In order to develop the agricultural produce marketing and enhance storage capacity SBP has decided to float a Scheme for “Financing Facility for Storage of Agricultural Produce (FFSAP)” to encourage Private Sector to establish Silos, Warehouses and Cold Storages. The salient features of the FFSAP Scheme are as under: .

1. Scope of the Scheme:

i) The financing shall be available on long term basis for establishment, expansion and balancing, modernization & replacement (BMR) of Steel/Metal/Concrete Silos, Warehouses & Cold Storage facilities for storing agricultural produce.

ii) Financing facilities shall be available for:-

(a) Purchase of new imported & locally manufactured plant & machinery, equipments and accessories thereof, to be used in Steel/Metal/Concrete Silos, Warehouses and Cold Storages. Detail of machinery given in Annexure –I.

(b) Purchase of new generators. The capacity of generator shall, however, not be in excess of in-house energy requirements of the Silos/Warehouses / Cold Storages.

(c) Upto 65% cost of entire civil works.

2. Tenor and size of Loans:

i) Financing shall be available for a maximum period of seven years including a maximum grace period of six months.

ii) In case financing is provided on staggered basis, maximum period of financing shall start from the date of disbursement of 1st installment.

iii) Maximum financing of banks / DFIs to a single project shall not exceed Rs 500 million under the Scheme. However, banks/DFIs may provide financing facilities over and above the said maximum limit from their own sources, keeping in view their internal policies.

iv) In case of financing requirements exceeding Rs 200 million, banks/DFIs are encouraged to provide finance under consortium arrangements.

v) Entire financing shall be subject to the adherence of all rules & regulations issued by SBP from time to time.

3. Rates of Service Charges:

i) The rate of service charges at which SBP will provide refinance to the banks shall be determined on the basis of average of weighted average yields of last two auctions of 3, 5 and 7 years PIBs, subject to the following:-

(a) The service charges shall be adjusted on six monthly basis.

(b) The rates once fixed shall remain locked-in for the entire duration of the loan, provided the borrowers continue to repay on due dates as per repayment schedule. In case new rates are lower, then benefit will be passed on to the borrowers.

(c) Where financing to a project is provided on staggered basis, each installment shall attract the rate of finance / refinance applicable on the date of disbursement of installment by the bank.

ii) For the financial year 2009-10 following service charges and rates for end users have been fixed which are lower than as worked out under criteria mentioned at 3(i):-

Tenor	Rate of Refinance	Banks’/DFIs’ Spread	End User’s Rate
Up-to 3 years	5.50%	2.50%	8.00%
Over 3 years and up-to 5 years	6.25%	2.75%	9.00%
Over 5 years and up-to 7 years	6.50%	3.50%	10.00%

4. Participating Financial Institutions (PFIS):

All commercial banks and Development Finance Institutions (DFIs) shall be eligible for providing financing under the Scheme.

5. Bank/DFI-wise Refinance Limits

i) Yearly limits shall be allocated to individual banks/DFIs under the Scheme.

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/DFIs to the Director, SME Finance Department, 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 date of issuance of this circular.

6. Grant of Refinance:

i) The State Bank shall provide refinance to each bank/DFI on service charge basis in terms of Section 17 (2) (d) read with section 22 of State Bank of Pakistan Act 1956.

ii) Refinance shall be allowed to the Banks/DFIs by the concerned office(s) of SBP BSC (Bank) on submission of documents as may be required by State Bank. The documents initially required are attached herewith.

7. Repayment of the loans:

i) Principal amount of loans shall be repayable in equal quarterly / half yearly installments after prescribed grace period, if any. However, if a borrower will repay the loan amount or its installment, in part or in full, before the due date(s), the banks/DFIs shall be under obligation to repay the amount(s) so received within three working days to the concerned office of SBP-BSC (Bank) failing which fine for late adjustment of loan will be recovered from the concerned bank/DFI, at the rate specified by the State Bank.

ii) The refinance granted by SBP-BSC offices to the Banks/DFIs shall be recovered on the due dates as reported in the original repayment schedule from the account of the banks/DFIs maintained with the respective office of the SBP BSC (Bank). In case the borrower(s) fails to make repayment of the amount of installment as per the original repayment schedule, the bank/DFI shall 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/DFIs 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.

iii) Mark-up shall be paid on quarterly basis.

