In
line with the Government of Pakistan policy for revival
of agriculture activities and SBP relief measures for
improving access to financing in flood affected areas,
it has been decided to launch a concessional financing
scheme to encourage farmers to sow canola in the flood
affected areas in Rabi season. In this regard it is
expected that MINFA and Provincial Agri. Departments
would ensure the timely availability of hybrid seeds,
fertilizer, Pesticides and on ground technical guidance
to the farmers.
2.
Under the scheme financing will be provided at affordable/concessional
mark up rates through banks. The banks and Zarai Taraqiati
Bank Limited (ZTBL) are allowed to obtain following
refinance facility to finance the farmers of notified
flood affected areas. An amount of Rs. 500 million has
been allocated under the scheme.
3.
The loans extended under the scheme shall also be covered
under credit guarantee scheme, where SBP would share
bonafide losses of banks to the extent of 30%.
a.
Scope / Eligibility Criteria
i.
Agricultural credit shall be provided to the farmers
for Canola Cultivation in affected districts/regions
as identified by MINFA under the Scheme (Schedule
1).
ii. Agricultural credit shall mean only 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. Banks 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 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 up-to a maximum
period of 6 months.
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 production cost, cash flows, repayment capacity,
risk profile of the borrower, etc.
c.
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 farmers will be available at
8% p.a. under the Scheme.
d.
Grant of Refinance
i.
The State Bank shall provide refinance in terms
of Section 17 (2) (b) read with section 17 A (2)
(d) and section 22 of State Bank of Pakistan Act,
1956 as amended from time to time.
ii. Limits shall be allocated to individual banks
under this Scheme having branches involved in agri.
lending in eligible areas. Interested banks may
send their request for sanctioning of limit for
current financial year to the Director, SME Finance
Department, within 7 days of issuance of circular.
iii. 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.
iv. 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.
e.
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, not later than 60 days
from the date of harvest of the 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 seven
working days to the SBP-BSC (Bank), 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 refinance granted by SBP-BSC, offices to
the banks shall be recovered within seven 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.
iv. Mark-up shall be paid on maturity of loan.
f.
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. 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 finance facility the borrower is required
to submit application on simple paper along with
D.P. Note on prescribed format.
v. 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.
vi. 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.
vii. 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.
g.
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 the concerned
office of SBP-BSC the loans installment/amount received
from the borrower before the due date within seven
working days as mentioned in Para (e ) 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.
h.
Sharing of Bona-fide Losses
Bonafide losses incurred by the banks due
to non-recovery of an agricultural production loan
made under the scheme, as proved to the satisfaction
of the State Bank of Pakistan, and fulfilling the
following conditions, would be shared to the extent
of 30% 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.
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. 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.
i.
Payment of Claims under the Guarantee Scheme:
Under the Scheme, SBP would share bonafide losses
to the extent of 30% out of which 50% claims of losses
shall be reimbursed by the SBP when the loan is categorized
as doubtful and the remaining 50% at the time of loss.
Claims shall be submitted to Agriculture Credit Department,
State Bank of Pakistan on semiannual basis i.e April
30th and October 31st duly verified/certified by the
bank’s internal audit. However, this re-imbursement
shall not obviate the lending institutions from the
right of recovery of the defaulted amount. The banks
shall continue with their regular procedure for recovery
of loan and status shall be reported to the Agricultural
Credit Department, SBP on yearly basis. As soon as
the loan is recovered, the bank shall be obliged to
return the proportionate share of SBP. A recovery
from a delinquent borrower after reimbursement of
claim of loss by SBP is to be treated as recovery
of principal and costs incurred on recovery efforts
will not be shared by SBP.
j.
Monitoring of the Guaranteed Portfolio:
To ensure compliance with the objectives of the guarantee
fund and avoid adverse selection problems on part
of banks, the Banking Inspection Department of State
Bank will review the guaranteed loan portfolios of
banks during their regular and special inspection
of the banks.
k.
Interpretation:
If any question arises in regard to the interpretation
of any of the provisions of the Scheme or of any directions
or instructions or clarifications given in connection
therewith, the decision of the SBP shall be final.
5. Above Scheme shall be effective from the date of
issuance of this Circular and shall remain valid only
up-to October 31, 2011.