Private sector wheat supply: SBP amends instructions – Business & Finance
The State Bank of Pakistan (SBP) has decided to modify the instructions issued for the financing of wheat purchases by the private sector.
Under the amended central bank instructions, for private sector participation in the 2021 wheat supply campaign, banks are required to strictly fulfill the conditions to extend funding to eligible borrowers, who must be licensed and flour mills. functional duly documented or approved. wheat traders registered with the relevant authority / department.
The new financing for the purchase of wheat will begin from the start of the 2021 wheat purchase campaign in the respective provinces. In accordance with the SBP, banks will provide financing to eligible borrowers to purchase native wheat for the 2021 harvest season (April 1 to June 30, 2021). The financing facility would be extended to borrowers eligible for the purchase of domestic and imported wheat from July 1, 2021, subject to other conditions mentioned in this circular.
SBP said banks can provide financing facilities to 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. The amount of this loan must 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, in proportion to the grinding capacity of each mill.
In addition, 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 released into the market gradually to repay the loans in order to got.
SBP has asked the banks to ensure that the funding in question is only used for the intended purpose. However, there are no restrictions on banks to extend financing to flour mills for purposes other than purchasing 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, said SBP.
The central bank said that private sector financing for the purchase of wheat will be provided against pledging of fresh wheat stock only and that the mortgage / charge of movable or immovable property would not be accepted 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.
These loans will be fully settled by March 31, 2022, positively.
In order to limit the possibility of hoarding, the SBP has asked banks to: require the customer (s) to disclose their storage location and to verify it; strictly monitor the wheat stock held by the customer, perform 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. SBP can acquire stock reports from banks to verify their authenticity / authenticity as and when required.
Be in the obligation to immediately recall the advances granted to the private sector in the event of hoarding of wheat; ensure that no financing is granted to the client for the repayment of loans contracted with other banks; 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 wheat / flour price speculation in the market .
SBP said the banks will submit a monthly statement regarding financing to the private sector for the purchase of wheat within ten working days of the end of the relevant month.