BY-LOW (V. 6-4-1391)
Enacted on 26 June 2012, by the
National Development Fund’s Operating Board of DirectorsWith reference to
Article 84 of the Fifth National Development Plan of the Islamic Republic of
Iran and the Budget Law for the current Iranian calendar month (started 21 March
2012), and the delegation of authority described in the Minutes of the meeting
of the Board of Trustees, dated 04 May 2012, the Manual of Terms and Conditions
For Granting Facilities from the resources of the National Development Fund
with an emphasis on the National Production and Support for the Iranian labor
and Capital is described as below in 12 parts, 72 paragraphs and 25 notes:Line. Word: DefinitionA. Act :
Part one: Definitions and Concepts:
The Fifth Economic Development Act of the Islamic Republic of IranB. Fund :
National Development FundC. Board of Trustees :
Board of Trustees of Fund - subject of paragraph C of the article 84 of the ActD. Bank :
Central Bank of the Islamic Republic of IranE. Agent Bank:
Any private or governmental banksF. Operating Board of Directors:
Operating Board of Directors of the National Development Fund – subject of paragraph D of the article 84 of the ActG. Manual:
Manual of terms and conditions for granting facilitiesH. Agency Agreement:
It is a contract made between the Operating Board of Directors and agent bank in accordance with the provisions of Article 84 and the Manual and the resources of the Fund to provide agent banks with facilities.
Part Two – General Terms
As per the request of the Operating Board of Directors, within one week from
the time the manual is approved, the agent bank shall take necessary measures
to open accounts required by the Fund.
B- The resources, subject of paragraphs one through (H) of article 84 of
the Fifth Economic Development Act of the Islamic Republic of Iran, must be
deposited into the Fund by the Bank, as prescribed by the Act.
Note 1: Principle and interest of the facilities must be re-deposited by
the agent bank into the Fund account for the purpose of re using them for the
Note 2: The Bank is required to pay interest- on a daily basis – on
respective currency deposits – the interest rate is determined on basis of
median interest rate paid on deposits by foreign banks – the interest will be
added to accounts every three months.
C- Pursuant to the agency contract that the Operating Board of Directors
will sign with the agent banks, with due regard to the manual provisions, the
funds will become available to those applicants who are willing to make
investment in the private sector, cooperatives, and enterprises that are owned
either by the public or private institutions, as described in detail in the 5th
part of this manual.
D- Public and private banks, approved by the Bank or sponsored by the
Investment Development Plan in Agricultural Sector (only with regards to water
and agriculture plans), within the framework of this manual, may grant
facilities to applicant for water and agricultural plans only.
E- Bank shall take necessary measures to issue Certificate of Blockage
of Currency for those group of enacted or approved plans in the agent banks
F- Acceptance of plans by agent banks, in provinces, after confirmation
of Province Investment and Entrepreneurship and in the center by confirmation
of concerned highest level technical and executive body, or authorized officer
will take place.
Part Three – Currency and Unit of Calculation
A- Currency used id U.S. Dollar
B- The funds will be paid out in accordance with the project's need in
U.S. Dollar or any other currency that will be announced by the Bank.
Note 1: The facilities must be repaid in the same currency that was paid
Note 2: If it becomes necessary, exchange rate will be in accordance
with the current international exchange rate announced by the Bank.
Part Four – Acceptable Activities in Divisions and
A- Investment in the following projects is acceptable: Investment
in production plans - Investment in industrial production plans - Investment in
mine exploration, oil, gas, petrochemical, water, electricity, energy, housing,
agricultural, natural resources, environmental protection, transportation,
communication and information technology, export of goods or services, export
of technical services, engineering, plans relying on technology, tourism, hotel
management, health and treatment training programs.
B- Investment for enhancing existing capacities (for example: purchase
of machinery and equipment) – cost of their installation, cost of training
associated with those new machinery and equipment, commissioning, purchase of
technology in conjunction with production and investment plans.
C- Investment in projects that result in renovation and energy
D- Investment in projects that within the framework of the
afore-mentioned paragraphs, economically and technically is justified
(regardless of whether it is export or non export oriented).
E- Granting facilities for export of engineering and technical services
(such as bank guarantee bonds) to the Iranian companies that won international
tenders – after receiving appropriate guarantees.
F- Foreign Investment Plans ( in accordance with article 40 of the
Constitution) – and joint foreign investment with private sector within the
framework of the Incentive for Foreign Investment Act, enacted on March 10,
2002, by the Islamic Consultative Assembly and its later amendments.
G- Granting facilities to those people who are interested in buying
Iranian products and services in targeted export markets.
