KARACHI: The State Bank of Pakistan (SBP) has launched a concessional financing and guarantee scheme, under which Rs500 million have been allocated to encourage farmers to sow canola in the flood-affected areas of the country in the current Rabi season, a bank statement said on Tuesday.
According to a circular issued by the central bank, the scheme financing will be provided at affordable and concessional mark-up rates through banks. The banks and Zarai Taraqiati Bank Limited (ZTBL) have been allowed to obtain refinance facility to finance the farmers of the notified flood-affected areas, it said.
Refinance under the scheme will be provided to the banks at five percent per annum, while the banks will be permitted to charge a maximum spread of three percent per annum from the borrowers, therefore, credit to farmers will be available at eight percent per annum, the circular said.
This scheme will remain valid up to October 31, 2011, it added.
The new scheme is in line with the government policy for revival of agriculture activities and the SBP relief measures to improve access to financing in the flood-affected areas, the statement said.
“In this regard, it is expected that MINFA (Federal Ministry of Food and Agriculture) and provincial agriculture departments would ensure timely availability of hybrid seeds, fertiliser, pesticides and on ground technical guidance to the farmers,” it added.
Under the scheme, agricultural credit will be provided to the farmers for canola cultivation in 17 affected districts as identified by the ministry. Out of the 17 districts, six districts are of Punjab (Layyah, Muzaffargarh, Rajanpur, Rahim Yar Khan, Multan and D G Khan), four districts from Khyber-Pakhtunkhwa (Nowshera, Charsadda, D I Khan and Peshawar), four from Sindh (Sukkur, Naushero Feroz, Benazirabad and Larkana) and three districts from Balochistan (Nasirabad, Jaffarabad and Jhal Magsi).
“Agricultural credit shall mean only farm credit for meeting the production and working capital requirements as defined in the Prudential Regulations for agriculture financing, while all categories of farmers (owner, owner-cum-tenant and tenant) of the specified areas will be eligible for agricultural loans under the scheme,” the circular said.
It said the tenor of the crop production loans and its repayment will be based on the cropping cycle up to a maximum period of six months, while there will be no maximum limit for borrowing by the farmers under this scheme.
However, the borrowing limit of farmer would be fixed by the bank, keeping in view the production cost, cash flows, repayment capacity, risk profile of the borrower, etc, it said.
The principal amount of loans under the scheme would have to be repaid on the agreed date between the bank and the borrower, however, not later than 60 days from the date of harvest of the crop, it said.
The banks would not take more than five working days in evaluating an application for credit under the scheme from the date of receipt of complete information from the borrower, it said.
“Where the request is declined, the bank will explicitly apprise the applicant reasons for rejecting the application,” the circular said.
The central bank would share bona fide losses to the extent of 30 percent, out of which 50 percent claims of losses would be reimbursed by the SBP when the loan is categorised as doubtful and the remaining 50 percent at the time of loss.
The claims would be submitted to the State Bank of Pakistan on semiannual basis, ie, April 30 and October 31 duly verified/certified by the bank’s internal audit.
“However, this reimbursement shall not obviate the lending institutions from the right of recovery of the defaulted amount,” the circular added.