KARACHI, March 21: Banks can now make much larger agricultural development loans than in the past to meet increasing demand from the farming community.

The State Bank on Thursday withdrew with immediate effect the existing limit of 15 per cent for development loans against total mandatory agricultural credit target set for the banks.

The SBP said in a circular that “banks are now free to extend development loans as well as production loans (to other than small farmers) up to 50 per cent of their targets.” But there is a condition attached to it: the banks shall use the remaining 50 per cent of their mandatory credit targets to small farmers for production/crop loans.

The circular said the limit for agricultural development loan has been made initially for a period of one year ending June 30, 2003.

President of Federation of Pakistan Chambers of Agriculture Syed Qamaruzzaman Shah said the SBP move should help in the recovery of the agriculture sector. “It is a timely decision,” Shah said talking to Dawn by telephone from Hyderabad. He said the farming community was in dire need of development money to modernize irrigation system and to catch up with new technology in production. “Increased limit of development loans will fulfil this purpose,” he said.

The development loans are offered to the farmers for purchase of agricultural machinery like tractors and tube wells and for making investment in irrigation and soil cultivation systems. A higher allocation for development loan means farmers can purchase more machinery and improve irrigation and soil cultivation methods.

According to the SBP second quarterly report, released here on Wednesday, commercial and specialized banks disbursed about Rs22 billion loans to the agricultural sector in the first half of this fiscal year up from Rs19 billion disbursed in the first half of fiscal 2000-01.