by Roderick T. dela Cruz
More big banks are expected to acquire rural banks under the Agri-Agra
Credit Law
More universal and commercial banks are expected to acquire shares in
rural banks in the provinces as a mode of compliance with the Agri-Agra
Credit Law, following the release of its implementing rules and
regulations over the weekend.
A circular containing the rules and regulations to implement the
Agri-Agra Reform Credit Act of 2009 was made available over the weekend,
although it was signed as early as July 20 this year by Bangko Sentral
Governor Amando Tetangco Jr. The law was signed by former President
Gloria Macapagal-Arroyo on February 23, 2010.
Several major banks such as Rizal Commercial Banking Corp. and East West
Banking Corp. recently announced acquisition of rural banks in order to
increase their exposure to rural banking.
The rules basically implement the required loan allocation of banks for
agriculture and agrarian reform credit, amounting to at least 25 percent
of their total loanable funds. The amount includes at least 10 percent
for agrarian reform beneficiaries and 15 percent in agricultural credit.
Banks' failure to comply with the rules would be subject to an annual
penalty amounting to one-half of one percent of the amount of
non-compliance or under-compliance, which will be computed on a
quarterly basis.
About 90 percent of the fines collected will be remitted to the
Agricultural Guarantee Fund Pool and the PCIC that insures farmers
against losses resulting from calamities and pest infestation.
Congress has amended the Agri-Agra law to remove some alternative modes
of compliance with the law such as investing in local government bonds,
socialized low-cost housing and barangay microbusiness enterprises.
The law retained other modes of compliance aside from actual extension
of loans to qualified borrowers. These include bond issues for the
exclusive purpose of on-lending to the agriculture and agrarian reform
sector declared as eligible by the Agriculture Department and its
agencies, special deposit account maintained for the exclusive purpose
of on-lending to the agriculture and agrarian reform sector, and
wholesale lending of other banks for the exclusive purpose of on-lending
to the agriculture, fisheries and agrarian reform sector.
Banks can also invest in bonds issued by the Development Bank of the
Philippines and the Land Bank of the Philippines that have been
expressly declared as eligible by the Agriculture Department and other
debt securities.
Banks can also subscribe in shares of stock in rural financial
institutions (preferred shares only), Quedan and Rural Credit Guarantee
Corp. (Quedancor), or Philippine Crop Insurance Corp.
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