Terms and conditions of facilities granted out of foreign exchange reserve account as prescribed in the Development 4th Plan In order to support and finance part of the foreign exchange needs of the private producers and exporters and cooperatives, facilities provided out of excess of income generated from selling crude oil, are granted within Islamic banking contracts and regulations and the bylaws passed by the Board of Trustees of Foreign Exchange Reserve Account through opening sight L/Cs and in accordance with the regulations on import and export of goods.
Natural persons and those companies whose major of their share capital is owned by a private sector or cooperative.
Industry, mine, agriculture, transportation and export of technical and engineering services and other services (including tourism) and IT
1. All investing activities in production and entrepreneurship projects in such areas as industry, mine, agriculture, transportation, services (including tourism) and export of technical and engineering services by private sectors and/or cooperatives,
2. Making investment to create new capacities including purchase of equipment and machinery, know-how and payment of installation and commissioning costs related to production and entrepreneurship projects in such areas as industry, mine, agriculture, transportation, services and technical and engineering services,
3. Making investment for development and restructuring of available production capacities including construction, machinery and installations,
4. Investment in foreign exchange and income generating projects in the service sector (hotel construction), and transportation (development, improvement and renovation of air and sea transport fleet), Remarks: in all above issues, priority is given to investment in energy optimization and ICT application projects.
5. Investment in agricultural projects with the goal of export development,
6. Issuance of letters of guarantee for Iranian companies who have won international tenders,
7. Joint venture projects approved under foreign capital attraction and support law,
8. Granting supplier’s credit loans to exporters of goods and services in order to promote and develop export of nonoil products,
As discerned by the Bank, the following assets and instruments may be accepted as collaterals:
2. Machinery and equipment,
3. Shares of listed companies,
4. Shares of unlisted companies,
5. Bank guarantee and reliable documentary credits of foreign banks issued in favor of the Iranian applicant,
6. Collectable instruments,
7. Promissory notes issued by the corporate managers,
8. Mine exploitation license,
9. Approved statements and finalized liabilities of public executive bodies along with the confirmation of the beneficiary including the transfer of the guaranteed resources to the bank,
10. Private bonds
11. Any other guarantee acceptable by the bank,
As commonly known in Iran, finance refers to providing financial resources needed for execution of projects and purchasing equipment for manufacturing (capital) projects as well as technical and engineering services of the projects, by using short-term foreign credit facilities according to the financial contracts concluded with foreign financers.
Execution of new infrastructural/manufacturing projects and development plans,
Purchasing technology and capital equipment as well as technical and engineering services,
Public/Private legal persons
Maximum Amount Paid
Usually 85% of the amount of a business contract/Proforma invoice and the cost of related export insurance (calculated based on the risk rating of the borrower in the country) is subject to finance loans.
Terms of Payment
The payment is usually paid through L/Cs and terms of payment are as follows:
15% of the amount of L/C as advance payment and interim payment,
85% of the amount of L/C is paid out of finance facilities
Interest Rate of Facilities
The interest rate of facilities is calculated based on the floating rate (LIBOR/EURIBOR) or fixed rate (CIRR) for six months plus a margin which is usually 0.5% in proportion to the amount of facilities used. In addition, other expenses including the management cost for almost 0.2% in proportion to the amount of facilities and the expense of commitment for almost 0.2% in proportion to the amount of facilities unused are received.
The period to use facilities under financial contracts is set according to the time of shipment and execution of the project as laid down in the commercial contracts and taking into account the policies set by Organization of Economic Cooperation and Development (OECD).
Number and sequence of installments: 10 to 17 consecutive installments, each with a respite period of 6 months,
First installment due date: 6 months after the repayment starting point, determined according to the provisions of the finance contracts,
Share certificates of listed companies
And other collaterals as discerned by bank’s authorities,
Refinance credit is a credit paid under a short-term credit line established between two banks or financial institutions under an agreement. Through this credit line, the price of the goods transacted between the buyer (applicant) and supplier (beneficiary) is paid to the supplier at the time of presentation of shipment documents on cash (at sight) basis. The opening bank (issuing bank) will then receive from the buyer and repay the amount paid to the seller by the corresponding bank (financer), plus the related interest one year later.
