KARACHI, Jan 26: The State Bank of Pakistan on Friday allowed banks to provide financing facilities to flour mills and licensed traders for procurement of indigenous wheat (fresh crop 2007 only).

Under SME and MFD Circular No. 01, the central bank, however, stated that the provision of the facility was subjected to the following conditions:

a) Banks will determine the rate of mark-up on lending to the private sector for the purposes of wheat procurement depending upon the risk profile of each borrower. As lending to the government agencies for wheat procurement is secured against government guarantee. It is expected that the related mark-up rate would be competitive in comparison to the rate charged to the borrower in private sector;

b) Banks may fix minimum margin requirement of 10 per cent of the value of the wheat stock. However, banks shall not provide any financial facilities (funded or non-funded) to enable borrowers to meet the margin requirements;

c) Loans provided to the private sector will be for the procurement of indigenous wheat only and shall be repayable on or before January 31, 2008 positively;

d) Banks are also allowed to provide facilities for wheat procurement by the seed processing plants, in line with their lending policies and the capacity/production plans of the seed processing plants.

e) Banks shall ensure that the loans provided under the wheat procurement policy 2006 have been adjusted as per terms of SMED Circular No. 05 dated 14-03-2006. Fresh financings to the eligible borrowers for procurement of wheat during 2007 shall start from commencement of wheat procurement season 2007 in respective provinces, on arrival of new crop in the market;

f) Banks will continue to submit a weekly statement in respect of financing to private sector for wheat procurement as per the prescribed format already in use; and

g) The lending shall be in compliance with the Prudential Regulations and other instructions of SBP issued from time to time.—APP