The State Bank of Pakistan has issued show-cause notices to those banks and DFIs which have failed to recover sugar financing dues on time from millers, sources in banking industry told Business Recorder on Monday. They said that despite SBP's clear-cut instructions to banks and DFIs regarding sugar advances recovery, some institutions did not recover the outstanding amounts of sugar financing on time.
The financing was disbursed to sugar mills for cane procurement in the last crushing season. Sources said: "The central bank has decided to take stern action against banks for non-compliance of sugar financing guidelines and, on Saturday, issued show-cause notices to banks and DFIs which remained unable to collect 100 percent outstanding amount from the millers, even after the due date had expired."
In the show-cause notices, SBP has asked the banks and DFIs focuses for non-compliance of SBP instructions on sugar financing, besides instructing them to furnish solid reasons, which they failed to recover complete amount of sugar advances from millers. Sources said SBP was likely to slap fine on banks and DFIs, if they failed to substantiate solid reasons behind the delay in recovery.
"Following the Economic Co-ordination Committee (ECC), SBP in July 2009 granted three months extension to the miller and fixed October 31, 2009 last date for the retirement of sugar financing obtained during the sugar cane crushing season 2008-09," sources said.
Sugar mills were also instructed to adjust loans and advances against pledged stocks (both raw and refined) by October 31, 2009 positively instead of July 31, 2009.
However, the recovery report received from different banks and DFIs has shown that sugar mills have not yet retired Rs 10 billion of sugar financing acquired from banks and DFIs against their stocks during the last season despite the SBP's clear-cut instruction to adjust loans by the end of October 2009.
Banks and DFIs have provided Rs 52 billion financing to sugar mills for crushing during 2008-09 season. However, out of the total disbursement mills have retired only Rs 41.6 billion by end of October 2009, while remaining amount has still not been paid. It may be mentioned here that sugar price is on the rise in the domestic market for last two months due to short supply by the mills, besides hoarding of the commodity.
Sugar in the retail market is available at different rates varying from Rs 60 to Rs 80 per kg in retail market and Rs 38 per kg at USC outlets, where daily thousands of people are witnessed in long rows for sugar at subsidised rates. The federal and provincial governments have also failed to implement the Supreme Court order, in which the court had directed the government to ensure the sale of sugar at Rs 40 per kilogram at retail market, however after this directive, millers are not releasing their stocks in the market.
Comments
Comments are closed.