Manual of Regulations for Banks and Other Financial Intermediaries — 1982 Book III

July 30, 1982 MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES - 1982 BOOK III The Monetary Board in its Resolution No. 1421 dated July 30, 1982, approved this codification of the rules and regulations governing banks and other financial intermediaries which shall be known and cited as: MANUAL OF REGULATIONS FOR BANKS AND OTHER FINANCIAL INTERMEDIARIES These codified regulations shall take effect as final authority as of August 1, 1982 and supersede all regulatory issuances in force and effect as of July 31, 1982 on subject matters covered by the codified regulations. For the Monetary Board: (SGD.) JAIME C. LAYA Governor PREFACE This Manual of Regulations for Banks and Other Financial Intermediaries, approved by the Monetary Board as final authority under its Resolution No. 1421 dated July 30, 1982, shall constitute the Code of Central Bank Regulations. As such, it shall be the single source of all substantive regulations issued by the Monetary Board or the Governor of the Central Bank, and shall be cited as the authority for enjoining compliance with the rules and regulations embodied therein. For the present, only existing substantive rules issued by the Monetary Board or the Governor which are being implemented principally by the Supervision and Examination Sector (SES), are set out in four volumes with pertinent Parts and Sections in line with the arrangement and text of the Manual of Regulations on the Supervision of Financial Intermediaries which was issued as a systematic compilation of supervisory regulations in 1975. Regulations being implemented by the International Sector would subsequently form part of this Manual. The present volumes correspond to Book I Expanded Commercial Banks (EKBs) and Commercial Banks (KBs); Book II Thrift Banks (TBs); Book III Rural Banks (RBs); and Book IV Non-Bank Financial Intermediaries (NBFIs). The divisional features of the former Manual of Regulations which have been found valuable, such as the division of the Books into Parts indicative of the major operations of banks and NBFIs, and the further breaking up of Parts into major topics consisting of Sections and Subsections, were retained, and new and improved features were introduced to facilitate research. In addition to a comprehensive table of contents, an alphabetical subject/descriptive word index has been added at the end of each book. The financial reforms of 1980 which restructured the financial system are already reflected in this Manual. Furthermore, the substantive regulations in the Rules Governing Rural Banks (also in Manual form) are consolidated with the rules included in the original Book III of the Manual of Regulations which was published in 1975. The books were reorganized and revised as a project of the Commission on the Supervision of Financial Intermediaries (CSFI). The Office of Supervisory Policy and Regulations in coordination with the Office of the General Counsel and the Office of the Senior Deputy Governor undertook the further refinement of the Books towards conversion of the Manual into a single authority on the regulation or supervision of financial institutions. INSTRUCTIONS TO USERS This Manual shall constitute the single source of all substantive rules governing the financial system of the country effective as of August 1, 1982. Presently, it is composed of the rules and regulations on the supervision of banks and non-bank financial intermediaries principally implemented by the Supervision and Examination Sector. It will subsequently include substantive regulations governing foreign exchange operations. The Manual, as the comprehensive authority on the specific subjects covered therein, shall be the basis for amending or repealing provisions incorporated in the Books. New rules shall immediately form part of the pertinent section or subsection of the Book affected so that the user shall no longer refer to a separate issuance, i.e., circular or memorandum, but shall instead cite the particular section or subsection of the Book as amended or repealed by the Monetary Board/Governor. Financial institutions regulated and supervised by the Central Bank shall comply with the provisions of the Manual and any violation thereof shall be punishable under its general provision on sanctions. As a code of regulations, the Manual contains the basic features of division into Parts, further subdivided into major topic headings which introduce the corresponding sections and subsections making up the provisions governing a major operation of the particular financial institutions. Parts and major topic headings as well as coded section numbers and headings are made uniform for all Books, with slight modifications in Book IV. Coding of sections utilizes four digits: the first digit refers to Book number, the second to Part number, and the last two refer to section numbers. All provisions for EKBs and KBs (contained in Book I), therefore, begin with number 1; 2 for TBs; 3 for RBs; and 4 for NBFIs. Rules on Part One of Book I bear section numbers beginning with 11; those of Book II begin with 21, and so on for Books III and TV. For example, the code number 1161.6 would mean as follows: The coding of Book IV includes the letters "Q", "N" and "P" which are appended to the pertinent code numbers to indicate provisions for non-bank quasi-banks (NBQBs); non-bank financial intermediaries (NBFIs) and pawnshops, respectively. For example, the code numbers 4161Q, 4161N and 4161P would refer to provisions on reporting requirements of NBQBs, NBFIs and pawnshops, in that order. The paging is by Parts, with each Part beginning with page 1, and so on corresponding to the number of pages of the particular Part. For example, Part I, consisting of 6 pages will start with a first page indicated as "Part I-1" with "Part I-6" as its last page number. The pages for updates will follow the same pagination, with added letters to indicate inserted pages, in case of amendatory regulations with more provisions. Appendices for all Parts are found at the last portion of the Manual, before the subject index, and are numbered consecutively, by appendix number. Appendix 1 composed of 3 pages, for example, will begin with a page indicated as "App. 1-1" and end with "App. 1-3". To facilitate reference, running section headings consisting of the coded number(s) of section(s)/subsection(s) whose provisions are contained in a particular page are indicated at either the upper right or left-hand corner of the page preceded by the symbols or . The cut-off date, which is initially June 30, 1982, is indicated immediately below the running section heads, as: 82.06.30. Issuances for the month ended July 31, 1982 are included as temporary inserts. Thereafter, the date of the pages affected by subsequent new issuances or amendments/repeals will be changed to the end of the semestral period during the semestral updating which shall reflect the changes that shall have occurred. Amendments to the Manual will be issued as temporary inserts to facilitate dissemination. All amendments within a semester will be reprinted as regular inserts to replace affected pages or as additional pages in case of long amendatory provisions. UPDATING INSTRUCTIONS BOOK III SES III Manual Manual Pages to be Removed Pages to be Inserted Table of Contents IX to IX IX to X XXI to XXII XXI to XXII XXVII to XXVIII XXVII to XXVIII XXIX to XXXI XXXI to XXXI Part I 3 to 4 3 to 4.a 7 to 8 7 to 8 11 to 12 11 to 12 17 to 20.a 11 to 20.a 47 to 48 47 to 48 Part II 7 to 10 7 to 10 17 to 18 17 to 18 25 to 26.a 25 to 26 Part III 1 to 2.a 1 to 2.a 11 to 12 11 to 12.a 15 to 16 15 to 16.a 21 to 22.a 21 to 22.a 24.a to 24.c 24.a to 24.c 39 to 40.a 39 to 40.a 51 to 52 51 to 52.a 87 to 98.b 87 to 98.b 138.a to 138.b 138.a to 138.c 144.c to 144.d 144.c to 144.f Appendices 1-1 to 1-2 1-1 to 1-2 14-1 to 14-2 14-1 to 14-2 15-1 to 15-2 15-1 to 15-2.a 36-1 to 36.3 36-1 to 36-4 38-1 to 38-4 38-1 to 38-5 39-1 to 39-2 40-1 to 40-2 41-1 to 41-3 42-1 to 42-3 43-1 to 43-2 Index 1-15 to 1-18 1-15 to 1-18.a Book III TABLE OF CONTENTS PART ONE ORGANIZATION, MANAGEMENT AND ADMINISTRATION A. SCOPE OF AUTHORITY SECTION 3101. Scope of Rural Banking Authority SECTION 3102. Authority to Perform Other Banking Services SECTIONS 3103 3105 (Reserved) B. CAPITALIZATION SECTION 3106. Minimum Capitalization 3106.1 Determination of minimum capital 3106.2 Capital build-up program SECTIONS 3107 3110 (Reserved) C. MERGER AND CONSOLIDATION SECTION 3111 Merger or Consolidation to Meet Minimum Capital 3111.1 Approval by the Central Bank 3111.2 Exchange of shares SECTIONS 3112 3115 (Reserved) D. NET WORTH TO RISK ASSETS RATIO SECTION 3116 Basic Ratio 3116.1 Suspended application of ratio in case of merger or consolidation 3116.2 Definition/Explanation of terms and phrases 3116.3 Required reports 3116.4 Sanctions 3116.5 Effects of deficiency SECTION 3117-3125 (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 3126 Shares of Stock: Kinds, Rights, Privileges and Par Value 3126.1 Unpaid subscriptions upon organization 3126.2 Transfer of shares 3126.3 Conversion of preferred stock to common stock; amendment of articles of incorporation 3126.4 Acquisition by small farmers of equity in rural banks SECTIONS 3127-3130 (Reserved) SECTION 3131 Ceilings on Stockholdings in Rural Banks 3131.1 Limits on stockholdings in a single rural bank 3131.2 Limits on stockholdings in several rural banks 3131.3 Ceilings on voting equity 3131.4 Exception to the 20% ceiling on individual/family group stockholdings in a rural bank SECTIONS 3132-3135 (Reserved) SECTION 3136 Dividends 3136.1 Definition of terms 3136.2 Declaration; payment of dividends; limitations 3136.3 Records; reports SECTIONS 3137-3140 (Reserved) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 3141 Definition and Qualifications of Directors SECTION 3142 Definition and Qualifications of Officers SECTION 3143 Disqualifications of Directors or Officers 3143.1 Persons disqualified to become directors 3143.2 Person disqualified to become officers 3143.3 Disqualifying procedures SECTION 3144 Bio-data; List of Directors and Officers SECTION 3145 Management Contracts SECTION 3146 Interlocking Directorships and/or Officerships 3146.4 Representatives of Government 3146.5 Categories of banks 3146.6 Definition of directors; officers SECTION 3147 (Reserved) SECTION 3148 Bonds, Training of Officers and Employees SECTION 3149 Salary and Compensation Benefit Programs 3149.1 Salaries 3149.2 Allowances and per diems SECTION 3150 Profit Sharing Programs 3150.1 Inclusion of program in by-laws 3150.2 Base for computation 3150.3 Other priorities 3150.4 Prior Monetary Board approval G. BANKING OFFICES SECTION 3151 Establishment of Banking Offices 3151.1 Prior Monetary Board approval 3151.2 Capital requirements 3151.3 Other requirements/factors to be considered 3151.4 Conditions precluding acceptance of application 3151.5 Conditions precluding processing of application 3151.6 Priority in processing 3151.7 Date of opening SECTION 3152 Establishment of Money Shops 3152.1 General guidelines in chartering 3152.2 Factors to be considered in the establishment of money shops 3152.3 Operational guidelines SECTION 3153 Establishment of Savings Agencies 3153.1 General guidelines in chartering 3153.2 Factors to be considered in the establishment of savings agencies 3153.3 Operational guidelines 3153.4 Miscellaneous SECTION 3154 Relocation of Banking Offices SECTION 3155 Establishment of Extension Offices 3155.1 General guidelines in chartering extension offices 3155.2 Conditions for processing applications H. BANKING DAYS AND HOURS SECTION 3156 Banking Days and Hours 3156.1 Banking hours beyond minimum 3156.2 Report of, and changes in, banking days and hours 3156.3 Emergencies 3156.4 Reports 3156.5 Existing authorizations and notifications 3156.6 Posting of schedule SECTIONS 3157-3160 (Reserved) I. INTERNAL CONTROL SECTION 3161 Records and Reports 3161.1 Categories of, and signatories to, bank reports 3161.2 Sanctions for wilful delay in submission of reports; refusal to permit examination 3161.3 Submission of certain required information 3161.4 Reports on crimes/losses 3161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers or stockholders 3161.6 Consolidation of financial statements of financial intermediaries