It
has been decided that, with a view to ensure participation
of the private sector in the wheat procurement during
the wheat procurement season 2008-09 (year 2009), banks
will continue to provide financing facilities to their eligible borrowers (licensed functional flour
mills only) for procurement of indigenous wheat
strictly (from fresh wheat crop 2009 ) subject to the
following conditions: -
i. The banks will ensure that the financing facilities extended
to their borrowers are strictly utilized for the purpose
for which they have been granted. Special efforts may
be made to ensure that the facilities availed for purposes
other than wheat procurement are not utilized for financing
of wheat stocks.
ii. Loans provided to the private sector will be for the
procurement of fresh indigenous wheat only. These loans
will be repayable on or before 31st January 2010 positively.
Non compliance of the requirement of MFD Circular No.01
dated 11-03-2008 regarding adjustment of loans disbursed
during the year 2008 would make the prospective borrowers
disentitled to avail financing for procurement of wheat
during 2009.
iii. Fresh financing to the eligible borrowers for procurement
of wheat during 2009 shall start from commencement of
wheat procurement season 2009 in respective provinces.
This financing will be subject to minimum cash margin
requirement of 10% of the value of the wheat stock. Banks
shall not provide any financial facilities (funded or
non- funded) to enable borrowers to meet the margin requirements.
iv. Banks will provide financing facilities against pledge
of fresh wheat stock only and shall not extend funds
to the private sector for procurement of wheat against
hypothecation / charge of moveable or immovable property.
v. Banks will determine the rate of markup on lending to
the private sector for the purposes of wheat procurement
depending upon the risk profile of each borrower. As lending
to the government agencies for wheat procurement is secured
against government guarantee, it is expected that the
related markup rate would be competitive in comparison
to the rate charged to the borrower in private sector.
vi. Banks will not entertain any application for grant of
fresh loans after 30th June, 2009 for procurement of
wheat. However, banks may provide financing facility
to functional flour mills for purchase of indigenous
wheat from the licensed wheat traders, who have procured
wheat during the procurement season 2009 and respective
Food Department against supply of wheat by them. Quantum
of such loan shall not be more than the value of wheat
to be supplied by the respective Food Department or
actual purchase from wheat traders, commensurate to
the milling capacity of each mill. Banks will also monitor
that existingstock of wheat purchased by the concerned
functional flour mill, has been grinded and that the
by-products of wheat viz. flour, meada, sujee etc, (financed
against bank loan) have also been released to the market
gradually to repay the loans so obtained. Financing
against by products of wheat shall also be subject to
the cash margin of 10%.
vii. Banks are also allowed to provide facilities for wheat
procurement by the seed processing plants, in line with
their lending policies and the capacity/production plans
of the seed processing plants. However banks may ensure
that such stock of wheat will be used for processing purposes.
viii. Banks will ensure that no revaluation of the pledged
stock is considered for release of any differential
amount to the borrowers against stock of wheat pledged
with the banks.
ix. The banks shall be under obligation to immediately
recall the advances allowed to the private sector in case
of hoarding of wheat by the functional flour mills. Therefore,
while executing financing agreement by the banks with
their borrowers, banks will clearly spell out that loans
can be recalled before agreed repayment / due date, upon
receipt of directives from the State Bank as and when
it is deemed necessary to curb hoarding. Banks will also
ensure that no financing is allowed by them to the flour
mills for retirement of the loans availed from other banks.
x. Banks will ensure that weekly stock report for the wheat
held by functional flour mills and pledged with the
bank is inspected periodically. Report on the inspection
should be submitted regularly to this department, within
07 days from the close of the month to which it relates,
indicating the name of the party, location of its godown
etc as per prescribed format. The SBP would also verify
the authenticity/genuineness of such inspection reports
through its Banking Inspection Department. Banks will
also ensure that the wheat stock is gradually released
to generate cash resources for the purpose of repayment
of bank loan.
xi. Banks will continue to submit a weekly statement in respect
of financing to private sector for wheat procurement as
per prescribed format within seven days from the close
of the relevant week. Delay in submission and / or misreporting
of data to SBP will attract penal action under BCO, 1962.
xii. The lending shall be in compliance with the Prudential
Regulations and other instructions of SBP issued from
time to time.
Any violation of SBP instructions would attract penal
provisions under BCO, 1962.
Please acknowledge receipt.