All manufacturing and trading importers may open refinance documentary credits by using the maximum one-year interbank credit line in order to import goods, raw materials, spare parts, machinery of the production lines and services.
Persons Qualified to Use Refinance Loans
Manufacturing and trading natural and legal persons with a minimum credit record of 5 years, producers and importers of drugs and pharmaceuticals, auto and parts manufacturers,
Goods, raw materials, spare parts, machineries for production lines and services importable to the country for which there is no legal prohibition on using the above-said facilities.
The maximum ceiling of refinance facilities is 80% of the amount of proforma/commercial contract signed.
Terms of Payment
A. 10% of the Rial-equivalence of the principal and interest of documentary credits at the time they are opened,
B. 10% of the Rial-equivalence of the principal and interest of documentary credits at the time of exchange of documents,
C. 80% of the Rial-equivalence of the principal and interest of documentary credits upon repayment of installments at the due dates of payment of foreign currencies to the corresponding bank. These rates shall vary according to the customer’s credit.
Loan Interest Rate
Loan interest rates are calculated based on six-month LIBOUR and/or EURIBOR rates plus a margin determined according to the borrower’s risk rating in the country.
1. Due date of each documentary credit under the loan contract is based on the terms and conditions of the relevant loans,
2. Loan Repayment Period: one year after the corresponding bank has paid the loan to the supplier or upon exchange of documents,
1. Immovable properties,
2. Promissory notes/drafts
3. Deposit certificates
4. Corporate shares,
5. Governmental negotiable instruments,
Export Facilities in the Form of Purchase Credit Guarantied out Of Local Resources Of The Bank
Part One: Conditions and Requirements of Granting Facilities
Subject of Facilities
These facilities are granted for export of goods and services to provide 60% of the value of goods and services, using local facilities and capabilities. The decision to grant these facilities for goods, and technical and engineering services is determined respectively by relevant establishment and the Committee on Art. 19 of Government’s Supportive Regulations for Export of Technical and Engineering Services.
Type of Currency and Calculation Department
1. Granting loans in GBP, Euro, SFr, Danish Krone (DKK), JPY, Swedish Krona (SEK) and AED is allowed and export L/Cs shall be opened in the same currency as in the Proforma/commercial contract or the work completion statements.
2. The used foreign exchange facilities shall be repaid in the same currency.
Interest Rate of Facilities Granted
The interest rate of facilities granted to applicants for using the loans is generally equal to the EU interbank interest rate (EUIBOR) plus 2% for Euro currency and interbank interest rake of related currencies in the international market (LIBOR) plus 2% per year for other authorized currencies. The annual interest rate is calculated based on 360 days (except the Japanese yen and Pound Sterling for which the interest rate is calculated based on a 360-day year)
Duration of Facilities
The maximum period of financing out of short-term credit lines (refinancing) shall be one year.
Mid-Term Finance Loans with ECO Development and Commercial Bank
An SME DEVELOPMENT FACILITY for small and medium size companies has been signed between Bank Mellat and Eco Bank Turkey in order to finance the circulating capital of manufacturing, commercial, agricultural and industrial companies for production, trading or service objectives and mid-term profit or preparation of related requirements for special projects or investment plans as well as finance imports from ECO member states (Afghanistan, Azerbaijan, Iran, Kirgizstan, Kazakhstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan).
Most Important Points of the Contract
1. The amount of contract is USD 15,000,000, however the credits shall be opened only in Euro. Also the minimum amount of each proforma is the Euro equivalence of USD 30,000 at least and USD 1,000,000 at most.
2. 100% of the documentary credits shall be financed at the time of exchange of finance documents,
3. The documentary credits shall be due in maximum 6 months
4. The loan duration shall be maximum 18 months after execution of the contract (30/10/2010),.
5. Loan interest rate: 6-month LIBOUR+ 1.2% per year plus a percentage as bank’s commission (the loan interest rate shall be collected every six months from the date of exchange of documents),
6. Repayment period: 3.5 years (seven equal installments, each with 6-month respite period),
7. Respite period: 6 months,
Requirements for using facilities
1. The company must be registered in Islamic Republic of Iran and if natural persons are concerned, they must be engaged in business inside the Islamic Republic of Iran.