and their allied undertakings/subsidiaries/affiliates SECTIONS 3162-3164 (Reserved) SECTION 3165 Audits 3165.1 Procedural guidelines 3165.2 Exemptions SECTION 3166 Internal Control System 3166.1 Proper accounting records 3166.2 Independent balancing 3166.3 Division of duties and responsibilities 3166.4 Joint custody 3166.5 Signing authorities 3166.6 Dual control 3166.7 Number control 3166.8 Rotation of duties 3166.9 Independence of internal auditor 3166.10 Direct verification 3166.11 Other internal control standards 3166.12 Dormant/Inactive accounts 3166.13 Miscellaneous SECTION 3167 Bank Protection 3167.1 Objectives 3167.2 Definitions 3167.3 Designation of security officers 3167.4 Security program 3167.5 Security devices 3167.6 Reports 3167.7 Corrective action SECTIONS 3168-3170 (Reserved) J. MISCELLANEOUS PROVISIONS SECTIONS 3171-3174 (Reserved) SECTION 3175 General Requirements on Organization and Operation 3175.1 Who may organize a rural bank 3175.2 Qualifications of organizers 3175.3 Disqualifications of organizers 3175.4 Procedural requirements 3175.5 Application for permit to organize 3175.6 Form of organization 3175.7 Requisites in formal organizations 3175.8 Establishment of additional rural bank 3175.9 Supplementary rules and procedures 3175.10 Rural bank office and premises 3175.11 Investment in fixed assets; limitations 3175.12 Insurance of office building, furniture and funds 3175.13 Acquisition of motor vehicles, office equipment and other commodities 3175.14 Contributions to expansion of RBAP building SECTIONS 3176-3198 (Reserved) SECTION 3199 General Provision on Sanctions PART TWO DEPOSIT AND BORROWING OPERATIONS A. DEMAND DEPOSITS SECTION 3201 Authority to Accept or Create Demand Deposits 3201.1 Prerequisites to accept or create demand deposits 3201.2 Permit to accept or create demand deposits 3201.3 Number of accounts 3201.4 Bonding of officers and employees 3201.5 Applicability of other rules and regulations SECTION 3202 Interest on Demand Deposits SECTION 3203 Reserves Against Demand Deposits SECTION 3204 Temporary Overdrawings; Drawings Against Uncollected Deposits 3204.1 Temporary overdrawings 3204.2 Drawings against uncollected deposits SECTION 3205 Checks without Sufficient Funds SECTION 3206 Current Accounts of Bank Officers and Employees SECTIONS 3207-3211 (Reserved) B. SAVINGS DEPOSITS SECTION 3212 Authority to Accept Savings Deposits 3212.1 Bonding of officers and employees SECTION 3213 Interest on Savings Deposits SECTION 3214 Reserves Against Savings Deposits SECTION 3215 Servicing Deposits Outside Bank Premises 3215.1 Solicitation of deposits under the TIPID movement 3215.2 Solicitation of deposits under the Barangay savings movement SECTION 3216 Deposits and Withdrawals 3216.1 Withdrawals of Samahang Nayon funds SECTION 3217 Dormant Savings Accounts SECTION 3218 Special Savings Deposits of Farmer-Borrowers 3218.1 Barrio savings fund 3218.2 Barrio guarantee fund SECTION 3219 Rental Deposits of Lessees SECTIONS 3220-3222 (Reserved) C. NOW ACCOUNTS SECTION 3223 Authority to Accept NOW Accounts 3223.1 Prerequisites to accept NOW accounts SECTION 3224 Interest on NOW Accounts SECTION 3225 Reserves Against NOW Accounts SECTION 3226 Rules on Servicing NOW Accounts SECTIONS 3227-3229 (Reserved) D. TIME DEPOSITS SECTION 3230 Authority to Accept Time Deposits SECTION 3231 Interest on Time Deposits SECTION 3232 Reserves Against Time Deposits SECTION 3233 Minimum Size and Term of Time Deposits SECTION 3234 Special Time Deposits SECTION 3235 Negotiable Certificate of Time Deposits 3235.1 Minimum features 3235.2 Insurance coverage 3235.3 Pre-qualification and other requirements 3235.4 Desistance from issuing new negotiable certificates of time deposit SECTION 3236 Reserved Requirements SECTIONS 3237-3238 (Reserved) E. GOVERNMENT DEPOSITS/FUNDS SECTION 3239 Authority to Service Government Deposits/Funds 3239.1 Banks which may accept Government funds 3239.2 Definition of terms 3239.3 Liquidity floor 3239.4 Exempt transactions 3239.5 Application for authority 3239.6 Sanctions SECTIONS 3240-3241 (Reserved) F. INTEREST ON DEPOSITS SECTION 3242 Interest on Demand Deposits SECTION 3243 Interest on Savings Deposits and NOW Accounts 3243.1 Computation of interest SECTION 3244 Interest on Time Deposits 3244.1 Computation of interest 3244.2 Time of payment 3244.3 Treatment of matured time deposits 3244.4 Pretermination SECTION 3245 Payment of Interest in Kind SECTION 3246 Special Savings and Time Deposits SECTION 3247 Employees Provident Fund Contributions SECTION 3248 Disclosure of Effective Rates of Interest SECTIONS 3249-3252 (Reserved) G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 3253 Accounts Subject to Reserves SECTION 3254 Form or Composition of Reserves 3254.1 Allowable drawings against reserves 3254.2 Interest income on reserve deposits 3254.3 Book entry method for reserve securities SECTION 3255 Computation of Reserve Position SECTION 3256 Reserve Deficiencies 3256.1 Chronic reserve deficiency; penalties 3256.2 Failure to cover overdrawings with the Central Bank 3256.3 Unpaid fines SECTION 3257 Report on Compliance SECTIONS 3258-3260 (Reserved) H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 3261 Schemes to Attract Deposits 3261.1 Raffles and lotteries 3261.2 Gifts or "giveaways" 3261.3 Other promotional schemes 3261.4 Sanctions SECTION 3262 Miscellaneous Rules on Deposits 3262.1 Opening of deposit accounts prohibitions 3262.2 Specimen signatures; ID photos 3262.3 Signature card; deposit slip 3262.4 Insurance on deposits 3262.5 Certification on deposit 3262.6 Withholdings tax on deposits of foreign diplomatic establishments SECTION 3263 (Reserved) SECTION 3264 Unclaimed Balances SECTIONS 3265-3268 (Reserved) I. BORROWINGS FROM THE CENTRAL BANK SECTION 3269 Rediscount Ceilings; Eligibility of Papers; Maturities 3269.1 Concept of rediscounting 3269.2 Eligible papers 3269.3 Maturities 3269.4 Loan ceiling 3269.5 Application procedures SECTION 3270 Qualifications/Disqualifications for Availment; Penalties 3270.1 Qualifications 3270.2 Temporary disqualification 3270.3 Denial of credit facilities 3270.4 Other requirements 3270.5 Effects of natural calamities 3270.6 Credit examination of borrowings rural banks SECTION 3271 Loan Values; Rediscount and Lending Rates 3271.1 Loan values, rediscount and lending rates 3271.2 Scope/definition of Indifferential areas of rediscounting 3271.3 Interest rate ceiling 3271.4 Unsecured loans 3271.5 Liquidated damages 3271.6 Authority to rediscount with designated branches of the Philippine National Bank, Land Bank of the Philippines and Amanah Bank 3271.7 Increase in interest rates SECTION 3272 (Reserved) SECTION 3273 Remittance of Collections/Repayments; Arrearages 3273.1 Remittance 3273.2 Arrearages 3273.3 Additional financial assistance 3273.4 Other requisites 3273.5 Special availment of rediscounting privilege SECTION 3274 Rediscounting of Specific Papers 3274.1 Integrated agricultural financing; cottage and small-scale industry financing 3274.2 Cottage industry fund 3274.3 Deleted by Circular 1063 3274.4 Short-term financing for cotton supervised credit 3274.5 Promissory notes supported by pledges of blue chip/high grade shares of stock * SECTION 3304 Past Due Accounts 3304.1 Redemption of foreclosed property 3304.2 Renewal of loans 3304.3 Write-off of loans 3304.4 Valuation accounts 3304.5 Penalty of past due loans SECTION 3305 Truth in Lending Act Disclosure 3305.1 Information to be disclosed 3305.2 Definition of terms 3305.3 Scope of regulations 3305.4 Availability for inspection of copies of contracts 3305.5 Information sheets and other reports to be submitted to the Central Bank 3305.6 Posters 3305.7 Offices authorized to enforce rules and regulations 3305.8 Penal provisions SECTIONS 3306-3310 (Reserved) B. SECURED LOANS SECTION 3311 Loans Secured by Unencumbered Real or Personal Property SECTION 3312 Loans Secured by Government Securities SECTION 3313 Loans Secured by Junior Mortgages on Real Estate SECTION 3314 Ceiling on Amount of Real Estate Loans Exempted from Publication Requirements SECTIONS 3315-3318 (Reserved) C. UNSECURED LOANS SECTION 3319 Loans Against Personal Security SECTIONS 3320-3325 (Reserved) D. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS SECTION 3326 Coverage; General Policy; Definitions 3326.1 General policy 3326.2 Definitions SECTION 3327 Transactions Covered SECTION 3328 Transactions Not Covered SECTION 3329 Direct/Indirect Borrowings SECTION 3330 Individual Ceiling SECTION 3331 Aggregate Ceiling; Ceiling on Unsecured Loans SECTION 3332 Exclusions from Aggregate Ceiling SECTION 3333 Procedural Requirements 3333.1 Approval of the board; when to obtain 3333.2 Approval by the board; how manifested 3333.3 Majority of the directors; computation of 3333.4 Contents of the resolution 3333.5 Transmittal of copy of board approval; contents thereof SECTION 3334 Reportorial Requirements SECTION 3335 Availment of Credit Facility with the Central Bank SECTION 3336 Sanctions SECTION 3337 Financial Assistance to Officers and Employees 3337.1 Mechanics 3337.2 Other conditions/limitations 3337.3 Reportorial requirements 3337.4 Sanctions SECTIONS 3338-3340 (Reserved) E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 3341 Agrarian Reform and Agricultural Credit 3341.1 Definition of terms 3341.2 Who may borrow; purposes 3341.3 Required allocation for agrarian reform and agricultural credit in general 3341.4 Computation of loanable funds 3341.5 Allowable alternative investment 3341.6 Submission of reports 3341.7 Syndicated type of agrarian reform credits/agricultural credit 3341.8 Amount of loan; security 3341.9 Terms of loans; renewals 3341.10 Interest and other charges 3341.11 Broadening channels of Agricultural Credit 3341.12 Restructuring of Farmer's Credit due to drought of 1983 3341.13 Accounting records SECTION 3342 Commercial, Industrial, Term Loans, Loans to Cooperatives 3342.1 Commercial loans 3342.2 Industrial loans 3342.3 Term loans 3342.4 Loans to cooperatives SECTION 3343 (Reserved) SECTION 3344 Temporary Overdrawings in Current Account SECTION 3345 Supervised Credit 3345.1 Steps in supervised credit system 3345.2 Requirement for supervised credit technician 3345.3 Applicability of supervised credit 3345.4 Valuation reserves for doubtful and loss loan accounts under the Masagana 99 and other similar supervised credit loans SECTIONS 3346-3350 (Reserved) F. SPECIAL FINANCING PROGRAMS SECTION 3351 Special Financing Programs 3351.1 Requirements for participation in special financing programs 3351.2 Special time deposits; requirements for availment/ utilization 3351.3 Rediscounting 3351.4 Penalty on past due special time deposits 3351.5 Checks in payment of special time deposits or rediscounting obligations 3351.6 Kinds of loans under special financing program 3351.7 Security 3351.8 Requirements for production loans 3351.9 Conversion of production loan into a commodity loan 3351.10 Marketing tie-up 3351.11 Agricultural guarantee fund SECTION 3352 Small Fishermen's Special Credit Fund 3352.1 General policy 3352.2 General procedure 3352.3 Special time deposit 3352.4 Guarantee of loans 3352.5 Loans by rural bank to end-users SECTION 3353 (Reserved) SECTION 3354 IGLF Program 3354.1 General criteria 3354.2 Additional rules and regulations SECTION 3355 Livestock and Poultry Financing 3355.1 General policies 3355.2 Specific programs SECTION 3356 Masagana 99 Rice Production Program 3356.1 Strategy of implementation 3356.2 Borrowing policies and procedures 3356.3 Technicians as collection agents 3356.4 Guarantee procedures 3356.5 Input distribution scheme 3356.6 Accounts undergoing court action 3356.7 Direct seeding scheme or sabog-tanim SECTION 3357 Masaganang Maisan and Maisagana Programs 3357.1 Masaganang Maisan Programs 3357.2 Maisagana Program SECTION 3358 Gulayan sa Kalusugan SECTION 3359 Financing Program for Fisheries Production and Development 3359.1 Rationale 3359.2 Objectives 3359.3 Projections 3359.4 Total funding requirement 3359.5 Lending procedures 3359.6 Marketing aspects 3359.7 Coordinating agencies and their responsibilities 3359.8 Personnel of implementing agencies and their responsibilities 3359.9 Reporting system SECTION 3360 (Reserved) SECTION 3361 Bakahang Barangay 3361.1 Bakahang Barangay (Cow-Calf) program 3361.2 CB-DALL Fund (Bakahang Barangay) SECTION 3361-A. Kalabaw ng