Please refer to BPD Circular N0.4 dated 9th June 2006 on the captioned subject.

2. In this connection, banks/DFIs are advised that:

a) The deadline for adjustment of financing facilities against the security of sugar stock (pledged/hypothecated) is being extended up to 31st October 2006 but only for those facilities whose expiry date is after 31st July 2006.

b) Banks/DFIs should ensure a minimum decline of one-third every month in their outstanding against security of sugar stock so that full adjustment is made by the above deadline.

c) Banks/DFIs would observe a cleanup period of at least one month after the settlement of each loan.

d) The progress of the banks/DFIs in this respect will be closely monitored by State Bank through weekly statements which should clearly indicate a decline in both stock & outstanding liabilities. The weekly statement should be submitted within three (3) working days of the end of the reporting week as per format already circulated vide BPD Circular No. 4 dated 9th June 2006.

e) The above directions and instructions conveyed through BPD Circular No. 4 dated 9th June 2006 shall not be applicable on financing against the security of molasses, ethanol, etc. and financing provided to Trading Corporation of Pakistan.

3. The banks/DFIs are allowed to extend financing facilities against the securities of imported sugar without the requirement of 50% cash margin. But, such financing shall be adjusted within 45 days of the disbursement of funds. In order to avoid the misuse of this relaxation, banks are required to obtain and retain sufficient documentary evidence in order to establish that the pledged sugar was imported after 9th June 2006.

4. The contravention of the above directions or instructions conveyed through BPD Circular No. 4 dated 9th June 2006 will attract penal action under the relevant provisions of BCO, 1962.

5. Other instructions on the subject shall, however, remain unchanged.

Please acknowledge receipt.