KARACHI, Aug 5: Farmers can now borrow much more from banks to meet their expenses in growing all the four major crops - cotton, wheat, paddy and sugar.
The State Bank has raised the per acre borrowing limits from Rs6,000 to Rs10,000 for cotton; from Rs4,000 to Rs6,600 for wheat and from Rs4,500 to Rs7,000 for paddy. It has doubled the borrowing limit for sugarcane growing to Rs16,000 per acre.
The central bank on Thursday informed all the banks engaged in disbursement of mandatory agricultural credit of the new limits. But it made it clear that these limits were indicative and the banks could lend more or less than the limits depending upon actual assessment at the time of lending.
The SBP circular issued to the banks said that for all other crops there was no prescribed limit and banks can lend as per the actual cost of the crops. Senior bankers say the banks normally adhere to the lending limits set by the SBP for crop financing.
The increase coupled with higher allocation for farm loans disbursement and lowering of mark-up by Zarai Taraqiati Bank from 14 to nine per cent is aimed at boosting the agricultural sector. The government is trying to revive this sector to help the economy grow by the targeted pace of 6.6 per cent in this fiscal year.
In the last fiscal year, the economy grew by an estimated 6.4 per cent, much higher than the original target of 5.3 per cent. But the agricultural sector is estimated to have grown by only 2.6 per cent, well below the target of 4.2 per cent and actual growth of 4.1 per cent a year earlier.
Sindh Chamber of Agriculture president Syed Qamaruzzaman Shah said the increase in crop loans was overdue because prices of all agricultural inputs had risen in the last three years. The central bank had last revised these limits in April 2001.
Talking to Dawn, Mr Shah said the increase would not meet the ultimate objective of reviving the agricultural sector if the banks continued to ignore small farmers.
"Bank branches engaged in farm credit disbursement should be bound to meet the borrowing needs of the farmers, specially the smaller ones in their respective locations," he said.
The State Bank has set a Rs85 billion target for agricultural credit disbursement during this fiscal year, higher than the actual disbursement of Rs73.6 billion in the last fiscal year.
SBP officials say they have already assigned individual targets to each one of the 21 banks engaged in disbursement of agricultural loans. Five major banks - National Bank, Habib Bank, United Bank, Muslim Commercial Bank and Allied Bank - have got a combined target of Rs38 billion; Zarai Taraqiati Bank Ltd has been given Rs34 billion target and Punjab Provincial Cooperative Bank has got Rs8 billion target.
The central bank has set a combined target of Rs5 billion for 14 local private banks. Central bankers say the total agricultural credit target of Rs85 billion as also the individual targets assigned to the banks are indicative and banks can make as much of farm loans as possible.
Bankers say the agricultural credit offtake will rise significantly if the banks offer crop insurance schemes. The Bank of Punjab has recently introduced the crop insurance scheme.