Barangay 3361.A.1 Kalabaw ng Barangay Program SECTION 3362 Second Rural Development Land Settlement Project 3362.1 Preliminary statement 3362.2 Participating rural banks or stock savings and loan associations 3362.3 Subloans extended by participating rural banks or stock savings and loan associations 3362.4 Loans by the Central Bank to the participating rural banks or stock savings and loan associations 3362.5 Audits and reports from the participating rural bank/stock savings and loan association SECTION 3363 Food Quedan Financing Program 3363.1 Objectives of the Program 3363.2 Legal bases 3363.3 Terminology 3363.4 Statement of policies 3363.5 Responsibilities of participating agencies 3363.6 Guidelines governing the grant of special time deposits 3363.7 Rules and regulations governing the guarantee coverage of food quedan 3363.8 Food commodities in storage at the bonded warehouse of the Food Terminal, Inc. 3363.9 Guidelines on the use of food trust receipts SECTION 3364 Cooperative Finance System 3364.1 Definition of terms 3364.2 General credit policies 3364.3 Types of financing 3364.4 Authorized lenders 3364.5 Eligible borrowers 3364.6 Credit requirements 3364.7 Amount of loan 3364.8 Loan periods; extension periods 3364.9 Collateral security; loan value 3364.10 Interest rates 3364.11 Loan repayment schedule 3364.12 Lending procedures 3364.13 Use of borrowed funds; diversion 3364.14 Application of payments; remittance to CB-CFG 3364.15 Default; foreclosure SECTION 3364.A. Rules and Regulations Governing Operations of the Cooperative Finance System SECTION 3365 Financing Program under the Consolidated Special Agricultural Rehabilitation Fund (Consolidated SARF) 3365.1 Availment of special funds 3365.2 Guidelines for participation SECTION 3366 Small and Medium-Scale Fisheries Credit Program (Biyayang Dagat '79) 3366.1 Objectives 3366.2 Outline of credit scheme 3366.3 Targets 3366.4 Organization, management and operations 3366.5 Marketing of fishermen's catch 3366.6 Role of rural bank technicians 3366.7 Role of BFAR extension workers 3366.8 Guarantee coverage SECTION 3367 The Cottage Industry Guarantee and Loan Fund 3367.1 Definition of terms 3367.2 Participating financing institutions 3367.3 Loans extended by participating financing institutions to borrowers 3367.4 Cottage industry guarantee operations 3367.5 Special time deposit 3367.6 Rediscounting SECTION 3368 CB-MEC Supervised Experience Education Program 3368.1 Objectives 3368.2 Definition of terms 3368.3 Priority projects 3368.4 General policies 3368.5 Lending operations 3368.6 Implementing agencies and their responsibilities 3368.7 Personnel of implementing agencies and their responsibilities 3368.8 Monitoring system 3368.9 Program review and evaluation SECTION 3369 Integrated Agricultural Financing for Ilocos Region 3369.1 Preliminary statement 3369.2 Eligible borrower 3369.3 Loan per hectare 3369.4 Interest rate 3369.5 Rediscounting 3369.6 Special Time Deposits 3369.7 Additional interest charges 3369.8 Schedule of loan releases for seed-bedding under the Virginia Tobacco Financing Program SECTION 3370 Burley Tobacco Supervised Credit Program 3370.1 Rationale 3370.2 Objectives 3370.3 Target areas 3370.4 Strategy of implementation 3370.5 Guidelines and policies 3370.6 Additional interest charges 3370.7 Schedule of loan releases for seed-bedding under the Burley Tobacco Financing Program SECTION 3371 Fourth CB: IBRD Rural Credit Project 3371.1 Definition of terms 3371.2 Participating institutions; eligibility requirements 3371.3 Other eligibility requirements 3371.4 Subloans extended by participating financial institutions; purposes 3371.5 Eligibility of borrowers 3371.6 Subloan limits 3371.7 Creditworthiness 3371.8 Maturity of subloans 3371.9 Loan repayment 3371.10 Grace period 3371.11 Interest rates 3371.12 Collateral 3371.13 Subloan applications and processing 3371.14 Release of subloan proceeds 3371.15 Penalty for non-payment 3371.16 Extension periods 3371.17 Subloans in litigation 3371.18 Procurement 3371.19 CB loans to participating financing institutions 3371.20 Auditing and reportorial requirements 3371.21 Guidelines on restructuring SECTION 3372 Cotton Supervised Credit Financing Program 3372.1 Objectives 3372.2 Strategy of implementation 3372.3 Implementing agencies and their responsibilities SECTION 3373 Medium-Term Financing under the Special Cotton Financing Program SECTION 3374 Pukyutang Barangay Program 3374.1 Strategy of implementation 3374.2 Eligibility requirements 3374.3 Purpose of the loan 3374.4 Loan basis 3374.5 Loan releases 3374.6 Loan term 3374.7 Interest rate 3374.8 Loan repayment 3374.9 Security 3374.10 Priority areas 3374.11 Financing requirements 3374.12 Training and accreditation 3374.13 Special time deposits for RBs/stock SLAs 3374.14 Recommended procedures/points to consider on loan processing for short-term supervised credit loans SECTION 3375 Supervised Credit for Selected Orchard Crops 3375.1 Objectives 3375.2 General policies; definitions 3375.3 Strategy of implementation SECTION 3375.A. KKK Livelihood Program 3375.A.1 Incentives to Participating Rural Banks 3375.A.2 Bank clearance for applicants 3375.A.3 Accreditation of Rural Banks SECTION 3375.B. Supervised Credit Production Program for Rural Out-of-School Youth under the Kabataang Sakahan Para sa Kaunlaran SECTION 3375.C. Expanded Yellow Corn Production Assistance Program (EYCPAP) 3375-C.1. The Implementing Guidelines Governing the Participation of Banks under the Expanded Yellow Corn Production Assistance Program (EYCPAP) may be found in Appendix 36 (Effective Sept. 2, 1984). 3375-C.2. The Eligibility Requirements for the Participation of Rural Banks in the Expanded Corn Program (ECP) of the government may be found in Appendix 39 (Effective April 24, 1985) SECTION 3375-D. INTENSIFIED RICE PRODUCTION PROGRAM (IRPP) 3375-D.1 The Implementing Guidelines Governing the Participation of Banks Under the Intensified Rice Production Program (IRPP) may be found in Appendix 38 (Effective Dec. 26, 1984). 3375-D.2. The Eligibility Requirements for the Participation of Rural Banks in the Intensified Rice Production Program (IRPP) of the government may be found in Appendix 39. (Effective April 24, 1985) SECTION 3375-E. Philippine Aquaculture Development Project 3375-E.1 The Rules and Regulations Governing the Implementation of the Philippine Aquaculture Development Project may be found in Appendix 37 (Effective September 19, 1984). 3375-E.2 The Eligibility Requirements for the Participation of Rural Banks in the Philippine Aquaculture Development Project may be found in Appendix 39. (Effective April 24, 1985) SECTION 3375-F. Participation of Banks in Financing Post-Harvest Facilities 3375-F.1 Implementing Guidelines Governing the Participation of Banks in Financing Post-Harvest Facilities may be found in Appendix 40 (Effective April 29, 1985) 3375-F.2 The Eligibility Requirements for the Participation of Rural Banks in Financing Post-Harvest Facilities may be found in Appendix 39. (Effective April 24, 1985) SECTION 3375-G. Participation of Banks in Financing the Soybean Production Program (NSPP) 3375-G.1 Implementing Guidelines Governing the Participation of Banks in Financing the National Soybean Production Program (NSPP) may be found in Appendix 41 (Effective April 29, 1985) 3375-G.2 The Eligibility Requirements for the Participation of Rural Banks in Financing the National Soybean Production Program (NSPP) may be found in Appendix 39 (Effective April 24, 1985) SECTION 3375-H. Participation of Banks in Financing the National Rootcrops for Feeds Program (NRFP) 3375-H.1 Implementing guidelines governing the Participation of Banks in financing the National Rootcrops for Feed Program (NRFP) may be found in Appendix 42 (Effective April 29, 1985) 3375-H.2 The Eligibility Requirements for the Participation of Rural Banks in Financing the National Rootcrops for Feed Program (NRFP) may be found in Appendix 39. (Effective April 24, 1985). G. EQUITY INVESTMENTS SECTION 3376 Scope of Authority SECTION 3377 Financial Allied Undertakings SECTION 3378 Limits on Investments in Allied Undertakings SECTION 3379 Non-Financial Allied Undertakings SECTION 3380 Investment in Philippine Farmers Marketing Systems, Inc. and Other Marketing Corporations SECTION 3381 Limitations and Restrictions 3381.1 Investments in and loans to a single enterprise 3382.2 Investments in all enterprises 3381.3 Conditions precluding investment in equities SECTIONS 3382-3390 (Reserved) H. OTHER OPERATIONS SECTION 3391 Purchase of Receivables and Other Obligations 3391.1 Definitions of terms 3391.2 Pre-conditions on placements 3391.3 Transitory provisions 3391.4 Sanctions SECTION 3392 Open Market Operations 3392.1 Legal basis 3392.2 Authorized dealers 3392.3 Accreditation 3392.4 Purchase/Sales 3392.5 R/P accommodation 3392.6 Exclusive transactions thru government securities dealers 3392.7 Market making by government securities dealers 3392.8 Regular repurchase agreements 3392.9 Reverse repurchase agreements with the Central Bank 3392.10 Repurchase agreements from the special overnight facility SECTIONS 3393-3398 (Reserved) SECTION 3399 General Provision on Sanctions PART SIX MISCELLANEOUS SECTION 3601 Purchase and Sale of Government Securities 3601.1 Premyo savings bonds 3601.2 DBP bonds 3601.3 Purchase and Sale by the National Treasurer and Government Corporations 3601.4 Purchase and Sales by the National Treasurer and Government-owned or controlled corporations SECTIONS 3602-3603 (Reserved) SECTION 3604 Miscellaneous Operations 3604.1 Investment in bonds and other debt securities 3604.2 Acceptance of lipstick checks 3604.3 Sale of Philippine National Bank money orders 3604.4 Foreign exchange dealership 3604.5 Posting of statement of condition of rural banks SECTIONS 3605-3606 (Reserved) SECTION 3607 Bank Advertisements SECTION 3608 Assessment Fees on Banks 3608.1 Annual fee SECTION 3609 Reproduction and Use of Facsimiles of Government Securities, Currency Notes and Coins 3609.1 Facsimiles of government securities APPENDICES NO. SUBJECT MATTER 1 Reports Required to be Submitted by Rural Banks to the Department of Rural Banks and Savings and Loan Associations 1-a Category B Reports of Rural Banks 1-b Format of Resolution for Signatories Category A-1 Reports of Rural Banks 1-c Format of Resolution for Signatories Category A-2 Reports of Rural Banks 1-d Format of Resolution for Signatories Category B Reports of Rural Banks 2 Certain Information Required from all Banks and Non-Bank Financial Intermediaries 3 Documents/Information on Organizational Structure and Operational Policies Required from Banks and Non-Bank Financial Intermediaries 4 Pro-Forma Articles of Incorporation 5 Revised Procedure in Organizing Rural Banks 6 TIPID Movement Manual 6-a Form Letter of Manifestation 6-b Report of Deposit Collection under the TIPID Movement 7 List of Potential Small Industries for IGLF Financing 8 Implementing Guidelines for Collection of Barrio Savings Fund 9 Guidelines on Barrio Savings Fund and Barrio Guarantee Fund 10 SEC Prescribed Format for Certification on Deposit 11 Maximum Maturity of Loans from the Central Bank to Institutional Borrowers 12 Procedures in Obtaining and Repaying a Rediscount or Loan with the Central Bank 13 Interest Income on Bank Deposits of Foreign Governments 14 "Gulayan sa Kalusugan" Program 15 Sample Format of Affidavit of Transfer of Stock Pro-forma information sheet for Incoming Voting Stockholders. 