agri loan
Ashraf Vohra
State Bank Launches Refinance Scheme for revival of SMEs, agricultural activities in flood affected areas
Karachi, In line with government's policy for revival of agriculture activities and State Bank of Pakistan SBP relief measures for improving access to financing in flood affected areas in the country, it was decided to launch from Tuesday, November 2, 2010, a concessional financing scheme through banks for agriculture production/ working capital finance to farmers and Small & Medium Enterprises (SMEs) in districts affected by recent flood as notified by National Disaster Management Authority.
A SBP press release Tuesday said, under the scheme financing will be provided at affordable/ concessional mark-up rates through banks/DFIs for which Rs 10 billion has been allocated: Agricultural Production Loans to Farmers: i) Agricultural credit shall mean only farm credit for meeting production/ working capital requirements, as defined under Prudential Regulations for Agriculture Financing. ii) All categories of farmers (owners, owner-cum-tenants & tenants) of specified areas will be eligible for agricultural loans under the Scheme. iii) Banks shall provide agri. loans to farmers as per their Lending Policy approved by their Board of Directors and SBP Rules & Regulations. iv) Banks are encouraged to arrange for insurance of loans provided under scheme and Mandatory Crop Loan Insurance for five major crops viz. wheat, rice, cotton, sugarcane, maize to avoid risk of losses due to natural calamities. Tenor of crop production loans and repayment of principal amount will be based on cropping cycle up-to a maximum period of one year.
Borrowing limit of farmer shall be fixed by bank keeping in view credit requirements, cash flows, repayment capacity, risk profile of borrower, etc. Banks may provide Short-Term Loans to SME borrowers, as defined in Prudential Regulations for SMEs in Flood Affected Districts. Banks shall provide financing facilities as per their lending policies approved by their Board of Directors and SBP rules & regulations. Banks shall provide short term loans for working capital requirements of SMEs for a maximum period of one year. Borrowing limits of SMEs shall be fixed by banks keeping in view credit requirements, cash flows, repayment capacity, risk profile of the borrower, etc. within maximum limit prescribed under Prudential Regulations for SMEs. Refinance under Scheme shall be provided to banks at 5.0% p.a. Banks shall be permitted to charge a maximum spread of 3.0% p.a. from borrowers, therefore credit to SMEs/ farmers will be available at 8.0% p.a. SBP shall provide refinance in terms of Sections 17 (2) (b) & (d) read with section 22 of SBP Act, 1956 as amended from time to time. Limits shall be allocated to individual banks under this Scheme having branches involved in SME/ agri. lending in eligible areas.
Interested banks may send their request for sanctioning of limit for current financial year to Director, SME Finance Department, within 7 days of issuance of circular separately for SMEs and agriculture finance. Banks can approach SBP-BSC (Bank) offices for availing refinance facility on Weekly Basis, once limits are approved and communicated to banks concerned. Refinance shall be allowed to banks by SBP BSC (Bank), offices on submission of documents as may be required by SBP. Principal amount of loans shall have to be repaid on agreed date between bank and borrower within maximum period of one year. However, if a borrower repays loan amount, in part or in full, before due date(s), banks shall be under obligation to repay the amount(s) so received within seven working days to SBP-BSC (Bank), failing which fine for late adjustment of loan will be recovered from concerned bank, at rate specified by SBP. Refinance granted by SBP-BSC, offices to banks shall be recovered within seven days of due dates as reported to office from account of banks maintained with respective office of SBP-BSC (Bank). In case borrowers fail to make repayment of amount of loan/ installment as per agreed dates, bank will be entitled to charge normal rate of mark up on such overdue principal amount besides taking other actions to recover same as are incidental to such defaults.
In no case liability of banks to pay/repay to SBP BSC, principal amount of refinance, or mark up or any other charges or penalty thereon shall be dependent upon recovery from borrower, nor shall such liability be affected by any default on part of borrower. Mark-up shall be paid on quarterly basis in case of financing to SMEs. However, mark up on agri. loans shall be paid on half yearly basis. Financing facilities already extended and outstanding shall not be eligible for refinance /debt swap. Financing shall be subject to compliance with all rules, regulations including Prudential Regulations for SMEs & Agriculture Financing. Banks shall not take more than 5 working days in evaluating an application for credit from date of receipt of complete information from borrower. Where request is declined, bank will explicitly apprise applicant reasons for rejecting application. Bank shall obtain an undertaking from borrower that disbursed amount shall be utilized strictly for purpose it has been granted.
Banks shall ensure fulfillment of requisite pre-disbursement formalities by borrower through due diligence as per their own internal arrangements to avoid malpractice and misutilization of funds. Refinance shall be provided on basis of certification/ confirmation by Internal Audit/ SME/ Agri Head/ Business Chief of financing bank that loan is within terms and conditions laid down in Scheme. Financing shall be checked/ verified by SBP Banking Inspection Department (BID)/ SBP-BSC Bank to ensure that same have been allowed as per terms and conditions of Scheme. In case of violation of terms & conditions, SBP reserves right to recover amount of refinance granted to bank along-with fine at rate of Paisa 60 per day per Rs 1000/- or part thereof. In case bank fails to deposit to concerned office of SBP-BSC loans installment/ amount received from borrower before due date within seven working days as mentioned in Para 5(b) above, late adjustment fine will be charged from concerned bank at rate of Paisa 60 per day per Rs 1,000 or part thereof. Scheme shall remain valid only up-to October 31, 2011. However, outstanding refinance shall be recovered on maturity of respective loans, SBP circular said.