In a bid to boost the sector, the State Bank of Pakistan (SBP) has raised the indicative credit limits for agricultural finance by banks to farmers to align the amount of advances with agricultural input needs.
The SBP said on Wednesday that the strengthened indicative credit limits for agricultural and non-agricultural production and development loans will directly benefit agricultural borrowers, who will now be able to obtain more credit from banks and, in turn, improve agricultural productivity through input use.
“It will also allow banks to align loan amounts with the real needs of farmers and therefore improve the flow of agricultural credit,” SBP said in a statement.
Credit requirements correspond to the actual demand of farmers or agricultural entrepreneurs for agricultural financing. The SBP has calculated the credit requirements based on various factors such as; land ownership, farm size, economic conditions and expected prices of agricultural products.
“In general, farmers with medium to large farms are in good financial condition and may have relatively low demand for credit, while subsistence and marginalized farmers rely primarily on credit/loans to meet their needs. financials, which range from 90 to 100 percent,” the central bank said in its report.
SBP said the indicative credit limits per acre 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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In line with the revised credit limits provided by SBP, indicative agricultural credit limits per acre for major crops have increased from Rs 45,000 to Rs 70,000 for rice, for wheat the credit limit has been revised to Rs 60,000 Rs per acre from Rs 40,000 per acre.
For cotton, the credit limit was raised to Rs 75,000 per acre from Rs 52,000 per acre, the credit limit for sugarcane was revised from Rs 73,000 per acre to Rs 105,000 per acre, while that for maize (hybrid) the credit limit was increased from Rs.55,000 per acre to Rs. 000 rupees per acre.
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It is important to note that indicative credit limits serve as a guideline for banks to assess the credit needs of agricultural borrowers while sanctioning credit limits. “Banks may, however, make adjustments based on market conditions, local input prices and borrowers’ ability to repay,” the SBP said.
The central bank added that the revised indicative credit limits will also help the provincial planning departments to estimate the total financial and credit needs of the respective provinces/regions for the agricultural and non-agricultural sectors.