16 Sample Format of Certificate of Compliance 17 Rediscounting Procedures for Rural Banks with a Rating of "A" or "B" 18 Lending Policies and Implementing Guidelines for Bakahang Barangay (Cow-Calf) Program of the Ministry of Agriculture and the Central Bank of the Philippines 19 List of Accredited Schools/Colleges 20 Farm Budget 21 Implementing Guidelines for Medium-Term Financing under the Special Cotton Financing Program 22 Format of Disclosure Statement on Loan/Credit Transaction 23 Format of Abstract of Truth in Lending Act 24 List of Rural Banks for Purposes of Special Restructuring of Past Due Coconut Loans 25 Illustrative Case of the Steps to be Taken by the RB/SLA in the Restructuring of CB: IBRD Loans under the 3rd and 4th Rural Credit Projects 26 Guidelines on the Restructuring of CB: IBRD Loans 27 Clean Note Policy 28 Guidelines and Procedures to Govern Shipment of Unfit/Mutilated Currency Notes to the Central Bank-Cash Department, Regional Offices and Cash Units 29 Guidelines and Procedures to Govern Verification of Currency Notes Deposited by Banks to their Demand Deposit Account with the Central Bank 30 Rediscounting of Eligible Papers of Rural Banks in Selected Provinces 31 Financing, Marketing and Cultural Package for Banana 31-a Financing, Marketing and Cultural Package for Coffee 31-b Financing, Marketing and Cultural Package for Papaya 31-c Financing, Marketing and Cultural Package for Pineapple 32 Procedures on Collection of Fines from Banks 33 Supervised Credit Production Program for Rural Out-of-School Youth under The Kabataang Sakahan Para sa Kaunlaran 34 Guidelines on Food Quedan Financing Program for Food Terminal, Inc. (FTI) Deposits 35 Guidelines on The Use of Food Trust Receipts under The Food Quedan Financing Program 36 Implementing Guidelines Governing the Participation of Banks under the Expanded Yellow Corn Production Assistance Program (EYCPAP) 37 Rules and Regulations Governing the Implementation of the Philippine Aquaculture Development Project 38 Implementing Guidelines Governing the Participation of Banks under the Intensified Rice Production Program (IRPP) 39 Eligibility requirements for the Participation of Rural Banks in the Agriculture Productivity Programs of the Government. 40 Implementing Guidelines Governing the Participation of Banks in Financing Post-Harvest Facilities for the Agricultural Productivity Programs of the Government. 41 Implementing Guidelines Governing Participation of Banks in Financing the National Soybean Production Program (NSPP). 42 Implementing Guidelines Governing the Participation of Banks in Financing the National Rootcrops for Feed Program (NRFP). 43 List of Reserve Eligible and Non-Eligible Securities. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas PART ONE Organization, Management and Administration A. SCOPE OF AUTHORITY SECTION 3101. Scope of Rural Banking Authority . A rural bank shall be organized in accordance with Republic Act No. 720, as amended, and, upon issuance of a certificate of authority to operate may, pursuant to the provisions of the Act and of pertinent rules and regulations, perform any or all of the following services: LLcd a. Grant loans and make investments as provided in Part Three; b. Accept savings and time deposits; c. Sell domestic drafts; d. Act as correspondent for other financial institutions; e. Receive in custody funds, documents, and valuable objects, and rent safety deposit boxes for the safeguarding of such effects; f. Act as financial agent and buy and sell, by order of and for the account of its customers, shares, evidences of indebtedness and all types of securities; and g. Make collections and payments for the account of others and perform such other services for its customers as are not incompatible with banking business. The bank shall perform the services permitted under Items "e," "f" and "g" as depository or as agent. Accordingly, it shall keep the funds, securities and other effects which it thus receives duly separate and apart from the bank's own assets and liabilities. Upon prior approval of the Monetary Board, a rural bank may perform any or all of the following services: (1) Open current/checking accounts or NOW (Negotiable Order of Withdrawal) accounts as provided in Title C of Part Two; (2) Act as trustee over estates or properties of farmers and merchants; (3) Act as official depository of municipal, city or provincial funds in the municipality, city or province where it is located, when so authorized by the Monetary Board in accordance with the provisions of Title E of Part Two and to such limitations as may be deemed necessary for the protection of said funds; (4) Rediscount paper with the Philippine National Bank or the Development Bank of the Philippines, or other banks and their branches and agencies, subject to such rules and regulations governing rediscounting; and (5) Invest in allied undertakings as provided in Title G of Part Three. SECTION 3102. Authority to Perform Other Banking Services . With prior approval of the Monetary Board, a rural bank may either (a) convert into a thrift bank, thence to a commercial bank and ultimately into a bank with expanded commercial banking authority; or (b) perform all the services authorized for thrift banks, thence, those authorized for commercial banks, and, ultimately, those authorized for a bank with expanded commercial banking authority. A rural bank which is granted authority to perform services of a bank under a different category may retain its corporate name: Provided , That, whenever necessary, it shall amend its articles of incorporation to include its new powers. A rural bank that is converted into a thrift bank or that services deposits and other transactions of another type of bank as may be determined by the Central Bank shall purchase the specified amount of the five-year Special Series Treasury Notes or the five-year Central Bank Certificates of indebtedness which shall be issued for the purpose. ( Effective June 3, 1981 ) SECTIONS 3103-3105. (Reserved) B. CAPITALIZATION SECTION 3106. Minimum Capitalization . Rural banks shall have a paid-in capital of at least P500,000, net of government capital contribution, of which P300,000 shall be paid in at the start of operation and the balance within three (3) years thereafter: Provided , That existing rural banks as of February 22, 1980 which do not meet the minimum capital requirements provided herein shall adopt a capital build-up program to increase their paid-in capital to at least P500,000, as follows: a. Within 5 years for rural banks in operation for less than 2 years; b. Within 4 years for rural banks in operation for 2 years but not more than 5 years; and c. Within 3 years for rural banks in operation for more than 5 years. Provided, however , That rural banks which may be established in Metropolitan Manila and in First Class "A" cities shall have a paid-in capital net of government capital contribution of at least P20 million and P10 million, respectively: Provided, finally , That as a pre-condition to the approval by the Monetary Board of any sale or transfer or a series of sales or transfers of the capital stock of a rural bank located in Metropolitan Manila or in First Class "A" cities, which will effect a change in the majority ownership or control of the voting stock of the bank from one group of persons to another group, the bank concerned shall immediately comply with the prescribed minimum capital requirement for new rural banks therein, notwithstanding any approved capital build-up program. It shall be the responsibility of the rural bank's board of directors and senior management to ensure full compliance with the bank's capital build-up program. Non-compliance with the approved program may mean withholding from the bank of some of the privileges such as branching, rediscounting and the like. ( Effective May 16, 1984 ) (As amended by Section 1 of BSP Circular 71 dated May 5, 1995) SUBSECTION 3106.1 Determination of minimum capital . Each rural bank shall have a minimum paid-in capital in the amounts stated herein above net of government counterpart capital, if any. In addition, the total on paid-in capital (including paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI), shall not be less than the amounts abovestated. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets shall be excluded. (As amended by Section 1 of BSP Circular 3 dated September 6, 1993) SUBSECTION 3106.2 Capital build-up program . Rural banks whose private paid-in capital are below the required minimum paid-in capital of P500,000 shall submit to the Department of Rural Banks and Savings and Loan Associations (DRBSLA) not later than August 31, 1980 a capital build-up program which shall include as a minimum the following features: a. The program shall provide for semestral capital build-ups as follows. (1) Rural banks in operation for less than 2 years 10 semestral periods starting September 30, 1980 up to September 30, 1985; (2) Rural banks in operation for 2 years but not more than 5 years 8 semestral periods starting September 30, 1980 up to September 30, 1984; and (3) Rural banks in operation for more than 5 years 6 semestral periods beginning September 30, 1980 up to September 30, 1983; b. The semestral capital build-up shall be the capital gap divided into equal amounts by the number of semesters of each bank's respective program. Capital gap shall mean the difference between P500,000 and the bank's outstanding common stock as of December 31, 1979; * merger or consolidation shall be based on mutual agreement of the parties concerned. However any appraisal surplus arising from the revaluation of the fixed assets, as may be agreed upon by the parties concerned, shall be limited in the case of a merger or consolidation, to bank premises and improvements and bank equipment which are necessary for its immediate accommodation in the transaction of the bank's business. Such revaluation which should be based on a fair valuation of the property shall be subject to review and approval by the Central Bank. SECTIONS 3112-3115. (Reserved) D. NET WORTH TO RISK ASSETS RATIO SECTION 3116. Basic Ratio . The net worth (or combined capital accounts) of a bank shall not be less than an amount equal to ten per cent (10%) of its risk assets as herein defined: Provided, however , That the Monetary Board may authorize a bank to maintain a net worth to risk assets ratio lower than ten per cent (10%) subject to certain conditions. The Monetary Board may subsequently raise a ratio but such upward adjustment shall be made effective only after a reasonable period of time. SUBSECTION 3116.1 Suspended application of ratio in case of merger or consolidation . If in the process of a bank merger or consolidation, the resulting bank is unable to comply fully with the net worth to risk assets ratio prescribed under these regulations the Monetary Board may, at its discretion, temporarily relieve the bank from full compliance with such ratio under such conditions as the Monetary Board may prescribe. SUBSECTION 3116.2 Definition/Explanation of terms and phrases a. Risk assets is defined as total assets minus the following assets: (1) Cash on hand; (2) Amount due from the Central Bank; (3) Evidences of indebtedness of the Republic of the Philippines and of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. As approved by the Monetary Board, such evidences of indebtedness or obligations subject of repurchase or resale agreements may be deducted by both the selling/borrowing and buying/lending banks; (4) Loans to the extent covered by holdout on, or assignment of, deposits maintained in the lending bank and held in the Philippines; (5) Bank premises, depreciated; (6) Furniture, fixtures and equipment, depreciated; (7) Balances maintained with the Philippine National Bank or any of its branches for clearing checks drawn on banks located in places not serviced by the Central Bank Clearing Offices; (8) The Agricultural Guarantee and Loan Fund (AGLF) portion of the CB:IBRD/AGLF special financing program and loans granted under the supervised credit scheme to the extent covered by guarantees; The privilege given to rural banks to classify as non-risk assets supervised credit loans to the extent covered by guaranty or crop insurance with the Philippine Crop Insurance Corporation shall be phased out in accordance with the following schedule: Percent to be Period Phased out November 1981 to April 1982 25% May 1982 to October 1982 50% November 1982 to April 1983 75% May 1983 to October 1983 100% (9) Portions of special time deposit loans covered by Industrial Guarantee and Loan Fund (IGLF) guarantee, (10) Real estate mortgage loans insured by the Home Financing Commission (HFC) to the extent of the amount of the insurance or the outstanding loan, whichever is lower; (11) Loans to the extent secured by Central Bank Certificates of Indebtedness and other assets listed in (3) above; cdi (12) Masagana 99 loans to the extent covered by guarantees; (13) KKK loans; ( Effective May 27, 1983 ) and (14) Deferred income tax. ( Effective April 23, 1985 ) b. Total assets . For this purpose, the term "total assets" shall exclude the following: (1) All trust department accounts; and (2) All contingent