i. The banks will ensure that the financing facilities extended to their borrowers are strictly utilized for the purpose for which they have been granted. Special efforts may be made to ensure that the facilities availed for purposes other than wheat procurement are not utilized for financing of wheat stocks.

ii. Loans provided to the private sector will be for the procurement of fresh indigenous wheat only. These loans will be repayable on or before 31st December, 2008 positively. Non compliance of the requirement of SME & MFD Circular No.01 dated 26-01-2007 regarding adjustment of loans disbursed during the year 2007 would make the prospective borrowers disentitled to avail financing for procurement of wheat during 2008.

iii. Fresh financing to the eligible borrowers for procurement of wheat during 2008 shall start from commencement of wheat procurement season 2008 in respective provinces. This financing will be subject to minimum cash margin requirement of 25% of the value of the wheat stock. Banks shall not provide any financial facilities (funded or non- funded) to enable borrowers to meet the margin requirements.

iv. Banks will provide financing facilities against pledge of fresh wheat stock only and shall not extend funds to the private sector for procurement of wheat against hypothecation / charge of moveable or immovable property.

v. Banks will determine the rate of markup on lending to the private sector for the purposes of wheat procurement depending upon the risk profile of each borrower. As lending to the government agencies for wheat procurement is secured against government guarantee, it is expected that the related markup rate would be competitive in comparison to the rate charged to the borrower in private sector.

vi. Banks will not entertain any application for grant of fresh loans after 30th June, 2008 for procurement of wheat. However, banks may provide financing facility to functional flour mills for purchase of indigenous wheat from the licensed wheat traders, who have procured wheat during the procurement season and respective Food Department against supply of wheat by them. Quantum of such loan shall not be more than the value of wheat to be supplied by the respective Food Department or actual purchase from wheat traders commensurate to the milling capacity of each mill. Banks will also monitor that existing stock of wheat purchased by the concerned functional flour mill has been grinded and that the by-products of wheat viz. flour, meada , sujee etc, financed against bank loan have also been released to the market gradually to repay the loans so obtained. Financing against by-products of wheat shall also be subject to the cash margin of 25%.

vii. Banks are also allowed to provide facilities for wheat procurement by the seed processing plants, in line with their lending policies and the capacity/production plans of the seed processing plants. However banks may ensure that such stock of wheat will be used for processing purposes.

viii. Banks will ensure that no revaluation of the pledged stock is considered for release of any differential amount to the borrowers against stock of wheat pledged with the banks.

ix. The banks shall be under obligation to immediately recall the advances allowed to the private sector in case of hoarding of wheat by the functional flour mills. Therefore, while executing financing agreement by the banks with their borrowers, banks will clearly spell out that loans can be recalled before agreed repayment / due date, upon receipt of directives from the State Bank as and when it is deemed necessary to curb hoarding. Banks will also ensure that no financing is allowed by them to the flour mills for retirement of the loans availed from other banks.

x. Banks will ensure that weekly stock report for the wheat held by functional flour mills and pledged with the bank is inspected periodically. Report on the inspection should be submitted regularly to this department, within 07 days from the close of the month to which it relates, indicating the name of the party, location of its godown etc as per enclosed format (annexure A). The SBP would also verify the authenticity/genuineness of such inspection reports through its Banking Inspection Department and any concealment of the fact or misstatement in this regard shall attract penalties under the BCO, 1962. Banks will also ensure that the wheat stock is gradually released to generate cash resources for the purpose of repayment of bank loan.

xi. Banks will continue to submit a weekly statement in respect of financing to private sector for wheat procurement as per the format attached herewith (annexure B) within seven days from the close of the relevant week. Delay in submission / and or misreporting of data reported to SBP will attract penal provision under BCO, 1962.

xii. The lending shall be in compliance with the Prudential Regulations and other instructions of SBP issued from time to time.

Any violation of SBP instructions would attract penal provisions under BCO, 1962.

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Encl. as above: