The main objectives are to make efficient agri. water management techniques commercially viable for stakeholders including banks; facilitate banks in developing products for efficient agri. water management techniques; to encourage, facilitate banks to provide working capital, term finance to farm and non-farm sector activities for utilization of efficient agri. water management technologies; encourage farmers to adopt modern, efficient farming techniques; increase productivity of crops, fruits, vegetables etc. by adopting modern techniques.
Climate changes, scarcity of usable canal water availability, water wastage, depleting underground water tables are challenges in agriculture growth in the country. Adoption of modern water management techniques by farmers is necessary to ensure optimal water utilization for soil fertility and better yield.
The guidelines, developed by SBP in consultation with stakeholders, are aimed at facilitating banks in developing specific products. Banks may adopt guidelines in present form or with some adjustments to suit their organizational, operational needs and market characteristics, subject to compliance with SBP’s regulations for agriculture financing, SBP circular said.
Individuals and all types of legal entities engaged in crops, horticulture, floriculture, other agriculture production activities or desirous to establish such new projects with sufficient knowledge, relevant experience are eligible for loan under financing scheme. Financing will be provided to meet working capital, term finance requirements to purchase tools/ equipments and running expenses of agri. water management systems including necessary toeing machinery for operating equipment, for example a tractor, etc.
Guidelines stipulate that to meet day to day expenses for functioning and maintenance of agri. water management systems, working capital financing can be provided on revolving basis for all activities related to efficient water management. Term finance facilities can be provided for medium to long term credit needs of agri. water management system. Loan limit shall be assessed by the bank keeping in view borrower’s profile, feasibility of business, cash flow, etc. as per bank’s credit policies. Bank shall also take into consideration any government or donor funding, if availed by borrower and will allow balance payment as a loan to farmer, net of government/donor subsidy or funds. Banks should undertake due diligence and market survey to assess the cost of equipment, vehicles and all other goods.
Banks shall determine mark up rate keeping in view KIBOR rate and their cost of funds, etc. in line with their credit policy and shall not charge any penalty on early repayment or adjustment of loans by borrower. Banks are advised to secure their financing, safeguard interests, facilitate borrowers as per their lending policies. Besides, they can secure financing by obtaining documents as per their financing policies, SBP regulations, guidelines, circulars. Completion of documentation formalities shall be responsibility of bank.
Under guidelines, banks are required to develop sound, reliable loan monitoring, tracking system to ensure proper utilization & quality of loan and its timely repayments. They shall ensure financing for efficient water management is being made in compliance with SBP prudential, other regulations for Agriculture Financing, including classification of non-performing loans.