PROCUREMENT OF WHEAT BY THE PRIVATE SECTOR

Please refer to BPD Circular No.12 dated the 10th May, 2004 through which bank financing to the private sector for procurement of wheat had been restricted.
2. Banks are aware that the wheat procurement season 2005-06 has already commenced. With a view to encourage the participation of the private sector in wheat procurement, it has been decided that the banks may provide financing facilities to their eligible borrowers (licensed wheat traders and the Flour Mills) for procurement of wheat, subject to the followings: -

a) The Banks will be free to determine the rate of mark up on their lending to the private sector for the purpose of wheat procurement depending upon the risk profile of each borrower. As the lending to the government agencies for wheat procurement is secured against the government guarantee, it is expected that the mark up rate for the private sector would be in excess of the rates charged by banks to the government agencies.

b) The bank may fix margin requirement as low as 10% of the value of the wheat stock. However, the banks shall provide no financial facilities (funded or un funded) to enable the borrowers to meet the margin requirements

c) The loan provided to the private sector shall be repayable on or before 31st January 2006.

d) Banks will continue to submit a weekly statement in respect of financing to private sector for wheat procurement as per the format already in use.

e) The lending shall be in compliance with the applicable Prudential Regulations.
The banks are also allowed to provide facilities for wheat procurement by the seed processing plants, keeping in view their lending policies and the capacity / production plans of the seed processing plants.
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