Please refer to SMEFD Circular No.16 dated November 2, 2010 on the captioned subject.

2. The captioned Scheme was introduced as part of Government’s policy for revival of agriculture activities and SBP relief measures for improving access to financing in flood affected areas. Under the scheme, financing is available at affordable/concessional mark-up rates through banks/DFIs for which a sum of Rs. 10 billion has been allocated. However, banks/DFIs have shown a rather dismal performance in utilizing the allocated funds. In order to improve access to finance for SMEs and farmers in flood affected areas, State Bank of Pakistan has decided to expand the scope of the said Scheme as under:

i) The Scheme will now also provide financing to the non-farm sector. Accordingly, Para 1(a)(i) is amended as under:

Agricultural credit shall mean “Farm Credit” and “Non-Farm Credit” for meeting production and working capital requirements, as defined under the Prudential Regulations for Agriculture Financing.

ii) Banks/DFIs shall repay the principal amount of refinance within 15 days of the due date(s), instead of 7 days. Accordingly, Para 5 (b) & (c) and 7 (b) of the Scheme are amended as under:

Para 5 (b) However, if a borrower repays the loan amount, in part or in full, before the due date(s), banks/DFIs shall be required to repay the amount(s) so received within fifteen working days to the SBP-BSC (Bank), failing which a fine will be recovered from the concerned bank/DFI for the late adjustment of the loan, at a rate specified by the SBP.

Para 5(c) The refinance granted by SBP-BSC offices to the banks/DFIs shall be recovered within fifteen days of the due dates as reported to the office from the account of the banks/DFIs maintained with the respective office of the SBP-BSC (Bank). In case the borrowers fails to repay the amount of loan/installment in line with agreed dates, the bank/DFIs will be entitled to charge the normal rate of mark up on such overdue principal amount, besides taking other actions for recovery as incidental to such defaults. Under no circumstance will the liability of banks/DFIs to pay/repay SBP BSC the principal amount of refinance, or mark up or any other charges or penalty thereon shall be dependent upon recovery of such amounts from the borrower, nor shall such liability be affected by any default on the part of the borrower.

Para 7 (b) In case banks/DFIs fail to deposit to the concerned office of SBP-BSC the loans installment/amount received from the borrower within fifteen working days of the due date as mentioned in Para 5(b) above, late adjustment fine will be charged from the concerned bank/DFI at the rate of paisas 60 per day per Rs 1,000 or part thereof.

iii) The validity of the Scheme has been extended to November 30, 2012.

3. Primary objective of the Scheme is revival of agriculture activities in flood affected areas, therefore, banks/DFIs would not provide more than 25% loans to non-farm sector, out of limit sanctioned for agricultural financing under the Scheme.

4. Refinance limits already sanctioned in favour of selected banks for agriculture and SMEs under the Scheme, for FY 2010-11 will continue to be available up-to expiry date of the Scheme. They can also apply for enhancement of limits after utilization of their existing limits. Further, other interested banks/DFIs, having branches in flood affected areas, may also apply to IH&SME Finance Department for sanctioning of fresh limits under the Scheme separately for agriculture and SMEs.

5. Other terms and conditions of the Scheme remain unchanged.