February 26, 2012, 11:34pm
MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) said it has
developed a new reportorial system to ensure that banks, especially
those accredited as rural financial institutions (RFIs), are exercising
prudence and due diligence in lending to the agricultural sector as
alternative compliance to Republic Act 10000 or the New Agri-Agra Law.
RA 10000, which mandates credit to agriculture and agrarian reform
beneficiaries, has replaced Presidential Decree 717 but the law still
requires banks to set aside 15 percent of their loanable funds for
agriculture and another 10 percent for agrarian reform-related loans.
In a statement, the central bank said its new reportorial system will
closely monitor the compliance of banks under RA 10000.
Last January, the BSP required banks to submit their annual reports
under the new guidelines, which officials admit are stricter since it
limits alternative compliance. Still, the new rules would help the BSP
to identify in more detail how banks are complying with the provisions
of the law.
Banks are required to submit the revised reportorial templates every
quarter. Penalties will be slapped for the non- or under-compliance with
90 percent of fees accruing to the Agricultural Guarantee Pool and the
Philippine Crop Insurance Corp.
The creation of RFIs is just one of the alternatives for compliance
provided under the new law. The BSP said it has defined guidelines to
determine if a bank that has sought accreditation qualifies as an RFI.
"The BSP (however) reminds (banks) that its accreditation is neither an
endorsement to infuse funds to the RFI nor an affirmation of the
soundness of its operations," the statement clarified. "The
accreditation only establishes a bank's focus on Agri-Agra lending.
Financial institutions are expected to exercise due diligence and
prudence when lending, depositing or investing in RFIs."
The BSP has accredited only three rural banks so far as RFIs, these are
Rural Bank of Kiamba in Sarangani, Producer's Savings Bank in Pasig
City, and Rural Bank of Barili in Cebu.
BSP explained that accredited RFIs will be given authority to raise
funds for Agri-Agra lending by accepting wholesale loans, placements in
RFI special accounts, and equity investments such as preferred stocks
from other financial institutions.
"RFIs then act as direct conduits to the agriculture sector and agrarian
reform beneficiaries by channeling the funds specifically allotted by
other banks for the program. This gives RFIs a critical role in the
funding chain."
RFIs also eliminate the old practice of "layering", said the BSP, which
is funding through several conduits before the proceeds are received by
the targeted beneficiaries or intended projects.
The new law also listed other alternatives for banks for easier
compliance such as investments in housing and education/medical bonds
and micro businesses even if these are not Agri-Agra related.
The BSP is in charged of accrediting RFIs while the Department of
Agriculture will accredit non-bank RFIs such as cooperatives,
microfinance non-governmental organizations, among others. (LCC)
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