With a view to enhance access of
formal financing to the farming community and to bring regulatory framework for
farmers’ financing in line with the changing business environment, State Bank
of Pakistan (SBP) has issued revised Prudential Regulations (PRs) for
Agriculture Financing.
The revised instructions call upon
banks to develop robust and market-oriented policies and practices to promote
enhanced flow of credit to the agriculture sector without compromising
financial stability and banks’ risk management.
The revised regulations, among other
areas, make it mandatory for banks to formulate comprehensive agri. financing
policies covering broad areas of strategic importance including loan
administration, disbursement & monitoring mechanisms, set-up and
maintenance of dedicated agri. finance departments equipped with qualified
agri. financing experts and delegation of powers relating to loan approval or
sanction at appropriate level. Further, to strengthen credit discipline and
prudent lending practices by minimizing information asymmetries, CIB report for
all agri. loans has been mandatory. To facilitate farming community in
repayment of crop production loans under Revolving Credit Scheme on the basis
of their cropping cycle, banks are now required to segregate the repayment in
two stages of at least 50% of the utilized credit during the year after harvest
of each rabi and kharif crop.
PRs also cover Islamic Agriculture
financing which will encourage banks to develop and launch products to meet the
financing needs of the farming community under Shariah Compliant modes.
Revisions in these regulations have
been made in consultations with stakeholders and encompass prudent practices
for banks financing various activities within agri. value chain and come into
force with immediate effect.
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