Question & AnswerQ&A (BSP CIRCULAR NO. 196)
The primary policy objective of PD 717 is to ensure the development of the agricultural and agrarian sectors by requiring the banking sector to allocate at least 25% of its loanable funds for agricultural credit, with 10% specifically for agrarian reform beneficiaries.
The NDC was authorized to issue Agri-Agra Economic Recovery through Agricultural Productivity (ERAP) Bonds totaling Fifty Billion Pesos (P50,000,000,000.00) to support projects for economic growth in the agricultural and agrarian sectors.
The Bonds are guaranteed by the Republic of the Philippines, and the interest income earned from these Bonds is exempt from the payment of taxes.
Proceeds must be used exclusively for the development of the agriculture and agrarian sectors, prioritizing projects identified by the NDC, Department of Agrarian Reform, and Department of Agriculture in areas such as rice production joint ventures, food chain establishment, livestock and agri-processing support services, and other similar undertakings.
It allows banks to invest such funds in government securities declared eligible by the Bangko Sentral, such as the NDC Agri-Agra ERAP Bonds, as an alternative compliance with PD 717.
The Bonds must not be hypothecated or earmarked for other purposes, and if involved in repurchase/resale agreements, only the buying/lending bank may use the Bonds as compliance during the holding period, with the agreement lasting at least 30 days without pre-termination.
Yes, banks can report on a consolidated basis if the subsidiary bank is at least 75% owned/controlled by the parent bank. The consolidated report must be accompanied by individual reports, subsidiary banks must separately submit reports to their regulators, only the parent bank may use excess compliance for its own compliance, and officers of the parent bank are responsible for the group's compliance.
Appropriate sanctions as provided under existing laws, rules, and regulations will be imposed based on the banks' consolidated compliance reports submitted to the Bangko Sentral every quarter.
ERAP Bonds not used for alternative compliance may be used as liquidity reserves for deposits and deposit substitutes, for common trust and fiduciary accounts, as liquidity reserves for government deposits, or as security for the faithful performance of trust duties, overriding certain maturity term restrictions applicable to other securities.
The Circular took effect upon the availability of the NDC Agri-Agra ERAP Bonds in the market.