01-04-2010, 03:54 AM
<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by Farkhanda</i>
<br />What's the difference b/w export refinance rate and export finance rate?
Is there any incentive for banks as they give subsidized loans to exports under the scheme?
Why SBP increase / decrease export REfinance rate?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Practically speaking not much difference between 2 terms. Conceptually speaking yes there is. Refinance is provision of finance on raw material and value added goods that already had finance during value addition phase, to facilitate export financing further.
For specific incentives to commercial banks please search further. One could be the difference between spread i.e. the rate at which SBP extends finance to commercial banks and the rate at which commercial banks extends to exporters. However, generally speaking, commercial banks' foreign exchange reserves increase due to export remittances i.e. when exporters get their payments from foreign buyers. Moreover, commercial banks are intermediaries which provide services to clients i.e. exporters and charge fee on services. So, their relationship with clients improve, revenues/deposits/foreign reserves improve. This is the way how banking works. Further, it is also regulatory requirement by Finance Division and SBP from commercial banks in Pakistan to facilitate exporters. So, they work as agent of SBP and Gov't.
Export refinance rate has direct link with SBP's various interests rates which SBP effects due to changing economic conditions and business requirements. To understand it, I would suggest to read about changes in SBPs bank rate.
For further reading, search SBP's export finance scheme or read the material provided by Banking Policy and Regulations Department (BPRD) and Banking Inspection Department.
I hope it helps.
<br />What's the difference b/w export refinance rate and export finance rate?
Is there any incentive for banks as they give subsidized loans to exports under the scheme?
Why SBP increase / decrease export REfinance rate?
<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">
Practically speaking not much difference between 2 terms. Conceptually speaking yes there is. Refinance is provision of finance on raw material and value added goods that already had finance during value addition phase, to facilitate export financing further.
For specific incentives to commercial banks please search further. One could be the difference between spread i.e. the rate at which SBP extends finance to commercial banks and the rate at which commercial banks extends to exporters. However, generally speaking, commercial banks' foreign exchange reserves increase due to export remittances i.e. when exporters get their payments from foreign buyers. Moreover, commercial banks are intermediaries which provide services to clients i.e. exporters and charge fee on services. So, their relationship with clients improve, revenues/deposits/foreign reserves improve. This is the way how banking works. Further, it is also regulatory requirement by Finance Division and SBP from commercial banks in Pakistan to facilitate exporters. So, they work as agent of SBP and Gov't.
Export refinance rate has direct link with SBP's various interests rates which SBP effects due to changing economic conditions and business requirements. To understand it, I would suggest to read about changes in SBPs bank rate.
For further reading, search SBP's export finance scheme or read the material provided by Banking Policy and Regulations Department (BPRD) and Banking Inspection Department.
I hope it helps.
