Muhammad Soban

The State Bank of Pakistan (SBP) has made amendments to its prudential regulations (PRs) relating to agriculture financing to allow banks and development finance institutions (DFIs) to increase lending to farm and non-farm sectors. According to the new amendments, the maximum amount of unsecured or clean lending for agriculture as defined in R-4 has been increased from Rs1 million to Rs5 million, the central bank said in a circular. Similarly, the exposure limit for the requirement of duly audited financial statements under R-20 has been raised from Rs10 million to Rs15 million. Banks and DFIs have been advised to ensure that these amended regulations are distributed throughout their branches and field offices.

The State Bank has been playing a vital role in uplifting the agriculture sector. Due to its significant contribution to national income, employment, food security, and export earnings, Pakistan's agriculture sector continues to play a central role in the economy. Historically, the SBP has recognized the importance of promoting access to finance for rural markets to assist farmers in meeting their financial needs. In recognition of the importance of agriculture lending for subsectors, the central bank has integrated agricultural lending regulation into its functions.

In August 2022, the State Bank had set a target of disbursing Rs1.8 trillion in agricultural credits to the financial institutions for disbursement among farmers during the fiscal year 2022-23. Under the overall target for FY23, Rs140 billion has been set aside for wheat crops, Rs45 billion for tractor financing, and Rs20 billion for harvesters, planters, and other farm machinery, to meet the national food security requirements. The country has been devastated by torrential rains and floods, causing estimated damages worth Rs320.824 billion to agriculture and livestock alone.

Floods destroyed millions of hectares of standing crops, including cotton, maize, sugarcane, oil seeds, and seasonal pulses. Approximately 800,000 animals died as a result of floods in Punjab, Sindh, Khyber Pakhtunkhwa, and Balochistan provinces, according to preliminary estimates. Economic experts suggested that the State Bank should start new easy financing facilities for small farmers from flood-affected areas so that they could start farming on their lands, fulfill their food requirements, and contribute to the economy.

Credit: Independent News Pakistan-WealthPk