SBP eases financing conditions for wheat purchases
KARACHI: The central bank on Saturday granted financing relief to the private sector for the purchase of wheat as the harvest season has just started.
“In view of the requests and comments received from stakeholders, the SBP has decided to modify the instructions issued for the financing of wheat purchases by the private sector,” the State Bank of Pakistan (SBP) said in a circular. .
“For the participation of the private sector in the 2021 wheat supply campaign, banks are required to strictly fulfill the following minimum conditions to extend financing to eligible borrowers (approved and functional flour mills duly certified by certain documents or traders of wheat approved registered with the relevant authority / department), “It said.
New funding for the purchase of wheat will begin as soon as the 2021 wheat purchase season begins in the respective provinces. Banks will provide financing to eligible borrowers to purchase native wheat for the 2021 harvest season (April 1-June 30). The financing facility would be extended to eligible borrowers to purchase domestic and imported wheat from July 1, 2021.
Banks may provide a financing facility to functioning flour mills for the purchase of native wheat from their authorized representative and the respective food service against the supply of wheat by them. The amount of this loan will not be greater than the value of the wheat to be supplied by the respective food department or the actual purchase from the wheat traders, depending on the grinding capacity of each mill. Banks will also monitor that the existing stock of wheat purchased by the relevant functional flour mill has been crushed and that the wheat by-products (financed by a bank loan) have also been gradually released to the market to repay the loans thus obtained. Banks will ensure that the funding in question is used only for the intended purpose.
“However, there are no restrictions on banks to extend financing to flour mills for purposes other than buying wheat. Banks can provide financing to flour mills for general needs such as overhead, however, banks will ensure that this financing is not used for purchasing wheat or for acquiring wheat / by-product stocks. wheat, ”the SBP said. “Private sector financing for the purchase of wheat will be provided against collateral for fresh wheat stock only and the mortgage / charge of movable or immovable property would not be acceptable as collateral for such financing. In addition, banks will ensure that no revaluation of the pledged stock is considered for the release of any differential funding amount to borrowers compared to the wheat stock already pledged with banks.
Banks are also authorized to provide financing facilities for the purchase of wheat by seed processing factories duly attested by test certificates issued by the Federal Department of Seed Certification and Registration, in accordance with their policies. loan and capacity / production plans of seed processing plants ensuring that this stock of wheat will be used for processing.
These loans will be fully paid by March 31, 2022.
“In order to limit the possibility of hoarding, banks should require customers to disclose their storage location and verify the same [and] strictly monitor the wheat stock held by the customer, with periodic and random inspections of the wheat pledged to the bank as well as the gradual release of the wheat stock to generate liquidity for the repayment of the bank loan, “said the SBP.
SBP can acquire stock reports from banks to verify their authenticity / authenticity as and when required.
Banks are urged to immediately recall advances to the private sector in the event of hoarding of wheat, to ensure that no financing is authorized to the customer for the repayment of loans contracted with other banks and to ensure that their customers strictly adhere to their government (federal / provincial) guidelines for the release of wheat stocks and not participate in any other activity that may result in wheat / flour price speculation in the market.