In order to discourage hoarding of sugar, banks/DFIs are advised to ensure meticulous compliance of the following instructions with immediate effect:

i. All existing loans / advances against the security of sugar stock (disbursed before the crushing period of 2008) shall be fully adjusted latest by 31st March, 2009. Furthermore, loans / advances against fresh stock (disbursed after start of crushing period 2008) shall also be fully adjusted latest by 31st July, 2009. Any renewal / fresh disbursement of such loans / advances shall be made only after a clean up period of at least one month after the adjustment of loan.

ii. All renewals/fresh disbursements of financing facilities against sugar stock shall henceforth be subject to a minimum cash margin of 50%. The banks/DFIs shall not finance the cash margin themselves.

iii. No fresh financing / renewal will be allowed against hypothecation of sugar stocks.

iv. Banks / DFIs will monitor the position of pledged sugar stocks and ensure that the release of pledged stock should result in corresponding reduction in outstanding loans / advances.

2) The above instructions shall not be applicable to financing facilities provided to Trading Corporation of Pakistan.

3) In order to enable State Bank to monitor the situation, all banks/DFIs shall submit the position of their outstanding loans / advances against sugar stock on fortnightly basis to this Department on the enclosed format within three (3) days of the end of each fortnight.

4) Any violation of the above instructions shall attract punitive action under the relevant provisions of the Banking Companies Ordinance, 1962.

Please acknowledge receipt.

 

Encl: As above