H- Granting facilities to those who intend to invest in international
capital and financial markets – subject to confirmation by the Fund's Board of
I: With respect to the above mentioned plans, priority will be given to
the following projects:
- projects which fall within international sanctions
- projects which will result in supporting the Iranian labor and capital
- projects to optimize energy consumption
- projects to develop current capacities
- joint venture projects (between Iran and a foreign party)
- exporting Iranian goods and services to target markets
- projects in which the applicant has more shares and will result in more job
opportunities (except for less developed areas and the water and agriculture
Part Five – Eligible Applicants:
The following people are eligible to apply for the Fund’s facilities:
A- Iranian natural entities who are engaged in activities enumerated in
part four of this manual and posses all respective licenses from concerned
B- Iranian legal entities in private sector- Iranian Cooperatives, and
enterprises affiliated with non governmental institutions that in accordance
with their article of association are engaged in activities enumerated in part
Note 1: If 20% of members of the Operating Board of Directors of a legal
enterprise is chosen by the government, regardless of their type of ownership,
that legal entity or enterprise won't be eligible to apply and receive
facilities from the Fund.
Note 2: An institution or a company is regarded as a non governmental
entity, when at least 80% of its stocks or capital is provided directly by
natural entities, or provided by natural entities via legal entities.
Note 3: With respect to those institutions and companies that their
majority of shares is owned by public or non profit institutions, such as
endowment organizations, insurance and retirement funds, and non profit
organizations, they are regarded as institutions and companies that are
associated with non governmental public entities.
D- Joint investment of Iranian and foreign companies in the framework of
the Incentive for Foreign Investment Act, enacted on March 10, 2002, by the
Islamic Consultative Assembly.
Note: With respect to joint ventures mentioned above, at least 30% of
the joint venture capital must be provided by the foreign company.
E- Foreign purchasers of Iranian goods and services in the
export target markets
Note: The facilities shall be provided solely for the purpose of
purchasing Iranian goods and services.
Foreign investors who carry out their business activities within the framework
of the Incentive for Foreign Investment Act, enacted on March 10, 2002, by the
Islamic Consultative Assembly, if 30% of the investment capital needed for the
plan is provided by the foreign investor, subject to observing provisions of
article 80 of the Iranian Constitution.
Part Six – Expected Rate of Return
A- With respect to rate of return for manufacturing and investment plans,
subject of Part Four of this manual, pursuant to resolution passed by the
Fund's Board of Trustee, with respect to water and agricultural plans, rate of
return will be at least 5% and with respect to plans in other categories and
sub categories, the rate of return will be at least 10%.
Part Seven – Interest, Guarantee Bonds
Interest rate applicable to facilities granted for plans in private sector,
cooperatives, enterprises affiliated with non governmental institutions, with
due regard to the expected rate of return on the Fund's resources, and rate of
return on manufacturing and investment plans, will be as follow:
A- For general facilities: 6% per year
B- With respect to investment plans in the provinces of Lorestan,
Kordestan, Ilam, Sistan & Baluchestan, Bushehr, Hormozgan, Koh kolouyeh,
Bouyer Ahmad, North Khorasan, South Khorasan, and other under developed cities,
as enumerated on the attached list,
the interest rate will be 1% less than the rate of general facilities.
Note: With regards to the less developed areas, subject to this
paragraph, the base for judgement will the ratification no. H36095T/76354,
approved by the Cabinet on 01 July 2009. Any further changes by the Cabinet
about the mentioned list may be also applicable. Also, in cases where the name
of the town or district has been included in the respective list, it includes
all districts, urban areas and villages located within the boundary of that
C- With respect to facilities granted for water and agricultural plan:
1% less than the rate of general facilities for all areas of the country
D- Guarantee bond (late payment penalty) 4% per year over the interest
Note 1: If partial payment is made on the facilities, only the portion
that is not paid is subject to late payment.
Note 2: the interest rates mentioned in this section are applicable to
contracts made between applicants and agent bank in the Iranian calendar year
1391 (March 21, 2012 through March 20, 2013). New rates will be announced by
the board of trustee or Operating Board of Directors to agent bank annually.
Until the time the new rates are announced, the current rates will be
Note 3: the date for calculating the interest of the facilities of the
Fund with the agent bank shall be calculated based on the date when the
facilities were first withdrawn from the account of the Fund with the bank.
Part Eight – Requirements
A- Maximum amount foreign currency facilities granted for a plan will be
equivalent to foreign currency investment in the plan.
Note 1: Foreign currency investment in a plan, regardless of whether it
is fixed capital or working capital, will be provided out of the Fund's
resources – the facilities will be provided to applicant via agent bank within
the framework of foreign currency needed for the plan, over the period the plan
is carried out.
Note 2: Paying facilities from the resources of the Fund for importing
raw material, spare parts and tools required for the current projects, is
permitted with a maximum 10% of the ceiling of the agency agreement concluded
with each agent bank.
