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BANKS WILL need to set aside at least 25% of their total funds for lending to farmers, fisherfolk and agrarian reform beneficiaries beginning next month after the government issued the implementing guidelines of the Agri-Agra Reform Credit Act yesterday.
The rules state that banks should allocate at least 25% of their total loanable funds to the agriculture sector, of which 10% should go to agrarian reform beneficiaries.
“Excess compliance in the 10% agrarian reform credit may be used to offset a deficiency, if any, in the 15% other agricultural credit in general, but not vice versa,” the rules read.
The implementing rules and regulations (IRR) drafted by the Bangko Sentral ng Pilipinas (BSP), the Department of Agriculture (DA) and the Department of Agrarian Reform (DAR) will take effect 15 days after its publication yesterday.
Republic Act (RA) 10000 or the Agri-Agra Reform Credit Act of 2009, approved by then Pres. Gloria Macapagal-Arroyo on February 23, 2010, amended Presidential Decree 717 signed by then President Ferdinand E. Marcos on May 29, 1975.
The rules also state the BSP, in consultation with the DA and the DAR, will prepare the guidelines on the computation of total loanable funds and how banks can comply with the law on a consolidated or group-wide basis.
BSP Deputy Governor Nestor A. Espenilla, Jr. said in a text message yesterday the circulars covering the computation of total loanable funds and banks’ consolidated compliance will be released “by Friday.”
The rules state that banks can directly comply with the requirements of RA 10000 through the actual extension of loans to qualifed borrowers or the purchase of eligible loans on a “without recourse” basis from other banks.
Alternative modes of compliance are also available:
• investment in bonds issued by the Development Bank of the Philippines and the Land Bank of the Philippines that have been declared eligible by the DA, the proceeds of which should be used for lending to the agriculture and agrarian reform sectors;
• investment in other debt securities that have been declared eligible by the DA or any agency authorized by the DA;
• subscription to shares of stock in accredited rural financial institutions (preferred shares only), the Quedan and Rural Credit Guarantee Corp. or the Philippine Crop Insurance Corp.
• investment in the special deposit accounts of rural financial institutions that are accredited by the BSP;
• wholesale lending to accredited rural financial institutions;
• rediscounting by universal and commercial banks of agriculture and agrarian reform credits;
• extension of loans for the construction and upgrade of infrastructure, including farm-to-market roads and post harvest facilities; and
• grant of loans to warehouses or millers or wholesalers accredited by the National Food Authority.
Banks that fail to comply with the requirements of the law will have to pay a penalty equivalent to 0.5% of their non-compliance or under-compliance, which will be computed on a quarterly basis.
“This is something we have to live with because it is the law,” Chamber of Thrift Banks Executive Director Suzanne I. Felix said in a text message yesterday.
To be fair to the BSP, she said, banks were consulted in the preparation of the IRR.
For his part, Banco de Oro Unibank Inc. President Nestor V. Tan said it would be difficult to meet the required lending to the agriculture and agrarian reform sectors.
“It is not for lack of trying. I don’t think the loan demand from this sector is big enough to accommodate 25% of the industry’s loanable funds,” he said.
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By: Louella D. Desiderio
Source: Business World, Aug. 24, 2011
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