accounts. c. Networth (or combined capital accounts) . This shall mean the total of the unimpaired paid-in capital, earned surplus, and undivided profits, net of deferred income tax, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank; excluding any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of bank assets, except in such cases as may be authorized by the Monetary Board. ( Effective April 23, 1985 ). For purposes of computing the prescribed ratio of net worth to risk assets, equity investments of a rural bank in another bank or enterprise shall be deducted from its net worth if the other bank or enterprise has a reciprocal equity investment in the investing bank, in which case the investment of the bank or the reciprocal investment of the other bank or enterprise, whichever is lower, shall be deducted from the net worth of the bank. d. Cash on hand . This refers to the total cash held by the bank consisting of both notes and coins in Philippine currency and in such foreign currencies acceptable as part of the international reserves. e. Amount due from the Central Bank . This refers to all deposits of the reporting bank with the Central Bank of the Philippines. f. Loans to be extent covered by hold-out on or assignment of deposits maintained in the lending bank and held in the Philippines . (1) A loan shall be considered as secured by a hold-out on or assignment of deposit only if such deposit account is covered by a hold-out agreement or deed of assignment signed by the depositor in favor of the bank and maintained in the lending bank and held in the Philippines. (2) The amount deductible from total assets shall be the outstanding hold out on or assignment of deposits signed by the depositor in favor of the bank. (3) Loans transferred to/carried by the bank's trust department (secured by deposit hold-out/assignment) are not deductible items. g. Bank premises, depreciated . This refers to the cost of the bank premises, including land owned by the bank, less the accumulated depreciation thereon. Properties used as bank premises purchased by the bank in foreclosure or execution sale shall not be considered owned by the bank until title is consolidated in the bank. h. Furniture, fixtures, and equipment, depreciated . This refers to the cost of furniture and fixtures, including equipment, owned by the bank, and used for its banking operations, less the accumulated depreciation thereon. i. Deferred income tax . This refers to the accumulated balance of income tax expense deferred in view of certain expenses on provision for losses not currently deductible for income tax purposes. ( Effective April 23, 1985 ) SUBSECTION 3116.3 Required reports . All rural banks concerned shall submit their statement of capital required and capital accounts monthly to the Department of Rural Banks and Savings and Loan Associations of the Central Bank in such reporting form as may be prescribed in pertinent issuances of the Central Bank. Rural banks, however, shall maintain the daily computation of the capital required and capital accounts and keep suitable records to facilitate verification of such data. SUBSECTION 3116.4 Sanctions a. The Monetary Board may, whenever warranted, impose additional sanctions on any erring bank provided under Section 22 of Republic Act No. 337, as amended, and Section 34-A of Republic Act No. 265, as amended. b. The Monetary Board may also impose sanctions on any bank if the required periodic reports to the Central Bank on this matter contain recurring material errors or inaccuracies. SUBSECTION 3116.5 Effects of deficiency . In cases where the total amount of valuation reserves required to be set up under Subsec. 3304.5(b) would impair the net worth of the rural bank such as to constrict its lending operations, the setting up of valuation reserves may be implemented on a staggered basis, not exceeding five (5) years upon prior approval of the Central Bank. SECTIONS 3117-3125. (Reserved) E. STOCK, STOCKHOLDERS AND DIVIDENDS SECTION 3126. Shares of Stock; Kinds, Rights, Privileges and Par Value . The articles of incorporation of a rural bank shall provide for: (a) common stock with the power to vote; (b) preferred stock to represent the counterpart capital of the Development Bank of the Philippines (DBP) or other authorized government agency, which shall be non-voting and preferred as to assets upon liquidation; and (c) preferred stock with such rights, voting powers, preferences and restrictions, as may be approved by the Monetary Board. Preferred and common stocks shall have a minimum par value of P10.00 per share: Provided , That this requirement shall not apply to existing rural banks whose par value per share of stock is less than P10.00. A rural bank shall not issue no par value stock. The foregoing does not in any way preclude any subdivision or agency of the government from investing in preferred stock: Provided , That the Land Bank of the Philippines or other authorized government agency may invest in both preferred and common stocks. SUBSECTION 3126.1 Unpaid subscriptions upon organization . Unpaid subscriptions to the capital stock of a rural bank shall be paid within five (5) years from the date of opening for business in not more than five (5) equal yearly installments without prejudice to the provisions of Sec. 3106. Before a rural bank may be authorized to apply for government assistance it must, in addition to other requisites, present a plan or schedule for the payment of unpaid subscriptions, in accordance with the foregoing requirements. SUBSECTION 3126.2 Transfer of shares a. Certificate of transfers, cancellations and issuance of duplicate; report on transfers To insure that existing laws and regulations on stock ownership and transfer are complied with, all transfers of common shares shall be reported to the Central Bank. The Central Bank must also be notified in case a stock certificate is lost, stolen or destroyed. This notification may be used as basis for issuance of duplicate certificate in accordance with Republic Act No. 201. The report or notification mentioned hereinabove shall be submitted not later than five (5) days from the time the transfer or loss is reported to the rural bank. Any delay in the report or notification shall subject the rural bank to the corresponding administrative penalties. b. Transfers requiring Monetary Board approval (1) Prior approval of the Monetary Board shall be required on the following: (a) Any sale or transfer of ownership or control of more than twenty per cent (20%) of the voting stock of a bank to any person whether natural or juridical; and (b) Any sale or transfer or a series of sale or transfers which will effect a change in the majority ownership or control of the voting stock of the bank from one group of persons to another group: Provided , That in no case shall such sale or transfer be approved unless the bank concerned shall immediately comply with the prescribed minimum capital requirement for new banks notwithstanding any approved capital build-up program. ( Effective May 16, 1984 ) (2) For purposes of Item (1), the sale or transfer of voting stocks shall refer to sales or transfers of voting stocks which are allowed under existing laws or Central Bank rules and regulations and which have not been registered/recorded in the transfer book/stock ledger or other records of banks. (3) Banks shall submit to the Monetary Board of the Central Bank, through the appropriate supervising and examining department, not later than May 4, 1982, a list, duly certified by the corporate secretary, of all their stockholders appearing in the stock and transfer book of the bank concerned as of April 2, 1982. The list shall indicate the name of the stockholders, number and percentage of voting stocks in his name, the date when such voting stocks were registered in the name of the stockholder, and the certificate number(s) of the shares of stock held by such stockholder. (4) All sales or transfers of voting stocks of banks entered into or effected prior to April 2, 1982 and subsequently thereafter which have not been registered/recorded in the stock and transfer book of the bank concerned shall, before being accepted for registration/recording therein, be referred to the Monetary Board of the Central Bank through the appropriate supervising and examining department, for purposes of determining compliance with the requirements of Item (1), as well as the provisions of existing laws and rules and regulations on ownership of voting stocks in banks. c. Registration of transfers and other arrangements (1) Unlawful and void transactions involving voting stocks in banks . The following transactions, to the extent of the excess over any of the ceilings referred to in this item are hereby declared unlawful and void ab initio . (a) The sale or transfer of voting stocks of banks to any individual or entity, if such sale or transfer, in itself, or in relation with another previous sale or transfer shall result in the ownership by foreign persons or corporations in excess of thirty percent (30%), or, when allowed by the Monetary Board and approved by the President of the Philippines, forty percent (40%) of the voting stock in the bank, in violation of Sections 12 and 12-A of Republic Act No. 337, as amended. (b) The sale or transfer of voting stocks of banks to any corporation, including its wholly- or majority-owned subsidiary in excess of transfer, in itself or in relation with another previous sale or transfer shall result in the ownership by such corporation and its wholly-or majority-owned subsidiary in excess of thirty percent (30%) of the voting stock of the banks and the other limitations prescribed in Section 12-B of Republic Act No. 337, as amended. (c) The sale or transfer of voting stocks of banks to (i) any natural person; (ii) persons related to each other within the third degree of consanguinity or affinity herein termed a family group; and (iii) any corporation or corporations which are wholly-owned or a majority of the voting stock of which is owned by a natural person such as in (i) above, or by a family group such as in (ii) above, including their wholly-or majority-owned subsidiaries, if such sale or transfer or encumbrance, in itself, or in relation with another previous sale or transfer, shall result in the ownership by such person or family group and such corporations in excess of twenty percent (20%) of the voting stock of the bank, in violation of Sections 12-B and 12-D of Republic Act No. 337, as amended, and Subsec. 3131.3. (d) Any arrangement, such as a voting trust agreement or proxy, which vests on any person or corporation the right to vote or control voting stocks in banks, if such agreement in itself, or in relation with another previous similar agreement or previous sale or transfer shall result in the acquisition of control, in excess of the limitations prescribed in Sections 12, 12-A, 12-B and 12-D of Republic Act. 337, as amended, and Subsec. 31313. Pursuant to Subsec. 