Circulars/Notifications  

 SMEFD Circular No. 18 of 2009
November 06, 2009 

The Presidents/ Chief Executives,
All Banks,

Dear Sirs/ Madams,

Agri. Loans Refinancing & Guarantee Scheme
for War Affected Areas of NWFP and FATA


To facilitate farmers of affected areas of NWFP and FATA for obtaining fresh loans from banks to resume agricultural activities, it has been decided that banks except Zarai Taraqiati Bank Limited (ZTBL) are allowed to obtain following refinance facility against their agri. production / working capital loans to the farmers of Swat, Lower Dir, Upper Dir, Malakand, Bunner, Chitral and Shangla districts of NWFP and FATA for the purpose of agricultural activities. SBP shall share up to 50% of bonafide losses of banks against the loans funded under the scheme. Details of the scheme are as under: -

a. Scope / Eligibility Criteria
i) Agricultural credit shall be provided to the farmers in affected districts/regions of NWFP and FATA (Schedule 1) under the Scheme.
ii) Agricultural credit shall mean only farm and non-farm credit for meeting the production/working capital requirements, as defined in Prudential Regulations for Agriculture Financing.
iii) All categories of farmers (owner, owner-cum-tenant and tenant) of the specified areas will be eligible for agricultural loans under the Scheme.
iv) Bank shall provide agri. loans to farmers as per their credit policy and SBP regulations.
v) Banks are encouraged to arrange for the insurance of loans provided under the scheme and mandatory crop loan insurance for five major crops viz. wheat, rice, cotton, sugarcane and maize to avoid risk of losses due to natural calamities.

b. Tenor and Size of Loans
i) Tenor of the crop production loans and its repayment will be based on the cropping cycle. For other farming activities working capital will be provided for a maximum period of one year.
ii) There will be no maximum limit for borrowing by the farmers under this Scheme. However, the borrowing limit of farmer shall be fixed by the bank keeping in view credit requirements, cash flows, repayment capacity, profile of the borrower, etc.

c. Rate of Mark-up
Refinance under the Scheme shall be provided to the banks at 6.0% p.a. The banks shall be permitted to charge a maximum spread of 2.0% p.a. from the borrowers availing credit under the Scheme.

d. Bank-wise Refinance Limits
i) Yearly limits shall be allocated to individual banks under this Scheme having branches involved in agri. lending in eligible areas.
ii) The limits shall be allocated for each fiscal year from 1st July to 30th June, which will be reviewed on quarterly basis.
iii) Applications for sanction of limits for each fiscal year (July-June basis) shall be sent by the interested banks to the Director, SME Finance Department, SBP latest by 15th May each year to facilitate sanction of annual limits at the earliest. For the current year the request for sanction of limits may be submitted within 15 days from the issuance of this circular.

e. Grant of Refinance
i) The State Bank shall provide refinance in terms of Section 17 (2) (b) read with section 17 A (d) and section 22 of State Bank of Pakistan Act, 1956 as amended from time to time.
ii) The banks can approach SBP-BSC (Bank), Peshawar for availing the refinance facility under the Scheme on bimonthly basis.
iii) Refinance shall be allowed to the banks by SBP BSC (Bank), Peshawar on submission of documents as may be required by State Bank. The documents initially required are attached herewith.

f. Repayment of Loans
i) Principal amount of loans under the scheme shall have to be repaid on the agreed date between bank and the borrower, however, in case of crop production loans it may not be later than days 60 days from the date of harvest of respective crop.
ii) However, if a borrower repays the loan amount or its installment, in part or in full, before the due date(s), the banks shall be under obligation to repay the amount(s) so received within fifteen working days to the SBP-BSC (Bank), Peshawar failing which fine for late adjustment of loan will be recovered from the concerned bank, at the rate specified by the State Bank.
iii) The bank shall obtain an undertaking from the borrower that the disbursed amount shall be utilized strictly for the purpose it has been granted.
iv) To avail refinance facility the borrower is required to submit application on simple paper along with D.P. Note on prescribed format.
v) The refinance granted by SBP-BSC, Peshawar to the banks shall be recovered within 15 days of the due dates as reported to the office from the account of the banks maintained with the respective office of the SBP-BSC (Bank). In case the borrowers fail to make repayment of the amount of loan/installment as per agreed dates, the bank will be entitled to charge normal rate of mark up on such overdue principal amount besides taking other actions to recover the same as are incidental to such defaults. In no case the liability of banks to pay/repay to SBP BSC, the principal amount of refinance, or mark up or any other charges or penalty thereon shall be dependent upon the recovery from the borrower, nor shall such liability be affected by any default on the part of the borrower.
vi) Mark-up shall be paid on half yearly/quarterly basis