2. They should have at most 250 manpower (except the contractual manpower),
3. Their circulating capital must not be higher than 15 million Euros,
4. Their subsidiaries (in case they hold more than 50% of the subsidiary’s share capital) must not have more than 250 employees,
5. Governmental companies are not allowed to use these facilities,
6. They must have healthy business activities in accordance with international regulations and standards,
7. They must not be a bankrupt company,
Short-Term Finance Loans of ECO Development and Trading Bank
The short-term loan contract (refinance) has been signed between this bank and Turkish ECO bank, the most important points of which are as follows:
Important points of the contract
1. Interest rate of facilities is one year EURIBOR+MARGIN (margin shall be different in each case),
2. Repayment of loans shall be carried out one year (360 days) after exchange of documents (payment of funds to the beneficiary) along with the expense of facilities incurred to General Department of Foreign Affairs.
3. Amount of each subcontract ranges from the Euro equivalence of USD 250,000 to USD 2,000,000;
4. These facilities may be used in the form of export from Iran, Pakistan and Turkey to any other country and/or import to Iran, Pakistan and Turkey to ECO member states (Afghanistan, Azerbaijan, Kyrgyzstan, Kazakhstan, Pakistan, Tajikistan, Turkey, Turkmenistan and Uzbekistan).
5. All payments are made in the currency as specified in the subcontract signed between Bank MEllat and ECO bank.
6. Each documentary credit shall be due maximum in 6 months.
7. The documentary credits under the contract must be opened in the form of sight and irrevocable L/Cs.
1. Bank Mellat sends the trading contract or related Proforma to ECO Bank.
2. ECO Bank informs Bank Mellat of the loan requirements. ECO Bank has full power to accept or reject the request submitted by Bank Mellat,
3. In case of ECO Bank’s approval and Bank Mellat’s confirmation of the conditions, Bank Mellat will send the related application to ECO Bank Via SWIFT.
4. Upon receiving the related application, the ECO Bank will inform the approval of the finance conditions to Bank Mellat Via SWIFT.
Foreign Exchange Facilities to Finance Circulating Capital of Manufacturing Units out of Foreign Exchange Reserve Fund
The reference foreign exchange facilities may be granted through opening documentary credits for purchasing raw materials, spare parts and consumables from foreign suppliers by natural and legal manufacturers through opening documentary credits in favor of the foreign supplier against presentation of requested documents.
Type of Currency
These facilities are paid in Euro, Japanese Yen and Emirates Dirham (AED).
Volume of Facilities Granted
In case the customer uses the maximum time specified (one year), the applicant’s contribution shall be 25% of the amount of Proforma, and the applicant is required to pay 10% thereof at the time of opening L/C and 15% upon the exchange of documents in foreign currency or Rials and the remaining balance (75%) shall be financed out of foreign exchange reserve fund as foreign exchange loans in order to settle and transact the documents (maximum by the approve amount).
In case the customer uses the six-month facilities, his contribution shall be only 10% of the Proforma, which is paid at the time of opening L/C and the remaining balance (90%) shall be paid out of foreign exchange reserve fund as foreign exchange loans in order to settle and transact the documents (maximum by the approved amount).
Repayment of Facilities
The facilities granted shall be repaid maximum one year from the date of exchange of the documents of L/Cs opened and the interest rate shall be generally equal to the interbank interest rate of relevant currency prevailing in the international market including six months/one year LIBOR plus 3% per year.
Penalty on Delay
The rate of penalty on delays in case of late payment of the liability including the principal and interests of loans on the repayment due dates is equal to the pertaining interest rate plus 12% per year.
The customer is bound to present to the Bank the final goods clearance certificate within a maximum period of 6 months after paying the sums of the documents to the foreign supplier. In case such certificate is not presented within the specified period, in addition to the interest, a penalty of 12% per year shall be accrued to the granted facilities as of the exchange of documents.