By Shahid Iqbal
KARACHI: The State Bank of Pakistan on Tuesday launched a concessional financing and guarantee scheme for flood affected areas. A sum of Rs500 million has been allocated to encourage farmers to sow canola in the flood affected areas in the Rabi season, the central bank said in a circular. The State Bank has recently announced a series of concessions including write-offs and urged commercial banks to move forward to support the devastated economy of the flood-hit areas.
The circular said under the scheme loans would be provided at affordable and concessional mark-up rates through banks. The commercial banks and Zarai Taraqqiati Bank Limited are allowed to obtain the refinance facility to finance the farmers of notified flood-affected areas, it added.
Refinance under the scheme will be provided to the banks at 5 per cent while the banks will be permitted to charge a maximum spread of three per cent from the borrowers.
“Credit to farmers will be available at 8 per cent per annum,” said the circular, adding that this scheme will remain valid up to October 31, 2011.
This new scheme is in line with the government 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 the federal ministry of food and agriculture and livestock (Minfal) provincial agriculture departments would ensure the timely availability of hybrid seeds, fertiliser, 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 Minfal.
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 will mean only farm credit for meeting the production and working capital requirements 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 tenor of the crop production loans and its repayment will be based on the cropping cycle up-to a maximum period of six months while there will be no maximum limit for borrowing by the farmers under this scheme.
However, the borrowing limit of farmer will 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 will 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, it said and added that banks will not take more than five 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 appraise the applicant reasons for rejecting the application,” it added.
Under the Scheme, the SBP would share bona fide losses to the extent of 30 per cent out of which 50 per cent claims of losses will be reimbursed by the SBP when the loan is categorised as doubtful and the remaining 50 per cent at the time of loss.
Claims will be submitted to the State Bank of Pakistan on semi-annual basis i.e. April 30 and October 31 duly verified and certified by the bank’s internal audit.
“However, this re-imbursement will not obviate the lending institutions from the right of recovery of the defaulted amount,” the Circular said.