B- In order to use Fund's resources, the facilities applicant must
notify the agent bank as how resources of the plan in Iranian currency are
Note: The agent bank is obligated to provide necessary Rial resources for
the projects from its own resources and the asset of the applicant, in
accordance to Parts 5-7 of the Budget Law for the current Iranian year (started
C- Total facilities granted by agent banks, out of the Fund's resources,
to enterprises that are affiliated to non governmental public institutions,
should not exceed 20% of facilities allocated to an agent bank.
Note: If applications sent by an agent bank, in conjunction with an
enterprise that is affiliated to a non governmental public institution, exceeds
20% of the facilities allocated to that agent bank, in order to comply with sub
paragraph 4 of paragraph (Y) of the article 84 of the Act, the agent bank must
coordinate its actions with the Fund and any action taken in that regard must be
with the Fund's consent.
D- Pursuant to note # 2 under paragraph (T) , the facilities, subject of
this manual , must be granted in foreign currency only. Applicants are not
permitted to convert the foreign currency into Rial in the domestic market –
this issue must be emphasized on the contracts made between applicants and
agent banks. Proper enforcement guarantee must be obtained from the applicants
in this regard.
E- Permitted amount of facilities for real and natural entities will be
in accordance with the Bank regulations.
F- It is imperative for applicants to observe provisions of the
"Maximum Use of State's Technical, Engineering, Industrial Manufacturing
and Executive Capabilities Act, enacted on March 2, 1997". Provision of
the law must be stipulated clearly on the contract signed between applicant and
the agent bank.
G- Granting facilities to authorized companies is subject to the fact
that ratio of stock holders' equity to total company's asset, at any time is
not less than 20%.
Part Nine – Brought in Capital by the Applicant
A- Applicants' share, regardless of being natural or legal
entity, in each plan must be equivalent of 25% of the total plan's cost in Rial
and foreign currency (based on technical, financial and economical assessment
of the agent bank).
Note: The applicant may not use loaned resources related to the project
in order to bring capital.
B- With respect to projects in the cooperatives sector, the applicant's
brought in share must be equivalent to 20% of the total Rial and foreign currency
cost of the plan.
C- With respect to projects in the agriculture and water sectors, the
applicant's brought in share must be equivalent to 20% of the total Rial and
foreign currency cost of the plan.
D- With respect to projects that will be carried out in less developed
provinces of Iran (attached list), the applicant's brought in share should be
at least 15% of the total cost of the plan in Rial and foreign currency.
E- With respect to joint venture investments that take place between
Iranian and foreign partners under provisions of the Incentive for Foreign
Investment Act, the brought in share of applicants must be equivalent to 30% of
the total plan's cost (in Rial and foreign currency) which shall be in monetary
ad non monetary (such as machinery and equipment for the plan).
F- With respect to export plans, including goods, engineering and
technical services, the brought in share of applicants must be equivalent to
20% of the total plan's cost (in Rial and foreign currency).
Part Ten – Duration of Facilities
A- Time required for investment up to trial operation of the plan
will be maximum of 3 years- moratorium period will be maximum of 6 months –
repayment period, including the investment, operation and moratorium periods,
at the determination of the operative bank, will be maximum of 8 years.
Note 1: In special cases, when approved by the Operating Board of
Directors, the operative bank will be allowed to add maximum of 12 months to
the cooperation period and decrease the repayment period accordingly.
Note 2: With respect to facilities granted for projects to be carried
out in less developed provinces of Iran, as enumerated on the attached list,
the total repayment period will be 10 years and for the housing sector in all
areas it will be 12 years, maximum.
Note 3: With respect to facilities granted to those who are interested
in purchasing Iranian goods or services, subject of part 3 of paragraph
(T) of article 84 of the Fifth Economic Development Plan of the Islamic
Republic of Iran, total financing period will
be at most two years, and for exporting goods and technical-engineering
services subject of part 2 of paragraph (T) of article 84 of the Fifth Economic
Development Plan of the Islamic Republic of Iran, total financing period will
be at most eight years to be set by the agent bank depending on the quality of
Note 4: the total period of financial procurement for granting
facilities to capital in circulation subject to Note 2 of Paragraph A Part 8 of
this manual is maximum two years.
Note 5: Payment (out of the Fund's resources), for approved plans, by
the agent bank, must take place within the pillar (regulations) of the agent
bank. It must be paid out gradually, step by step, and in accordance with
actual physical progress of the plan.
B- With respect to repayment of the facilities, with due regard
to the plan's conditions, the agent bank will have the option to determine the
On facilities's due date, the agent bank must return the principle and interest
of the facilities to the National Development Fund, in the same currency that
it was paid out / letter of credit was opened for customer, within 10 working
days. Otherwise, guarantee bond, subject of part seven of this manual, will be
applicable to it. In case the applicant requested that the facilities to be
repaid in a currency other than the currency that the facilities was paid out,
the current rate of exchange will be applicable. But, in any case, the agent
bank must return the money to the Fund in the same currency that was paid out.
