SBP issues guidelines for water management system

According to the State Bank of Pakistan (SBP), the main objectives of these guidelines are to make efficient agriculture water management techniques commercially viable for stakeholders including banks, to facilitate banks in developing products for efficient agriculture water management techniques, to encourage and facilitate banks to provide working capital and term finance to farm and non-farm sector activities for utilization of efficient agriculture water management technologies, to encourage farmers to adopt modern and efficient farming techniques, and to increase the productivity of crops, fruits, vegetables etc. by adopting modern techniques.Climate changes, scarcity of usable canal water availability, wastage of water and depleting underground water tables are the challenges in the growth of agriculture in the country. Adoption of modern water management techniques by the farmers is necessary to ensure optimal water utilization for soil fertility and better yield.The guidelines, which have been developed by the State Bank in consultation with the stakeholders, are aimed at facilitating banks in developing specific products for the purpose. “Banks may adopt the guidelines in the 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”, says AC&MFD Circular No.2 of October 12, 2011.According to the guidelines, individuals and all types of legal entities engaged in crops, horticulture, flori-culture and other agriculture production activities or desirous to establish such new projects with sufficient knowledge and relevant experience are eligible for loan under the financing scheme. Under the guidelines, the financing will be provided to meet working capital and term finance requirements for purchasing of tools/equipment and running expenses of the agriculture water management systems including the necessary toeing machinery for operating equipment, for example a tractor.Under the guidelines, the term finance facilities can be provided for medium to long term credit needs of the agriculture water management system.The loan limit shall be assessed by the bank keeping in view the borrower’s profile, feasibility of the business, cash flow, etc. as per bank’s credit policies, the guidelines said, adding that the bank shall also take into consideration any government or donor funding, if availed by the borrower and will allow balance payment as a loan to the 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, the guidelines added.