KARACHI: The State Bank has launched Rs10 billion concessional financing scheme through banks to improve access to financing in flood- affected areas.
The State Bank on Tuesday issued detail circulars for banks and development financial institutions (DFIs) asking them to participate in the scheme for agriculture production, working capital finance to farmers and Small and Medium Enterprises (SMEs) in districts affected by recent flood.
“Under the scheme financing will be provided at affordable/concessional mark-up rates through banks and DFIs for which Rs10 billion has been allocated,” said the State Bank.
Refinance under the Scheme will be provided to the banks at the rate of 5 per cent per annum. The banks will be permitted to charge a maximum spread of 3 per cent from the borrowers, therefore credit to SMEs and farmers will be available at 8 per cent.Mark-up will be paid on quarterly basis in case of financing to SMEs. However, mark-up on agriculture loans will be paid on half yearly basis.
The State Bank said the agricultural credit will mean only farm credit for meeting the production or working capital requirements.
All categories of farmers (owners, owner-cum-tenants and tenants) of the specified areas will be eligible for agricultural loans under the Scheme.
The State Bank encourages banks to arrange for insurance of the loans provided under the scheme and Mandatory Crop Loan Insurance for five major crops viz. wheat, rice, cotton, sugarcane and maize to avoid risk of losses due to natural calamities.
According to the circular, tenor of the crop production loans and repayment of the principal amount will be based on the cropping cycle up-to a maximum period of one year.
The circular said the banks may provide Short-Term Loans to SME borrowers. However, banks will provide short term loans for working capital requirements of SMEs for a maximum period of one year.
Principal amount of loans under the scheme will have to be repaid on agreed date between bank and the borrower within a maximum period of one year.
Banks will 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.
Refinance will be provided on the basis of certification and confirmation by the Internal Audit, SME or Agri Head or Business Chief of the financing bank that the loan is within the terms and conditions laid down in the Scheme.
Limits will be allocated to individual banks under this Scheme having branches involved in SME or agriculture 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.
The scheme included affected 17 districts of Sindh, 18 of Khyber Pakhtunkhwa, 11 districts of Punjab, 12 of Balochistan, 7 of Azad Jammu and Kashmir and 1 of Gilgit Baltistan.
The scheme will be effective from the date of issuance of this Circular and will remain valid only up-to October 31, 2011. However, outstanding refinance will be recovered on the maturity of respective loans.