KARACHI: The State Bank of Pakistan (SBP) has authorized banks to provide financing facility for the purchase of domestic and imported wheat from July 1, 2021.
The SBP, on requests and feedback received from stakeholders, amended the instructions issued for the financing of wheat purchases by the private sector for 2021.
According to the amended guidelines issued by the SBP for wheat supply, new funding for the purchase of wheat will begin from the start of the 2021 wheat supply season in the respective provinces.
Banks will provide financing to eligible borrowers to purchase native wheat for the 2021 harvest season, that is, April 1 to June 30, 2021. In addition, the financing facility would be extended to eligible borrowers. for the purchase of domestic and imported wheat. from 01 July 2021 subject to the conditions announced by SBP.
In addition, the SBP also extended the funding retirement period by two months. From now on, the wheat financing loans will be fully settled by March 31, 2022, positively compared to the previous maturity of January 31, 2022.
In accordance with SBP guidelines, banks will also ensure that the financing is only used for the supply of wheat. However, there are no restrictions on banks to extend financing to flour mills for purposes other than purchasing wheat.
Banks may 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.
For the participation of the private sector in the 2021 wheat supply campaign, banks are required to strictly meet the minimum conditions set by SBP to extend financing to eligible borrowers, including approved and functioning flour mills duly documented or documented. licensed wheat traders registered with the relevant authority / department. .
The banks were requested to provide financing facilities to the functioning flour mills for the purchase of native wheat from their authorized representative and the respective food department against the supply of wheat by them.
However, 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.
Financing to the private sector for the purchase of wheat will be provided against pledging of 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 amount of differential financing to borrowers compared to the stock of wheat 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.
According to SBP, in order to limit the possibility of hoarding, banks will ask the customer (s) to disclose and verify their storage location.
The banks will also 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 purpose of repaying the bank loan. SBP can acquire stock reports from banks to verify their authenticity / authenticity as and when required.
In addition, banks would be required to immediately recall advances to the private sector in the event of wheat hoarding. The banks will ensure that no financing is given to the customer for the repayment of loans taken out with other banks.
Banks will also ensure that their customers strictly adhere to the respective government (federal / provincial) guidelines for the release of wheat stocks and are not involved in any other activity that may cause speculation on the price of wheat / flour. on the market.
Banks will be required to submit a monthly statement regarding private sector financing for the purchase of wheat from that department in the attached format (Annex-A) within ten working days from the end of the relevant month.
Copyright Business Recorder, 2021
