The maximum repayment tenure of development loans under the agriculture financing has been increased from 5 years to 10 years. The State Bank of Pakistan (SBP) has made some necessary amendments to "Loans for Farm Development and Machinery/Equipment," Regulation R-13 (Tenure, Classification and Provisioning) and Regulation R-15 (Tenure) of Prudential Regulations for Agriculture Financing. These amendments are applicable to all banks/DFIs with immediate effect. In order to encourage banks/DFIs to enhance financing for development loans in crop and non-crop sectors, the State Bank has enhanced maximum repayment tenure of loans by 5 years. The maximum repayment tenure of development loans in crop and non-crop sectors has been increased from 5 years to 10 years in revised Prudential Regulations (PRs) for agriculture financing.
However, the SBP said that banks may decide the actual tenure of a product, duly approved by the Board of Directors (BoD), based on the nature of financed product, useful life of machinery/tool and repayment capacity of borrowers.
According to revised Regulation, R-13 for Tenure, Classification and Provisioning, loans for farm development can be extended for 1 to 10 years. Whereas, the tenure of financing for machinery/equipment should not be allowed for more than the useful life of machinery/tool.
However, all such loans should be allowed for a maximum period of 10 years. These loans, ie, for farm development and for purchase of machinery/equipment would be classified as per previous directives. However, any relaxations given under Regulation R-5 of agriculture financing would be applicable.
The revised Regulation, R-15 on tenure said that the maximum tenure for livestock financing would be 10 years including grace period.
Banks/DFIs have been advised to ensure dissemination of these regulations among their branches/field offices. All other instructions for agriculture financing will remain unchanged, the central bank said.