KARACHI, March 31: Anticipating a bumper wheat crop, the State Bank of Pakistan has announced “ample credit line” to the private sector for procurement from the farmers but has made it clear that mark-up rate on such loans will be determined by the lending banks upon risk profiles of each borrower.

The banks’ lending rate to government agencies will be relatively competitive as compared to the rates to be charged from private sector, because there is a government guarantee.

The second quarterly report of the State Bank for 2006-07, released on Friday, says that central bank’s move to provide ample credit line to private sector is to ensure the timely offtake of wheat stocks by the traders.

The report then emphasises the need for such effective policy measures for other crops and makes a specific reference to the lingering price dispute on sugarcane between the growers and millers for last few years.

“Price disputes resulted in delays in crushing, thus areas under the crop remained occupied,” the report observes while suggesting for putting in place “effective regulations”. But at the same time it says that regulations generally create distortions, however if market failures do not permit the effective outcome then regulations can indeed help achieve netter results.

The private traders seeking bank loans for wheat procurement may be subjected to a minimum 10 per cent margin of the value of wheat stocks by the lending banks. The banks shall not provide any financial facilities to enable borrowers meet this margin requirement.

The borrowers will be provided loan only for purchase of local wheat and will have to be adjusted by January 31, 2008.

Banks have also been allowed to provide facilities for wheat procurement by the seed processing plants, in line with their lending policies and the capacity plans of the seed processing plants.