8. Other Terms & Conditions:-

i) Banks/DFIs shall provide financing facilities to the prospective borrowers as per their lending policies duly approved by their Board of Directors. Further financing shall be subject to compliance with all rules and regulations including Prudential Regulations as prescribed by the State Bank from time to time.

ii) Banks / DFIs shall ensure that loan proceeds are used exclusively for the purpose it is approved. They shall also ensure that borrowers has fulfilled pre-disbursement formalities, through due diligence as per their own internal arrangements to avoid malpractices and mis-utilization of funds under the Scheme.

iii) The banks /DFIs shall ensure the correctness / evaluation of feasibility & cost estimates either through expertise available in-house or through an outside reputable consultant (either an individual or firm) & place it on record.

iv) Disbursements by banks/DFIs should not be made to the borrower directly; instead payments shall be made to the manufacturers / suppliers of plant & machinery.

v) In case of financing for civil works the bank/DFI concerned shall monitor as per its own mechanism that the funds are utilized strictly for the construction purpose as per approved plan. Banks/DFIs may open an escrow account where borrower’s share is deposited for making matching disbursements for civil works.

vi) Financing shall be available only against LCs in case of financing against imported plant & machinery / raw material to be used for construction of the Silos/Cold Storage.

vii) Banks/DFIs shall not take more than six weeks in evaluating an application for financing under the Scheme from the date of receipt of complete information from the borrower. Where the request is declined, the bank/DFI will explicitly apprise the prospective borrowers in writing, the reasons for rejecting the application.

viii) Financing shall be available to the extent of C&F Value/ex-factory/ showroom price of the new imported or locally manufactured plant, machinery, equipments and accessories thereof.

ix) Advance payment to the extent of 20% of the C&F value/ex-factory/ showroom price of imported or locally manufactured machinery can be made in terms of related underlying agreement by securing the bank’s interest. In case of imported machinery, advance payment will be subject to compliance with the terms & conditions prescribed in FE Manual and instructions issued from time to time by SBP’s Exchange Policy Department in this regard.

x) Refinance shall be provided on the basis of certification by the Internal Audit of financing bank/DFI with regard to confirmation that the loan is within the terms and conditions laid down in the Scheme. A copy of the said Internal Audit Certificate shall also be submitted to the concerned office of SBP BSC (Bank) at the time of availing the refinance facility.

xi) Loan / financing under the Scheme shall be checked/verified by SBP’s Banking Inspection Department (BID) during inspection of the banks/DFIs to ensure that the same have been allowed as per the terms and conditions of the Scheme.

xii) Financing shall not be available for the purpose of acquisition of land.

xiii) Second-hand plant, machinery and equipment shall not be eligible under the scheme.

xiv) All LCs (sight as also usance) established since January 01, 2008 shall be eligible for financing.

xv) Where a bank/DFI considers the requests of their borrowers for rescheduling of loans granted under the Scheme, the principal amount of refinance shall only be rescheduled in a way that total tenor of refinancing under the Scheme does not exceed maximum period of 7 years from the date of 1st disbursement made by the banks. Further, the borrower shall be liable to make payment of mark-up at the rate applicable on the date of such rescheduling, or the original rate whichever is higher.

9. Fines:-

i) In case of violation of the terms & conditions of the Scheme, the SBP shall reserve the right to recover the entire amount of refinance granted to the bank/DFI along-with fine at the rate of Paisa 60 per day per Rs 1000/- or part thereof.

ii) In case, a borrower will make early repayment(s) of the amount of loan/installment(s) and bank/DFI fails to repay the same to concerned office of SBP-BSC within three working as mentioned in clause 7(i) above, late adjustment fine will be charged from the concerned bank/DFI at the rate of Paisa 60 per day per Rs 1,000 or part thereof.

iii) It may be noted that fine shall be recovered through the bank/DFI who availed refinance under the Scheme. Therefore, it will be the responsibility of the bank/DFI to secure its interest in this regard, however, in no case fine imposed on bank/DFI due to its negligence shall be passed on to the borrower. In case, they pass on the fine so recovered from them to the borrower, the bank/DFI shall be under obligation to justify the same to ensure that the fine is not passed on to the borrower merely on the strength of the action of SBP.

10. The Scheme shall be effective from the date of issuance of this Circular and shall remain valid up-to December 31, 2012. A further period of six months shall be given for full disbursement of entire loan for all loans sanctioned, under the Scheme, and conveyed to the borrower before December 31, 2012.

Encl: Annexure-01
Encl: As above