3131.3, any stockholder may transfer in one transaction to a new investor his entire stockholdings of voting stock, even if it is in excess of the twenty percent (20%) ceiling. (2) Stockholders to be informed of the ineligibility to acquire or control additional voting shares . The Corporate Secretary shall promptly inform stockholders who have reached any of the ceilings imposed by law of their ineligibility to own or control more than the applicable ceiling. (3) Requirement for newly established banks . Entities which may hereinafter apply for a license to engage in banking business shall, before being allowed to operate, submit (a) An alphabetical list of stockholders with the number and percentage of voting stocks owned by them. (b) A separate list containing the names of persons who own voting stocks in banks and who are related to each other within the third degree of consanguinity or affinity, with proper indication of the combined percentage of voting stocks held by them in the particular bank, as well as corporations which are wholly-owned or a majority of the stock of which is owned by any of such persons, including their wholly- or majority-owned subsidiaries. (4) Procedure in the transfer or registration of transactions of voting stocks in banks . In all transactions which may lawfully come to the Corporate Secretary involving transfer of voting shares of stock or registration of voting trust agreements, or any form of arrangement vesting the right to vote the voting shares of stock of the bank, the Corporate Secretary shall (a) ascertain the identify and citizenship of the transferee, voting trustee, proxy or person vested with the right to vote, and his relation to existing stockholders, and for this purpose, he should require the transferee, voting trustee, proxy or the person vested with the right to vote to submit proof of citizenship, which may consist, in case of a corporation, of a certified true copy of the articles of incorporation, accompanied by the affidavit of the Corporate Secretary of the corporation, certifying to the correctness and accuracy of the list of stockholders and the percentage of shares owned by them. (b) require the transferee, voting trustee, proxy or person vested with the right to vote, at the time of the receipt of the request for transfer or registration, or at any time thereafter, to disclose all information with respect to persons related to the transferee, voting trustee, proxy or person vested with the right to vote, within the third degree of consanguinity or affinity, as well as corporations, partnerships or associations where the transferee, voting trustee, proxy or person vested with the right to vote has equity interest, and the extent thereof. (App. 15-3) ( Effective May 9, 1985 ) (c) require the transferee to execute an affidavit (App. 15) stating, among others, that the transferee is a bonafide owner of shares of stock and that he acknowledges full awareness of the requirements of the law and the prohibitions against exceeding ownership of voting stocks beyond the limitations prescribed by Sections 12, 12-A, 12-B, and 12-D of Republic Act No. 337, as amended, and Subsec. 3131.3. In the event the request for transfer or the arrangement sought to be registered will patently cause the voting stocks of a person or persons related to each other within the third degree of consanguinity or affinity or corporations, to exceed the limits prescribed by law, the Corporate Secretary shall deny the transfer or registration and forthwith inform the parties to the transaction in writing. Simultaneous with the notice to the parties, the Corporate Secretary shall submit a written report to the Governor of the Central Bank of the attempted illegal transfer or arrangement, together with the names, addresses of parties and other pertinent data with respect to the particular stock transaction. In the event the Corporate Secretary has reason to doubt the legality of the transfer or of the arrangement sought to be registered, he may commence an action before the Securities and Exchange Commission, pursuant to its original and exclusive jurisdiction to hear and decide cases involving controversies arising out of intra-corporate relations. (5) Duties of securities brokers and dealers in case transaction is coursed through them . If the transfer of voting shares in banks is effected through the intercession of securities brokers and dealers, only securities brokers and dealers duly registered with the Securities and Exchange Commission can request the Corporate Secretary for the transfer of shares in banks. Securities brokers and dealers shall inform prospective sellers and buyers of voting stocks in banks that no person or persons related to each other within the third degree of consanguinity or affinity, or corporations can own more than the ceilings prescribed by law and that in case of a sale or transfer, shall require the transferee to furnish information and execute an affidavit, as provided in Item; b (4) (a), (b) and (c) of this subsection. SUBSECTION 3126.3 Conversion of preferred stock to common stock; amendment of articles of incorporation . Rural banks may convert their unissued preferred shares into common stock. In the case of sale by the DBP or other authorized government agency of its preferred stock to private persons, such stock may be converted into private preferred or common stock: Provided , That pending amendment of the bank's articles of incorporation, if necessary for the purpose of reflecting the conversion, the transfer shall be recorded by the bank in its stock and transfer book and such shareholders shall thereafter enjoy all the rights and privileges appurtenant to the converted stock. The certificates for the government preferred stocks so transferred shall be surrendered and cancelled and the corresponding preferred or common stock certificates, as the case may be, shall be issued. The corporate secretary of the bank shall submit to the appropriate supervising and examining department a report of every transfer of preferred stock from the DBP or other authorized government agency to private shareholders within five (5) banking days from date of such transfer. When all the preferred shares of stock held by the DBP or other authorized government agency have been sold to private shareholders, the bank's articles of incorporation shall be amended to reflect the conversion, if any, of such government-held preferred shares of stock into private preferred or common stock. For this purpose, a certificate that all preferred shares have been sold and transferred to private shareholders shall be issued, duly signed by the President, the corporate secretary, and a majority of the board of directors. The bank shall submit copies of such certificate and the amended articles of incorporation to the Central Bank for the issuance of a certificate of authority for the purpose of registering the amended articles with the Securities and Exchange Commission. The procedure is for the rural banks to amend their articles of incorporation and submit the same to the Central Bank for approval. However, the sale of converted unissued preferred stock into common stock to private persons shall not be valid unless amendment to the bank's articles of incorporation is approved by the Central Bank and subsequently duly registered with the Securities and Exchange Commission. cd SUBSECTION 3126.4 Acquisition by small farmers of equity in rural banks . It shall be obligatory upon an existing rural banks to accept offers to invest in the equity of the rural bank from farmers who are its clients and who are members of a Samahang Nayon , or from a Samahang Nayon of which said farmers are members, in the form of common shares of stock of the rural bank representing in the aggregate up to forty per cent (40%) of the voting stock of the bank. For purposes of this section, client shall mean any farmer-member of a Samahang Nayon who is a depositor or borrower of the rural bank. a. Procedures (1) The farmer-member of the Samahang Nayon shall make a written offer to the rural bank for the purchase of the shares of stock. The offer of the farmer-member shall be accompanied by a certification from his Samahang Nayon that he is a member in good standing. The offer of a Samahang Nayon shall be accompanied by a certification from the Bureau of Cooperatives Development, DLGCD, that it is a Samahang Nayon in good standing. (2) In the acceptance of offers, the rural bank shall apply the "first come, first served" basis, to be reckoned by the day (all offers received on the same day, regardless of time, shall be considered as received simultaneously). In cases where the number of remaining available shares is insufficient to satisfy two or more offers on any given day, the offer of a Samahang Nayon shall be given priority over that of an individual farmer member, while the offer of a farmer-member who is a resident of the locality where the rural bank is situated shall be given priority over that of a farmer-member who is not a resident. If the offers received on the same day have the same priority, the remaining available shares shall be equally divided between them. (3) Before any transfer or issue of stock under this section is entered in the books of the rural bank, there should be full compliance with the provisions of Section 7 of Republic Act. 720, as amended. b. Shares of stock ; sources ; limitations (1) The shares of stock to be made available by the rural bank shall come from shares of stockholders who are willing to sell and/or from the unissued common shares of stock of the bank. If these are inadequate for the purpose, the necessary increase in capitalization shall be effected by the rural bank. Whenever the capital stock is increased for this purpose, the additional shares of stock shall be to satisfy the offers of qualified farmer-members of Samahang Nayon . (2) In the disposition of voting share under this subsection, sales shall be made to as many Samahang Nayons as possible within the area of operation of the rural bank concerned. Priority shall be given to Class "A" Samahang Nayons as certified by the Bureau of Cooperatives Development DLGCD. (3) The disposition of the shares of stock by the rural bank to the farmer-members of Samahang Nayon shall be by purchase and not by subscription, and the sale shall be on a cash basis only. (4) The acquisition of shares of stock in existing rural banks by the farmer-members or by the Samahang Nayon shall be subject to the limitations on individual, family group, or corporate holdings established under Section 12 of Republic Act No. 337, as amended. c. Determination of cost of acquisition . The price of the share of stock shall be agreed upon between the parties. Where no agreement is reached on the price, it shall be the fair market value of the share of stock at the time of the proposed purchase, to be determined by the Department of Rural Banks and Savings and Loan Associations, on the basis of the following guidelines: (1) The number of shares of common stock outstanding shall be ascertained. (2) The total surplus available, consisting of earned surplus, capital surplus, and surplus reserve except for the reserve for bad and doubtful account, shall likewise be ascertained. (3) The "Appraisal Surplus" arrived at in the revaluation of the fixed assets which shall be conducted by a duly licensed expert or specialist not in any way connected with the rural bank, shall also be included in the computation. The appraisal value of the fixed assets shall be disclosed in the statement of financial condition of the rural bank together with the accumulated depreciation on appraisal values, depreciation on appraisal, excess of appraised values over actual or historical cost, the date of appraisal and the name of the licensed appraiser. "Appraisal Surplus" shall be shown in the net worth section and shall not be made available for dividends except the portion thereof that is absorbed through accumulated depreciation charges on appraisal increment which may be declared as stock dividends. (4) The total of Items (2) and (3) above plus the total paid-in common stock, divided by the total number of shares of common stock outstanding (Item (1) above) equals the fair market value per share. d. Posting of notices . Every rural bank shall post a notice within the bank's premises and in three (3) conspicuous places in the locality where the rural bank is situated, to the effect that common shares of stock of the rural bank representing in the aggregate up to forty per cent (40%) of the voting stock of the bank are available for sale to farmers who are clients of the bank and who are members of a Samahang Nayon or to any Samahang Nayon of which said farmers are members. Within thirty (30) days from June 2, 1975, the president of each rural bank shall submit to the Department of Rural Banks and Savings and Loan Associations, a certification signed by him that the required notices have been posted, stating therein the places where such notices have been posted. SUBSECTION 3126.5 (Additional provision as provided by CBP 1173 dated April 11, 1988) SECTIONS 3127-3130. (Reserved) SECTION 3131. Ceilings on Stockholdings in Rural Banks . The following rules shall govern stockholdings in rural banks: SUBSECTION 3131.1 Limits on stockholdings in a single rural bank . Except for equity investments by holding corporations, at least seventy per cent (70%) of the equity of which is held by Filipino citizens, and of Filipino-controlled domestic banks, the capital stock of any rural bank shall be owned directly or indirectly by Filipino citizens. The equity investment of any corporation in any rural