SBP instructs banks on wheat procurement loans

Staff Reporter

The State Bank of Pakistan (SBP) has issued instructions to banks for procurement of wheat by the private sector for the season 2021 and to curb the possibility of hoarding.

The SBP in a statement the other day said that for private sector’s participation in the wheat procurement season 2021, banks are required to strictly fulfil the following minimum conditions for extending financing to eligible borrowers (licensed and functional flour mills duly evidenced by some documentation or licensed wheat traders registered with concerned authority/department).

Banks will provide financing to eligible borrowers only for the procurement of indigenous wheat for the harvest season of 2021.

Banks will ensure that the subject financing will be used only for intended purposes.

Special efforts shall be made to ensure that the facilities availed for purposes other than wheat procurement are not utilised for financing of wheat stocks.

Fresh financing for procurement of wheat shall start from commencement of wheat procurement season 2021 in respective provinces.

Financing against wheat and by-products of wheat viz flour, meada, sujee, etc, will be subject to minimum cash margin requirement of 10 percent of the value of the wheat stock and by-products.

Banks shall not provide any financing facilities (funded or non- funded) to enable borrowers to meet the margin requirements.

Financing to the private sector for procurement of wheat shall be provided against pledge of fresh wheat stock only and charge of moveable or immovable property would not be acceptable as collateral for such financing.

Moreover, banks will ensure that no revaluation of the pledged stock is considered for release of any differential financing amount to the borrowers against stock of wheat already pledged with the banks.

Banks will not entertain any application for grant of fresh loans after 30th June, 2021 for procurement of wheat.

However, banks may provide financing facilities to functional flour mills for purchase of indigenous wheat from their authorized representative and respective food department against supply of wheat by them.

Quantum of such loan shall not be more than the value of wheat to be supplied by the respective food department or actual purchase from wheat traders, commensurate to the milling capacity of each mill.

Banks will also monitor that existing stock of wheat purchased by the concerned functional flour mill, has been ground.

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