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011030

STATE BANK OF PAKISTAN BANKING SUPERVISION DEPARTMENT

BSD CIRCULAR No.41
30^th   October, 2001

All Banks,
Dear Sirs,

Refinance facility under the Export Finance Scheme for Consultancy Services.

The Government of Pakistan has accorded “deemed export” status to the foreign earnings remitted into Pakistan against consultancy services in various service sectors of  economy such as medical, pharmaceutical, engineering, accountancy, management, financial services, wholesale, distribution and retail trade, transportation, storage and communication, tele-communication services, educational services, real estate development, hotel and tourism/tourism related services, technical testing facilities and consultancy services etc. which are being rendered by various Pakistani enterprises by way of designing, solution providing, surveys, feasibility preparation, marketing and promotional activities including local market analysis, studies, product development, handling of / and transfer of technology assignments, warehousing, manufacturing and distribution etc. on behalf of their foreign principals. The foreign earnings against all such consultancy services would now henceforth be treated as export proceeds and all consultancy services mentioned above would qualify for export finance facility under Part I of Export Finance Scheme for a period not exceeding 180 days at the rates prescribed under the Scheme.  The facility would be available on case by case basis to qualifying enterprises / companies.  The concerned enterprises would, therefore, have to determine their financing needs against agreement / contract executed by them for providing consultancy services to their principals and would be required to liquidate the same from the repatriation of export proceeds received from their principal / buyer abroad, while the facilities under Export Finance Scheme shall be available for the maximum period of 180 days. The banks are advised to provide financing facility to the qualifying enterprises under the Export Finance Scheme. The realization of proceeds against consultancy services rendered by the company shall be made as prescribed by our Exchange Policy Department.

2. Accordingly, since exports from Pakistan are subject  to ‘E’ form procedure, the ‘E’ form cannot, however, be made applicable to the export of services rendered by supplier of above consultancy service providers as such type of exports do not take place physically. As such, the respective consultants will intimate to their banker on the following format the details of export of services :- 

The Authorized Dealer concerned will maintain a separate record of such exports and ensure timely repatriation of the export proceeds on the basis of the instructions contained in Chapter XII of the Foreign Exchange Manual. A monthly report will also be  furnished to the Junior Joint Director (General), Exchange Policy Department, State Bank of Pakistan, Central Directorate, Karachi.

3. Applications for providing refinance against finances provided by banks for export of consultancy services to be rendered by Pakistani enterprises relating to sectors specified in para 1 above will be submitted by the banks to the concerned office of the State Bank on format as per specimen attached  duly supported by the following documents :- 
i) An agreement / contract between the Pakistani  enterprise(s) and their foreign principal specifying the nature of Consultancy Services to be rendered by the Pakistani enterprise / company alongwith value of such service, duration of service involved and the schedule of payment.

ii) The information as at  i ) above  alongwith the programme of  services to be rendered with period  and cost shall be duly attested by the financing bank.iii) Schedule of financial requirements of the borrowing firm duly attested by the bank with reference to the relative contract, indicating the amount required at various intervals in line with schedule at ii) above so as to ensure that the finance obtained is liquidated within 180 days of its drawing from the bank. 

iv) Indication of the amount already obtained by the borrowing enterprise / company by way of advance from their principal abroad, if any, which shall not qualify for financing as usual.

v) An  undertaking  from  the  borrowing enterprise / company  on  the  enclosed  format (Annexure- A) 
vi) D. P. Note

The grant of finance shall be subject to the receipt of satisfactory feedback about the principal from his banker abroad as also on a declaration from the borrower confirming authenticity of the contract. 

4. The terms and conditions of Part-I of the Export Finance Scheme relating to fine, submission of returns and statements to the State Bank of Pakistan etc. will, mutatis mutandis, apply in these cases as well.  However, the requirement to export of goods, will be substituted with the requirement to perform the consultancy services as per original contract.

5. As consultancy services would not entail any visible exports, Authorized Dealers are, therefore, advised to report realization of services charges against the funds provided to them by the concerned Office of the State Bank as per arrangements prescribed by our Exchange Policy Department in the following  new code No. and schedule as under :-

Code List No.5 
Invisible  Receipts
F - Miscellaneous  Services.

6. The following documents will be required to be submitted within  30 days from the expiry of the loan or liquidation of the facility if repaid earlier then the maturity of the loan, whichever is earlier to SBP as evidence of performance under the relevant contract / agreement:-

a) Copy of Invoice(s) raised against the services made.
b) EPRC / Credit Advice.
c) Form at Annexure - D

Please acknowledge receipt.

Yours faithfully,

( Kazi  Abdul  Muktadir  )
Director

Annexure-A,B,C,D.

Annexure - ‘A’
UNDERTAKING FOR OBTAINING REFINANCE  AGAINST CONSULTANCY SERVICES UNDER PART I OF THE EXPORT FINANCE SCHEME

The Manager,
________________________(Branch)
________________________( Bank )

Dear Sir,
We do hereby certify and confirm that an advance of Rs.___________ has been allowed to us by you under the Export Finance Scheme of the State Bank of Pakistan with mark up at ______% per annum.