bank shall not exceed thirty per cent (30%) of the voting stock of such rural bank: Provided , That the equity investment of a corporation which is wholly-owned, or the majority of the voting stock of which is owned by a family group, shall not exceed twenty per cent (20%) of the voting stock of any rural bank. Upon prior approval of the Monetary Board, more than thirty per cent (30%) or a majority or all of the voting stock or all of the equity of a rural bank may be owned by a commercial bank, or by a bank authorized to provide commercial banking services or to operate under an expanded commercial banking authority, or by a holding corporation referred to in Section 12-C of Republic Act No. 337, as amended: Provided , That the holdings of voting stock of any individual, family group, or corporations, in such commercial bank, or bank authorized to provide commercial banking services or to operate under an expanded banking authority, or holding corporation shall be within the ceilings as provided in Sections 12, 12-A, 12-B and 12-D of Republic Act. No. 337, as amended. A "holding corporation", for purposes of this subtitle, shall refer to a corporation primarily organized to hold equities in rural banks/thrift banks. SUBSECTION 3131.2 Limits on stockholdings in several rural banks . When the combined stockholdings of a family group, and/or its wholly or majority-owned corporation or corporations, amount to twenty per cent (20%) or more of the voting stock in each of three (3) rural banks; the family group and/or its wholly or majority-owned corporation or corporations, may thereafter acquire shares in any number of other rural banks only to such an extent as would not enable this group of investors to elect by virtue of its shareholdings a director of the board of each additional rural bank. Persons owning voting stock in a bank who are related to each other within the third degree of consanguinity or affinity shall comprise a "family group" whose combined holdings are subject to the twenty per cent (20%) ceiling. Persons who are related to each other but not within the third degree, such as first cousins, do not form a family group. In determining whether the prospective investor, transferee or purchaser is part of a family group subject to the twenty per cent (20%) ceiling, the degree of relationship shall be counted from the transferee or purchaser. SUBSECTION 3131.3 Ceilings on voting equity a. Individual/family group/corporate ceiling . Except as provided for in Item 'b' below, the stockholdings in any bank of any of the following shall not exceed twenty per cent (20%) of the voting stock of the bank: (1) Any natural person; or (2) Persons related to each other within the third degree of consanguinity or affinity, herein termed a family group; or (3) Any corporation or corporations which are wholly-owned or a majority of the voting stock of which are owned by a natural person such as in (1) above, or by a family group such as in (2) above, including their wholly- or majority-owned subsidiaries: Provided , That where (3) together with (1) or (2) own or desire to own equity in any bank, their combined voting stockholding shall be the basis for the computation of the twenty per cent (20%) ceiling. b. Stockholdings in excess of ceiling . Any or all, as the case may be, of the above-mentioned stockholders owning more than twenty per cent (20%) of the voting stock of any bank on the date of the effectivity of Presidential Decree. No. 71 amending Republic Act No. 337, may maintain but may not increase such holdings in percentage terms; and once reduced, the same may not thereafter be increased beyond twenty per cent (20%) of the bank's voting stock. Stockholders falling under categories (1) or (2) of Item 'a' of this subsection who are presently allowed to own up to thirty five per cent (35%) of the voting stock in a newly organized rural bank shall be covered by this rule. c. Transfers and acquisitions of shares within a family group . Transfers of ownership of shares of stock within a family group which do not thereby increase but merely maintain the aggregate percentage holdings of the group beyond twenty per cent (20%) of the bank's voting stock, shall be allowed: Provided , That no stockholder-member of a family group may acquire additional shares from any other member of that group, if such acquisition would increase his holdings of voting stock beyond the twenty per cent (20%) ceiling on individual holdings. d. Transfers to new investors . Any stockholder may transfer in one transaction to a new investor who is a natural person his entire stockholdings of voting stock, even if it is in excess of the twenty per cent (20%) ceiling. However, if the new investor belongs to any family group already holding voting stock in the same bank, his capacity to acquire new shares shall be limited to an extent which is within the individual/family group/corporate ceiling set forth in Item 'a' of this subsection. Furthermore, if the new investor acquires twenty per cent (20%) or more of the voting stock of the bank in that single transaction, he shall thereafter be subject to the provisions of item "b" of this subsection. In any case, the new investor shall not acquire more than twenty percent (20%) of the bank's voting stock from two (2) or more stockholders. e. Determination of 1) relationship within the third degree of consanguinity or affinity, and 2) a "family group" subject to the twenty per cent ceiling (1) Relationship of persons to each other within the third degree of consanguinity or affinity shall be determined in accordance with the provisions of Articles 963 to 966 of the New Civil Code of the Philippines. (2) Persons owning voting stock in a bank who are related to each other within the third degree of consanguinity or affinity shall comprise a family group whose combined holding is subject to the twenty per cent (20%) ceiling. Persons who are related to each other but not within the third degree, such as first cousins, do not form a family group. In determining whether the prospective transferee or purchaser is part of a family group subject to the twenty per cent (20%) limitations, the degree of relationship shall be counted from the transferee or purchaser. It is possible for a person to belong to several family groups, and in such a case, it is enough that the percentage limit of twenty percent (20%) for one family group is exceeded for the acquisition/transfer of shares to be considered a violation, even if the transaction may not violate the limit for all of the other possible family groups. SUBSECTION 3131.4 Exception to the 20% ceiling on individual/family group stockholdings in a rural bank . A person, or family group, may own up to thirty-five percent (35%) of the voting stock of a rural bank which is under organization: Provided , That upon registration of the rural bank's articles of incorporation with the Securities and Exchange Commission, holdings which are in excess of twenty percent (20%) of the voting stock of the rural bank shall not be increased but may be reduced and, once reduced, shall not be increased thereafter beyond twenty percent (20%) of the voting stock of the bank. (As amended by CBP Circular 1171 dated March 29, 1988) SECTIONS 3132-3135. (Reserved) SECTION 3136. Dividends . Pursuant to the first paragraph of Section 84 of Republic Act No. 337, as amended, and on the underlying principle that no bank shall, while it continues in operation, withdraw or permit to be withdrawn either in the form of cash dividends or otherwise, any portion of its capital, the following regulations shall govern the cash dividend declaration by banks. SUBSECTION 3136.1 Definition of terms a. Bad debts . shall include any debt on which interest is past due for a period of six (6) months, unless it is well secured and in process of collection. A loan payable in installments with an automatic acceleration clause shall be considered a bad debt, within the contemplation of this section, where installments or amortizations have become past due for a period of six (6) months, unless the loan is well secured and in process of collection. For a loan payable in installments without an acceleration clause, only the installments or amortizations that have become past due for a period of six (6) months and which are not well secured and in the process of collection shall be considered bad debts within the contemplation of this section. b. Well-secured . A debt shall be considered "well secured" (or fully secured) if it is covered by collateral in the form of a duly constituted mortgage, pledge, or lien on real or personal properties including securities, having a loan value sufficient to discharge the debt in full, including accrued interest and other pertinent fees and expenses. c. In process of collection . A debt due to a bank shall be considered in process of collection when it is the subject of continuing extrajudicial or judicial proceedings aimed towards its full settlement of liquidation, or otherwise to place it in current status. The extrajudicial proceedings, such as the writing of collection or demand letters, must have been initiated by the bank and/or its lawyers before the interest or installments or amortizations on the debt have become past due and unpaid for a period of six (6) months. The debt shall continue to be considered in process of collection for a period of six (6) months counted from date of the first collection or demand letter and if, within this period, the debtor fails to make a payment of at least twenty percent (20%) of the outstanding balance of the principal on his account plus all interests which may have accrued thereon, the same shall automatically be classified as bad debt unless judicial proceedings are instituted. The debt shall continue to be considered in process of collection during the pendency of the judicial proceedings. When judgment against the debtor has been obtained, the bank must be active in enforcing the judgment for the debt to continue to be considered in process of collection. SUBSECTION 3136.2 Declaration, payment of dividends; limitations a. Declaration . Prior to any declaration of dividends, valuation reserves equivalent to fifty percent (50%) and one hundred percent (100%) of Masagana 99 and other similar supervised credit loans considered as "doubtful" of collection and "uncollectible or worthless or loss", respectively, shall be set up or adjusted. (1) Dividends, whether cash or stock, may be declared by a rural bank after it shall have complied with the requirements of Section 84 of Republic Act No. 337, as amended, and the following: (a) If the amount of its reserve for retirement of government preferred stock is at least equal to the amount which should have been accumulated if the rural bank had transferred annually to the reserve account from its undivided profits an amount equal to at least an average of one-tenth (1/10) of the total amount of preferred stock; (b) If after having provided for all required reserves, it shall have transferred to surplus account at least twenty percent (20%) of the credit balance of the undivided profits account at the end of each year. (2) The net amount available for cash dividend declaration shall be the total of unrestricted or free earned surplus and undivided profits less: (a) Bad debts against which valuation reserves are not required to be set up; (b) Unbooked valuation reserves, and other unbooked capital adjustments required by the Central Bank, whether or not allowed to be set up on a staggered basis; (c) Accrued interest receivable credited to income but not yet collected, net of reserve for uncollected interest on loans; and (d) Deferred income tax as defined under item 'i' of Subsection 3116.2. ( Effective April 23, 1985 ) SUBSECTION 3136.2. a (2).e (Additional provision as provided by No. 1a of Circular 1170 dated January 13, 1988) Accrued interest earned but not yet collected or received on loans or any installments thereon shall not be considered profits and/or earnings for purposes of cash dividend declaration. b. Limitations; prohibitions (1) Dividends on outstanding common stock shall not exceed fourteen percent (14%) per annum, except in any of the following cases: (a) When the surplus account referred to in this section shall have reached fifty percent (50%) of the private