KARACHI: The State Bank of Pakistan (SBP) has amended the Prudential Regulations to facilitate the banks to enhance the flow of credits to the farm and non-farm sectors.

The central bank on Monday increased the maximum limit of unsecured or clean financing for agriculture from Rs1 million to Rs5m.

“It has been decided to make the amendments in Prudential Regulations for Agriculture Financing to enable banks and DFIs to enhance the flow of credit to farm and non-farm sectors,” said the SBP in a circular.

On Aug 26, the SBP assigned an annual agriculture credit disbursement target of Rs1,800 billion to the financial institutions for FY23 to cater to the agriculture credit demand in the country. Furthermore, in line with national food security requirements and the need for farm mechanisation to boost agriculture productivity, specific targets of Rs140bn for wheat crop production loans, Rs45bn for tractor financing, and Rs20bn for financing harvesters, planters, and other farm machinery have been set under the overall target for FY23.

It further said the exposure limit for the requirement of financial statements duly audited by a practising chartered accountant has been enhanced from Rs10m to Rs15m.

During FY22, the financial institutions managed to disburse Rs1419bn to the agriculture sector, compared with the disbursement of Rs1366bn during FY21.

However, the SBP said during the announcement of the annual credit target for FY23 that recently, growth in agriculture credit disbursement remained subdued due to various challenges such as adverse climate change effects, resource constraints in banks, underutilisation of approved limits by borrowers, etc., while a few banks, particularly large public sector banks, among others, also performed slower than usual and struggled to achieve their assigned annual targets.

The SBP has also enhanced the per acre indicative credit limits for agriculture financing to support the farming community to avail adequate financing from banks and optimise their agriculture input usage.

With a view to ensuring food security, the per acre indicative credit limit for wheat has been enhanced from the existing Rs60,000 to Rs100,000, which will allow farmers to deploy quality inputs for improved yields.

However, due to massive damage caused by rains and floods in Sindh and Balochistan, it is not yet clear how much land is available for crop cultivation and what types of crops would be suitable with high water levels. Neither the Sindh nor Balochistan governments have estimated the loss or devised a plan to meet the requirement for land cultivation. Sindh is still facing high floods in many areas.

Published in Dawn, September 20th, 2022

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