Note: In case the agent bank is late in returning the installments
to the Fund, pursuant to provisions of contract signed between the Bank and
Agent bank, and pursuant to paragraph D of the manual, the Central Bank of Iran
will be authorized to withdraw money from the resources of the agent bank for
principle, interest and guarantee bond.
D- With respect to repayment schedule, the agent bank will be authorized
to let the applicant repay the facilities in simple or adjustable installments,
subject to signing a contract with the applicant. With respect to adjustable
installments, the first installment may not be less than 30% of the last
E- In case the facilities is combination of facilities from (domestic
banks and Fund's resources), the contents of this manual will govern the
portion of the facilities (principle, interest, brought in capital, repayment
period, etc…) that is derived from the Fund. In this regard, the agent bank
will be authorized to apply its own rules and regulations to the portion that
is not derived from the Fund.
Part Eleven – Responsibilities of agent banks
A- The agent banks undertake to provide sufficient facilities in
their branches in Tehran, and center of provinces, to accept application forms
from investment applicants.
B- The agent banks undertake to hire sufficient skilled employees to
review submitted application forms from technical, financial and economic point
C- The agent banks undertake to evaluate worthiness of applicants and
rank them with respect to their credit history.
D- The agent banks undertake to evaluate rate of return of the plans.
The rate of return must not be less than the rate of return stipulated in part
E- The agent banks undertake to evaluate feasibility study report of the
plan with respect to technical, financial and economical aspects of the plan
F- The agent banks undertake to forward a summary of credit report
concerning approved feasibility study report, on respective forms sent by the
Fund, to the Operating Board of Directors.
G- The agent banks undertake to sign contract with applicant concerning
the financing of the plan.
H- The agent banks undertake to ascertain that the needed capital (in
Rial) is procured by the applicant, either through domestic resources of the
agent bank or any other means.
I- The agent banks undertake to schedule precisely the financing period
and repayment schedule and period of the facilities.
J- The agent banks undertake to precisely supervise the physical and
financial progress of the plans – in this regard the agent bank must submit a
progress report to the Operating Board of Directors, every three months.
K- Generally speaking, the agent bank undertakes to be responsible for
general risks associated with the facilities. The agent bank accepts to be
responsible for receiving installments from applicants and to be responsible
for repayment of the facilities on its due date (principle and interest) to the
L- The agent banks undertake to observe rules and regulations
promulgated by the Board of Trustees, or Operating Board of Directors of the
M- In order to prevent wastes and optimize the Fund's resources, the
agent banks undertake to consult with experts concerning validity of prices
indicated on proformas – In this regard agent banks must envision a provision
in their contract with applicant concerning reimbursement of damages sustained
by the agent bank if discrepancy is found and proven between the prices
indicated on proforma and actual price of that product.
N- The agent banks undertake to inform customers, at the time of signing
contract with them, as to how fluctuation in exchange rate can affect their
financing – and what measures they can take to cover those risks.
Part Twelve – Other Provisions
A- With respect to purchase of technology and importation of new (stock)
equipment, if information concerning those machinery and equipment conform to
technical standards, and when such information is confirmed by concerned
and when agent bank endorses such purchase – and when there is valid guarantee
covering the machinery and equipment - it is OK to finance the transaction
B- With respect to facilities provided to exporters, the facilities will
be provided on basis of transaction needs – on basis of credit worthiness of
applicant (preferably on basis of exports made by the respective division in
the past three years).
Note: Exporters who enter into contract with their own branch or
representative, or branch or representative of those purchasers, who indeed are
affiliated with them, are not eligible to receive facilities from the Fund.
C- With respect to facilities that are intended for export of Iranian
goods, services, engineering and technical services, financing will be provided
in foreign currency through letter of credit, transportation documents, or on
basis of financing contracts, work status report, or transportation documents
issued in the name of exporter, subject to confirmation by the agent bank.
D- With respect to currency rate exchange fluctuation, facilities
applicants may cover themselves through Article 72 of the Fifth Economic
Development Act of the Islamic Republic of Iran. If applicant fails to take
advantage of such protection, he/she will be responsible for consequences.
E- The Operating Board of Directors, by observing regulations contained
in this manual, will inform the public of availability of such facilities
through publicizing it in highly circulated newspapers.
With respect to other issues not addressed in this manual, provisions of the
Fund's articles of association, subject of article 84 of the Fifth Economic
Development Act of the Islamic Republic of Iran, provisions of monetary and
currency directives of the Bank, will be operative.