Circulars/Notifications - Banking Supervision Department  
 BSD Circular Letter No. 33
December 3, 2001  

ALL Banks. 

Dear Sirs, 

Deregulation of Wheat Trade 

 

As your are aware that there has been a shift in the Government Policy for procurement/import of essential commodities including wheat to the market mechanism wherein the Government has decided to entrust the work relating to wheat procurement and storage to the private sector. In this regard, the Government as also SBP is taking all measures for the smooth transition of the business from the public sector to private sector, especially for wheat procurement and storage capacity. It has been noted that at present, the private sector does not have the required resources for procurement and storage of wheat. To ensure that the transition to procurement of wheat by private sector is accomplished smoothly, without causing any inconvenience to the general consumers, following guidelines are issued to banks for providing financial facilities to private sector for wheat procurement/storage: 

                              i.        The banks will provide credit to private sector for wheat procurement under Commodity Operations at 12% mark up rate to the eligible flourmills for the initial year. The lending rates shall subsequently be made market based on their linkage with rates on T-Bills. 

                             ii.        In order to assess the credit risk, the banks would have a direct interaction with the borrowers and the Flour Mill Association would ensure cooperation in this regard so that banks are able to complete their credit approval / appraisal process and legal documentation required for this purpose. 

                           iii.        For the purpose of enhancement in the wheat storage capacity in the private sector banks will provide adequate funds for a maximum period upto 7 years for the construction of silos, and other structures that can serve as a storage area for wheat at a debt equity ratio of 60:40 at normal lending rates. The banks would ensure that the transactions are viable and their exposure is secured adequately. The banks may like to approach Ministry of Food Agriculture & Live Stock (MINFAL) who would prepare standardized models for construction of storage facilities (of various sizes / types). 

Please acknowledge receipt. 

 



Yours faithfully,
(Kazi Abdul muktadir)
Director
       
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