LAHORE There is no risk in yellow cab financing as defaulted vehicles to be seized immediately through trackers, says Bank of Punjabs head of commercial banking Liaqat Ali. He said that the bank will definitely charge the markup but not from the customers, rather the government would pay interest but details yet to be decided, however the rate of interest will be fixed on normal standard. Talking to The Nation, he said that the BoP, which is the financer of the provincial governments 'Self Employment Scheme is going to launch the project, keeping in mind that nowhere in the world leasing has ever been failed. The financing of taxis in Punjab is absolutely viable and the bank has watched its interest fully, claimed Mr Liaqat, who is also supervising the taxi scheme project financing. He said that there is no risk of any default, as the defaulter cannot run because his vehicle will be identified through tracking system and will be brought into the bank custody due to non-payment. He said that the Punjab government allocated Rs4.5 billion in fiscal 2012 budget to provide 20,000 yellow cabs to youth of the province. In the first phase, around 2000-2500 units delivery will be made in DG Khan, Multan and Pindi in the first week of Oct. He said the provincial government will provide cars on interest-free basis with down-payment of 20 percent. He said that the government has shortlisted Suzuki Mehran and Bolan for the scheme that will be launched in five big cities of the province. The bank will provide 8000 bolan and 12000 Mehran with Rs7,950 installment. Liaqat Ali said that other banks charge 17-18 percent markup, with down-payment of around 1,67,000 while total payment will be around Rs7,65,000 without any life insurance of the borrower. Mehrans current ex-factory price is around Rs4,81000 and if registration fee, company freight bill, vehicles 4 percent insurance fee and personal insurance fee are included, it will become approximately Rs600,000. We will charge only about Rs5,70,000 and down-payment of Rs93,500-96,000. Other banks will charge over Rs7,65000 without personal insurance. We will purchase the from factory with concession of Rs20,000 per vehicle, Mr Liaqat said. When asked that the vehicles will cost around Rs12 billion and who will bear the expanses other than Rs4.5 billion, he said that the bank would bear 80 percent of the financing and the customer will pay 20 percent. He said that the Bank of Punjab is not the only option available to the provincial government as all other leading banks might take interest in the scheme after the launch of the scheme. On a question he said that the government itself did not approach any bank to finance this scheme, otherwise several banks are interested in this scheme. He said more banks may show interest to provide finance to expand this scheme further when they will see the success of the present scheme of interest-free provision of taxis to the public. Responding to a question, he said the scheme draws no parallel to the yellow cab scheme launched by the Nawaz Sharif-led government in 1992-93. Under the old scheme, 65,000 vehicles, including 35,000 taxis, were provided on 10 per cent down-payment with a 10 per cent mark-up. The old scheme provided a large number of luxury vehicles to the people, as most of them were imported from Korea, wasting huge amount of foreign exchange and providing no benefit to local auto industry. More over as those were luxury vehicles they were not used for commercial purpose, so no employment was generated, resulting into burden on the financer. He said: In the present scheme no luxury vehicle is included, besides they are not being imported and they will be manufactured at local level, creating a considerable employment and saving huge foreign exchange which was wasted in the last scheme. The old schemes vehicles were fully loaded with accessories and AC facility and down-payment was just 10 percent, so most of the people sold their accessories to pay the down-payment. On the other hand we are providing only basic units, having no facility of AC or any other luxury service with 100 percent extra down-payment as compared to the last scheme. The last scheme had no tracking system in the vehicle while we are installing the multi purpose tracker in the cars. Due to this system there is no risk of theft. Moreover due to this the vehicle can be located any time and anywhere. The tracker will suggest as to how long the vehicle has traveled and whether the vehicle is parking in the garage of the owner or being plied on roads. BoPs commercial banking head observed that the programmes name is 'self-employment scheme so it is not transferred or to be leased out to other owner. It will be crime if the vehicle is not used for commercial purpose as in this way no employment will be generated, which is the actual aim of the plan, he maintained. The old scheme provided no self-insurance cover, and in case of death the bank had to lose while in the current scheme, every provider of the car will be under the cover of self-insurance. So, in case of any mishap, the insurance company would pay the whole amount and the bank would not have to suffer loss in any case, he stated. He argued that in the old scheme there was no system of any verification but in the new system every customer will have to attend the 15-day training. In this way the liaison between the customer and the bank will be established and the chances of disappearance of the borrower will be decreased, he added. Experts said that the step of allowing only the locally assembled vehicles is a positive for the auto industry and due to this the Suzuki profits are expected to jump by 80 percent following the Punjab governments taxi scheme, Expert said that for the old scheme, Habib Bank provided Rs8 billion, United Bank Rs3 billion and National Bank Rs1 billion. The last scheme drew much criticism due to politically motivated allotments where even luxury cars were imported and financed, causing large-scale defaults affecting banks financial health.