g. Other Terms and Conditions
i) Financing under the Scheme shall be subject to compliance with all the rules and regulations including Prudential Regulations for Agriculture Financing.
ii) Banks shall not take more than 5 working days in evaluating an application for credit under the Scheme from the date of receipt of complete information from the borrower. Where the request is declined, the bank will explicitly apprise the applicant reasons for rejecting the application.
iii) Banks shall ensure fulfillment of requisite pre-disbursement formalities by the borrower through due diligence as per their own internal arrangements to avoid malpractice and mis-utilization of funds under the Scheme.
iv) Refinance shall be provided on the basis of certification/confirmation by the Internal Audit/Agri Head/Business Chief of the financing bank that the loan is within the terms and conditions laid down in the Scheme.
v) Financing under the Scheme shall be checked/verified by our Banking Inspection Department (BID)/ SBP-BSC Bank to ensure that the same have been allowed as per the terms and conditions of the Scheme.
vi) Mandatory crop loan insurance for five major crops viz. wheat, rice, cotton, sugarcane and maize. In addition, banks are encouraged to arrange for the insurance of loans provided for all other agri. production/ working capital financing. In case of hypothecated stocks/ assets, they should be comprehensively insured from reputed insurance company or group of companies.

h. Fines
i) In case of violation of the terms & conditions of the Scheme, the State Bank reserves the right to recover the amount of refinance granted to the bank along-with fine at the rate of Paisa 60 per day per Rs 1000/- or part thereof.
ii) In case, bank fails to deposit to SBP-BSC, Peshawar the loans installment/amount received from the borrower before the due date within fifteen working days as mentioned in Para f (ii) above, late adjustment fine will be charged from the concerned bank at the rate of Paisa 60 per day per Rs 1,000 or part thereof or prospectively at such rate as may be announced by the State Bank from time to time.

i. Sharing of Bona-fide Losses
Bonafide losses incurred by the banks due to non-recovery of an agricultural production/ working capital loan made under the scheme, as proved to the satisfaction of the State Bank of Pakistan, and fulfill the following conditions, would be guaranteed upto 50% in terms of Section 17D(2) of the State Bank of Pakistan Act:-
i) Loans have been given strictly in accordance with the provisions of the Scheme and in accordance with SBP Regulations
ii) All formalities required prior to the sanction and disbursement of loans have been meticulously observed; and
iii) The bank shall exercise the due diligence in recovering dues in all possible manners in respect of any guaranteed account as it might have exercised in the normal course if no guarantee had been provided.
iv) All efforts for recovery of loans including legal remedies viz. filing of recovery suit have been taken by the bank
v) The payment of guarantee claim by SBP to banks shall not in any way affect their right to recover the defaulted amount from the borrowers. The banks shall exercise all the necessary precautions and initiate such actions as deem necessary for recovery of the defaulted amount.
vi) The bank shall promptly repay the amounts subsequently recovered from the borrower to SBP under the guarantee scheme.

j. Procedure for Claims
Claims of bonafide losses in respect of agricultural production/ working capital loans granted by banks under the scheme and have been classified as loss under the PRs for Agricultural financing shall be submitted to Agricultural Credit Department, State Bank of Pakistan on annual basis i.e. by 31st January each year duly verified/ certified by the bank’s Internal Audit on the format given below:-

Year of Disbursement
Total amount of Production/ Working Capital Loans Disbursed During the Year
Amount of Outstanding Loans (Principal) Classified as Loss (December)
Amount of Loans (Principal) Considered as Absolutely Unrecoverable
       


The claims of losses against absolutely unrecoverable loans will be reimbursed by SBP subject to post verification by Banking Inspection Department in their regular On-site Inspection / specialized inspection of the bank.

2. Above Scheme shall be effective from the date of issuance of this Circular and shall remain valid only up-to December 31, 2012.


Encl: (i) Schedul-1 (ii) Documents

 

Yours faithfully,


(Mansoor H. Siddiqui)
Director

 


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