2. We further confirm and undertake that the aforesaid advance of Rs.__________has been obtained by us against the following Contract and the same shall be utilized by us exclusively to provide consultancy services in Pakistan on behalf of our principal(s) covered by the said Contract :-

3. We do hereby further undertake to submit to you the following documents on completion of the prescribed period and the statutory period prescribed for realization of export proceeds under the above Contract against which you have allowed to us the above advance under Export Finance Scheme :-
(a) Commercial invoice raised for the consultancy services provided.
(b) EPRC / Credit Advice.
(c) A certificate of the bank concerned to the effect that the bank has disbursed the value of consultancy services supplies referred to at (a) in equivalent Pak rupees and that the proceeds in foreign currency has been realized alongwith the bank’s proceeds realization certificate.

3. We hereby confirm and agree that in the event of our failure to provide consultancy services on or before the due date and / or to submit the above documents to you within 30 days from the expiry of the loan or liquidation thereof, whichever is earlier, you have our irrevocable authority to charge us and debit our account with fine at the prescribed rate on the amount of the advance availed of, less the amount repaid as a result of part supplies, if any, from the date of the original advance. We also hereby confirm and agree that you have our irrevocable authority to debit our accounts maintained with you in use of our failure to repay the loan availed by us for the purpose specified in para 1 above on due date. We certify and confirm that we have not borrowed against the above Contract any amount from any other bank.

4. We do hereby further confirm and undertake that the documents in respect of the aforesaid Contract will be realized by us through your bank only if otherwise expressly permitted by you and proceeds thereof will be appropriated immediately on realization towards the aforesaid advance allowed by you to us. We further confirm and undertake that notwithstanding the repayment of the finance by us on due date or earlier, we shall continue to be liable to submit to you the relative proof of provision of consultancy services to our foreign principal for which the financing facility has been made to us.

Bank’s authorized signature.

ANNEXURE – ‘B’
FORM OF APPLICATION TO BE SUBMITTED BY THE SCHEDULED BANKS TO THE CONCERNED OFFICE OF THE STATE BANK OF PAKISTAN T O OBTAIN REFINANCE FROM THE STATE BANK AGAINST FINANCE PROVIDED FOR CONSULTING SERVICES UNDER PART-I OF EXPORT FINANCE SCHEME IN TERMS OF BSD CIRCULAR NO.______ DATED ____________.

Name of the Scheduled Bank:______________________________________
_____________________________________________________________
Address:______________________________________________________
Date:______________________

To

The State Bank of Pakistan,
_____________________
_____________________

Dear Sir,

In terms of the agreement executed by us with you on ______________ (Date), we hereby apply to you for refinance to the extent of Rs.____________ against finance given by us to the _____________________ 1 by way of export finance.

As provided in the said Agreement we enclose bills of exchange/promissory notes specified in the schedule hereto, executed in our favour and endorsed by us in your favour in respect of the finance sanctioned to our constituents as listed in the aforesaid
Annexure – " C ".

We request you to grant refinance:-
i) by purchase/rediscount of Bills of Exchange and promissory notes under Section 17(2) (a) of the State Bank of Pakistan Act, 1956 or;
ii) as a loans against such bills under Section 17(4) (c) of the said Act, (Clause not applicable to be deleted.).

We certify that the signatures on the said bills/notes are the genuine signatures of the parties thereto and that where a bill or note is signed or endorsed by a person purporting to act under an authority, such person is duly authorized to do so and to the best of our knowledge and belief each such party is financially sound, solvent and credit worthy.

We certify that to the best of our knowledge and belief the loans given by us to the borrower as specified in the schedule hereto have been used by the borrower to finance the consultancy services covered by the relevant instructions pertaining to Export Finance Scheme (Part-I).

We certify that bills of exchange/promissory notes specified in the scheduled hereto are eligible for purchase/rediscount as provided in Section 17(2)(a) or Section 17(4) (c) of the State Bank of Pakistan Act, 1956.

Yours faithfully,

Signature_______________
Designation_____________

1 Please mention the name of the borrower.

ANNEXURE-C
Serial No._______________
STATEMENT SHOWING DETAILS OF THE FINANCE PROVIDED TO THE BORROWER BY BANKS IN TERMS OF BSD CIRCULAR NO______ DATED_______ AGAINST WHICH REFINANCE IS BEING SOUGHT FOR UNDER EXPORT FINANCE SCHEME (PART-I).

NAME OF THE SCHEDULE BANK_________________________________________________________
ADDRESS:______________________________________________________________________________
DATE_______________________________

Certified that the contents of this statement are correct to the best of our knowledge and belief.

For and on behalf of__________________________________
__________________________________
(NAME OF THE SCHEDULED BANK)

(Signature) __________________________
(Designation) ________________________

Annexure " D "
STATEMENT OF PERFORMANCE AGAINST REFINANCE OBTAINED FROM SBP UNDER THE EXPORT FINANCE SCHEME ( PART-I ) INCLUSIVE OF FINANCES/REFINANCES OBTAINED BY BORROWER

Name of the Scheduled Bank _______________________ Loan No.____________________
Address (Branch) ________________________________ Date of grant _________________
Date __________________________________________ Amount _____________________

We undertake and certify as under that the contents of this statement are correct to the best of our knowledge and belief.

For and behalf of

(Signature of borrower)
Seal of Borrower

(Signature) (Signature)
Designation (Designation

Name of the Bank

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