KARACHI: The State Bank on Tuesday removed all conditions for private sector getting loans for wheat procurement from commercial banks as the central bank asked all banks to provide loans for wheat purchasing.

‘The State Bank of has withdrawn with immediate effect conditions placed on commercial banks for providing financing facilities to the private sector with regard to procurement of wheat,’ said the SBP release.

It said the banks were now free to extend financing facilities to the private sector for procurement of wheat, keeping in view their lending policies, business consideration, risk profile of the borrowers and compliance with SBP regulations, said the circular.

Earlier this year, the State Bank had placed several conditions on banks, which included fresh financing to the eligible borrowers (licensed functional flour mills only) against the pledge of fresh indigenous wheat only, cash margin restrictions and adjustment of loans by January 31, 2010.

Provinces also buy wheat to keep it as reserves and provide them to the flour mills at the prevailing prices to keep the price under control. The private sector has been involved in hoarding and black marketing of wheat, which cost the common people heavily when the prices went up.

However, the provincial governments are not capable to buy the entire wheat crop, which could yield around 22 to 23 million tons of wheat. This inability provides a big space to the private sector to play a key role in wheat business and establish the price trend.

Experts feel that the private sector could create shortages raising hue and cry that wheat or flour is being smuggled to the neighbouring countries. They said there was always a possibility for price hike of wheat and flour if wheat crops fall short of expectation or if the provincial departments responsible for buying and supplying wheat remain inefficient at the time of high demand of the commodity.