In order to revive agricultural activities and facilitate the flow of fresh credit in the Flood Affected Areas , State Bank of Pakistan is introducing a concessional financing scheme through banks for agri. production/working capital finance to Farmers and Small & Medium Enterprises (SMEs) in districts affected by flood of 2014, as reported by National Disaster Management Authority.
Under the scheme financing will be provided at affordable/concessional mark-up rates through banks/DFIs for which Rs. 10 billion has been allocated. The details of the Scheme are as under:-
1. Agricultural Production Loans to Farmers
a. Scope / Eligibility Criteria
i) 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) All categories of farmers (owners, owner-cum-tenants and tenants) of the specified areas will be eligible for agricultural loans under the Scheme.
iii) Banks shall provide agri. loans to farmers as per their Lending Policy approved by their Board of Directors and SBP Rules & Regulations.
iv) Banks are encouraged to arrange for insurance of the 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 repayment of the principal amount will be based on the cropping cycle up-to a maximum period of one year.
ii) The borrowing limit of farmer shall be fixed by the bank keeping in view credit requirements, cash flows, repayment capacity, risk profile of the borrower, etc.
2. Short Term Loans to the SMEs
a. Banks may provide Short-Term Loans to SME borrowers, as defined in Prudential Regulations for SMEs in Flood Affected Districts.
b. Banks shall provide financing facilities as per their lending policies approved by their Board of Directors and SBP rules & regulations.
c. Banks shall provide short term loans for working capital requirements of SMEs for a maximum period of one year.
d. The borrowing limits of SMEs shall be fixed by the banks keeping in view credit requirements, cash flows, repayment capacity, risk profile of the borrower, etc. within the maximum limit prescribed under Prudential Regulations for SMEs.
3. Rate of Mark-up
Refinance under the Scheme shall be provided to the banks at 5.0% p.a. The banks shall be permitted to charge a maximum spread of 3.0% p.a. from the borrowers. Therefore, credit to SMEs/farmers will be available at 8.0% p.a.
4. Grant of Refinance
a. The State Bank shall provide refinance in terms of Sections 17 (2) (b) and (d) read with section 22 of State Bank of Pakistan Act, 1956 as amended from time to time.
b. Limits shall be allocated to individual banks under this Scheme having branches involved in SME / agri. lending in eligible areas. Interested banks/DFIs may send their request for sanctioning of limit for current financial year to Director, I.H.& SME Finance Department separately for SMEs and agriculture finance.
c. The banks can approach SBP-BSC (Bank) offices for availing the refinance facility under the Scheme on Weekly Basis, once limits are approved and communicated to the banks concerned.
d.Refinance shall be allowed to the banks by SBP BSC (Bank), offices on submission of documents as may be required by State Bank. The documents initially required are attached herewith.
5. Repayment of Loans
a. Principal amount of loans under the scheme shall have to be repaid on agreed date between bank and the borrower within a maximum period of one year.
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.
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 borrower 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.
d. Mark-up shall be paid on quarterly basis in case of financing to SMEs. However, mark up on agri. loans shall be paid on half yearly basis.
6. Other Terms and Conditions
a. Financing facilities already extended and outstanding shall not be eligible for refinance /debt swap.
b. Financing under the Scheme shall be subject to compliance with all the rules and regulations including Prudential Regulations for SMEs and Agriculture Financing.
c. 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.
d. The bank shall obtain an undertaking from the borrower that the disbursed amount shall be utilized strictly for the purpose it has been granted.
e. 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.
f. Refinance shall be provided on the basis of certification/confirmation by the Internal Audit/ SME/Agri Head/Business Chief of the financing bank that the loan is within the terms and conditions laid down in the Scheme.
g. Financing under the Scheme shall be checked/verified by SBP’s Banking Inspection Department (BID)/ SBP-BSC Bank to ensure that the same have been allowed as per the terms and conditions of the Scheme.
7. Fines
a. 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.
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.
8. Above Scheme shall be effective from the date of issuance of this Circular and shall remain valid only up-to December 31, 2015. However, outstanding refinance shall be recovered on the maturity of respective loans.
Encl: Documents