accordingly.  

Sayyar Gul
Sayyar Gul is doing his MS Computational Sciences & Engineering from National University of Science and Technology. He is technology enthusiast with keen interest in new technological developments from around the world.

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