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In a bid to boost the sector, the State Bank of Pakistan (SBP) has enhanced the indicative credit limits for agriculture financing by banks to farmers to align the amount of advances with agriculture input requirements.

The SBP said on Wednesday that the enhanced indicative credit limits for production and development loans of farm and non-farm sector will directly benefit agriculture borrowers, who will now be able to obtain more credit from banks and, in turn, enhance agriculture productivity through adequate use of inputs.

“This will also enable banks to align the loan amounts with the actual requirements of farmers and resultantly, enhance the flow of agriculture credit,” said SBP in a statement.

The credit requirements are the actual demand of the farmers or agriculture business entrepreneurs for agricultural financing. The SBP calculated the credit requirements based on various factors like; land holding, size of farms, economic conditions and expected prices of the agriculture produce.

"Generally, farmers having medium to large farm size are in a good financial position and may have relatively low credit demand while the subsistence and marginalised farmers mainly rely on credit/loans to meet their financial requirements which varies from 90 to 100%," the central bank said in its report.

SBP said that the per-acre indicative credit limits for crops, orchards, forest trees and agriculture-related infrastructure are based on technical data received from leading agricultural research institutes and other stakeholders.

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As per revised credit limits provided by SBP, the per-acre indicative agriculture credit limits for major crops has increased Rs45,000 to Rs70,000 for rice, for wheat, the credit limit has been revised to Rs60,000 per acre from Rs40,000 per acre.

For cotton, the credit limit has been raised to Rs75,000 per acre from Rs52,000 per acre, Sugarcane credit limit revised from Rs73,000 per acre to Rs105,000 per acre, whereas, for maize (Hybrid) the credit limit has increased from Rs55,000 per acre to Rs78,000 per acre, while for maize the credit limit has been raised to Rs65,000 per acre from Rs45,000 per acre.

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It is important to note that the indicative credit limits serve as a guideline for banks to assess the credit requirements of agriculture borrowers while sanctioning credit limits. “Banks may, however, make adjustments on the basis of prevailing market conditions, local prices of inputs, and repayment capacity of borrowers,” the SBP said.

The central bank added that revised indicative credit limits will also facilitate provincial planning departments in estimating the total financial and credit requirements of respective provinces/regions for farm and non-farm sectors.


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