Wednesday, October 6, 2010

Canola cultivation in flood-hit areas

SBP launches Rs 500 million financing scheme

Staff Report

KARACHI: The State Bank of Pakistan (SBP) has launched a concessional financing and guarantee scheme, under which an amount of Rs 500 million has been allocated to encourage farmers to sow canola in the flood affected areas of the country for the current Rabi season.

According to a circular (SMEFD Circular No 15) issued on Tuesday – under the scheme, financing will be provided at affordable/concessional markup rates through banks.

Banks and Zarai Taraqiati Bank Limited (ZTBL) are allowed to obtain following refinance facility to finance the farmers of notified flood affected areas, it added.

Refinance under the scheme will be provided to banks at 5.0% per annum – while the banks will 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., according to the circular. This scheme will remain valid up to October 31, 2011.

This new scheme is 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. “In this regard it is expected that MINFA (Federal Ministry of Food and Agriculture) and provincial agriculture departments would ensure timely availability of hybrid seeds, fertilizer, pesticides and on ground technical guidance to the farmers,” it added.

Under the scheme, agricultural credit will be provided to the farmers for canola cultivation in 17 affected districts as identified by MINFA. Out of the 17 districts, six districts are of Punjab (Layyah, Muzaffargarh, Rajanpur, Rahim Yar Khan, Multan and D.G. Khan), four districts are from Khyber Pakhtunkhwa (Nowshera, Charsadah, D.I. Khan and Peshawar), four are from Sindh (Sukkur, Nausheroferoz, Benazirabad and Larkana) and three districts are from Balochistan (Nasirabad, Jaffarabad and Jhal Magsi).

According to the circular, agricultural credit shall mean only farm credit for meeting the production/working capital requirements, as defined in Prudential Regulations for agriculture financing while all categories of farmers (owner, owner-cum tenant and tenant) of the specified areas will be eligible for agricultural loans under the scheme.

It said the time period of the crop production loans and its repayment will be based on the cropping cycle up to a maximum period of 6 months while 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., it added.

Principal amount of loans under the scheme shall have to be repaid on the agreed date between the bank and the borrower, however, not later than 60 days from the date of harvest of the crop, it said and added that 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,” it added.

Under the Scheme, SBP would share bona fide losses to the extent of 30% out of which 50% claims of losses shall be reimbursed by the SBP when the loan is categorised as doubtful and the remaining 50% at the time of loss. Claims shall be submitted to the SBP on semiannual basis i.e. April 30th and October 31st duly verified/certified by the bank’s internal audit. “However, this reimbursement shall not obviate the lending institutions from the right of recovery of the defaulted amount,” the circular said. Dailytimes

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