paid-in capital of the rural bank: Provided , That cash dividends shall not exceed fourteen percent (14%) per annum; and (b) When a rural bank is no longer tax exempt, whether totally or partially. (2) Cash dividends shall not be declared by a rural bank under any of the following circumstances: (a) If arrearages in its obligations with the Central Bank amount to one million pesos or more; (b) If its past due loans comprise twenty-five per cent (25%) or more of the total loan portfolio at any time during the last six (6) months prior to the dividend declaration; and (c) If during the last six (6) months prior to the dividend declaration, its obligations with the Central Bank arising from the rediscounting of papers covering loans granted under the supervised credit scheme exceeded the prescribed ceilings. LLjur (3) Whenever dividends of not less than fourteen per cent (14%) are declared on common stock, government preferred stock shall be entitled to a cash dividend not to exceed two per cent (2%) of total outstanding preferred stock. Should the dividends declared on common stock be less than fourteen per cent (14%), the dividend on preferred stock shall be proportionately reduced. SUBSECTION 3136.3 Records ; reports . Declaration of cash dividends shall be reported by the bank concerned to the appropriate supervising and examining department of the Central Bank within ten (10) banking days from date of approval of the declaration by the bank's board of directors. The report shall be submitted in the prescribed form. Pending verification of above-mentioned report by the appropriate supervising and examining department of the Central Bank, the bank concerned shall not make any announcement or communication on the declaration of cash dividends nor shall any payment be made thereon. In any case, the declaration may be announced and the dividends paid, if, after thirty (30) banking days from the date the report required herein shall have been received by the Central Bank, no advice against such declaration has been received by the bank concerned. The liability for cash dividends declared shall be taken up in the bank's book on the date of approval of the board of directors. Banks whose shares are listed with any domestic stock exchange may declare cash dividends and give immediate notice of such declaration to the SEC: Provided , That no record date is fixed for such cash dividends pending verification of the report on such declaration by the appropriate supervising and examining department of the Central Bank. Dividends of all kinds, whether on common or on preferred shares of stock should not be treated as interest expense, considering that only irredeemable stock may be issued by banks under existing regulations. SUBSECTION 3136.4 (Additional provision as provided by CBP Circular dated August 30, 1988) (As amended by BSP Circular 97 dated December 11, 1995) SECTIONS 3137-3140. (Reserved) F. DIRECTORS, OFFICERS AND EMPLOYEES SECTION 3141. Definition and Qualifications of Directors . Directors shall include: (1) directors who are named as such in the articles of incorporation, (2) directors duly elected in subsequent meetings of the bank's stockholders, and (3) those elected to all vacancies in the board of directors. To be a director of a rural bank, a person shall have the following minimum qualifications: He shall be a Filipino citizen and a holder of at least one (1) voting stock in the rural bank; He shall be at least twenty-five (25) years of age at the time of his election or appointment; and He shall be at least a college graduate or have at least five (5) years experience in business, or have undergone training in banking acceptable to the Department of Rural Banks and Savings and Loan Associations. The foregoing qualifications shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. SECTION 3142. Definition and Qualifications of Officers . Officers shall include the President, Executive Vice-President, Senior Vice-President, Vice-President, General Manager, Secretary Trust Officer, and others mentioned as officers the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representations publication or any kind of communication made by the bank. An officer of a rural bank shall have the following minimum qualifications: a. He shall be a Filipino citizen; b. He shall be at least twenty-one (21) years of age; c. He shall be at least a college graduate, or have at least five (5) years experience in banking or trust operations or related activities or in a field related to his position and responsibilities, or have undergone training in banking or trust operations acceptable to the Department of Rural Banks and Savings and Loan Associations: Provided, however , That trust officers shall have at least two (2) years of actual experience or training in trust operations or fund management or other related fields. d. He shall possess such other specific qualifications as may be required by the Central Bank for the particular office; and e. Majority of the key executive officers of the rural bank must be actual residents of the locality where the rural bank is to be established. However, the President must always be an actual resident of that locality. The foregoing qualifications shall be in addition to those already prescribed under existing applicable laws and regulations. SECTION 3143. Disqualifications of Directors or Officers SUBSECTION 3143.1 Persons disqualified to become directors . Without prejudice to provision of existing laws prescribing disqualifications for directors, the following persons are disqualified from becoming directors: a. Persons who have been convicted judicially or administratively of an offense involving moral turpitude, or judicially declared insolvent, spendthrift, or incapacitated to contract; b. Directors, officers and employees who have been removed by the Monetary Board pursuant to the provisions of Section 34-A of Republic Act No. 265, as amended, and other provisions thereof; c. Persons who shall refuse to disclose the extent of their business interests to the Department of Rural Banks and Savings and Loan Associations when required for the proper implementation of a provision of law or of a circular, memorandum or rule or regulation of the Central Bank. This disqualification shall be in effect as long as the refusal persists; d. Directors, excluding non-resident directors, representing foreign equity interests, who have been absent for whatever reasons for more than fifty per cent (50%) of all meetings, both regular and special, of the board of directors for a two-year period reckoned from the date of the election of the director concerned. This disqualification applies for purposes of the succeeding election; e. Those who are delinquent in the payment of their obligations as defined hereunder. This disqualification shall operate as long as the delinquency persists; Delinquency in the payment of obligations means that an obligation of a person with a bank where he is a director or officer or where he may be elected or appointed to said position, or at least two obligations with other banks and with non-bank financial intermediaries performing quasi-banking functions, under different credit lines or loan contracts, are past due for at least three (3) months. Obligations shall include all borrowings from a bank or from a non-bank financial intermediary performing quasi-banking functions obtained by: (1) A director or officer for his own account or as the representative or agent of others or where he acts as a guarantor, indorser or surety, for loans from such financial institutions; (2) The spouse or child under parental authority of the director or officer; (3) Any person whose borrowings or loan proceeds were credited to the account of, or used for the benefit of a director or officer; (4) A partnership of which a director or officer, or his spouse is the managing partner, or a general partner owning a controlling interest in the partnership; and (5) A corporation, association or firm wholly-owned or majority of the capital of which is owned by any of a group of persons mentioned in the foregoing items (1), (2) and (4). f. Persons found by the Monetary Board to have willfully failed or refused to comply with any banking law, order, instruction or regulation issued by the Monetary Board or by the Governor, or to have committed irregularities or to have conducted business in an unlawful, unsafe or unsound manner as determined by the Monetary Board in any institution supervised by the Central Bank; and g. Persons who have been dismissed for cause from any institution under the regulation or supervision of the Central Bank. The foregoing disqualifications shall be in addition to those already required or prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. Unless otherwise provided, directors elected or appointed without possessing the qualifications, or possessed of any disqualifications as enumerated herein, shall vacate their respective positions immediately. SUBSECTION 3143.2 Persons disqualified to become officers . The grounds stated in Subsec. 3143.1 for disqualifications of directors of rural banks shall also be grounds for disqualification of officers, with the exception of that stated in Item 'd' thereof. Except as may be authorized by the Monetary Board or the Governor, the spouse or a relative within the second degree of consanguinity or affinity of any person holding the position of Chairman, President, Executive Vice-President or any position of equivalent rank, General Manager, Treasurer, Chief Cashier, or Chief Accountant is disqualified from holding or being elected or appointed to any of said positions in the same bank; and the spouse or relative within the second degree of consanguinity or affinity of any person holding the position of Manager, Cashier, or Accountant of a branch or extension office of a bank is disqualified from holding or being appointed to any of said positions in the same branch or extension office. In any case, this disqualification shall not affect those holding the position of Chairman as of May 13, 1976 and those holding any of the other said positions as of August 18, 1973, until the expiration of their respective terms of office: Provided , That where no term of office was fixed or specified, or where the position is being held in a mere hold-over capacity by reason of the non-election or non-qualification of the successor, or at the pleasure of the board of directors, such chairman or officer concerned shall vacate the position not later than 31 March 1981. The foregoing disqualifications shall be in addition to those already prescribed by Republic Act No. 337, as amended, and other existing applicable laws and regulations. No appointive or elective public official, whether full-time or part-time, shall at the same time serve as officer of any rural bank except in cases where such service is incident to financial assistance provided by the Government or a government-owned or controlled corporation to the bank. Unless otherwise provided, officers elected or appointed without possessing the qualifications, or possessed of any disqualifications as enumerated herein, shall vacate their respective positions immediately. SUBSECTION 3143.3 Disqualifying procedures a. Upon the establishment of any of the grounds for disqualification in Subsecs. 3143.1 and 3143.2, the office of the disqualified director or officer shall immediately become vacant, except in the case of delinquency in the payment of obligations wherein the director or officer concerned shall be given a grace period of thirty (30) days after such ground for disqualification has been established. b. All cases of disqualification shall immediately be reported to the board of directors of the institution concerned. If the ground for disqualification is delinquency in the payment of obligations, the report shall be made at the expiry of the thirty-day grace period mentioned in Item 'a' above. The board shall act on the report not later than the following board meeting. Within seventy-two (72) hours thereafter, the corporate secretary shall report to the Governor of the Central Bank through the appropriate supervising and examining department the name of the director or officer involved, the ground for his disqualification and the action taken by the board. c. When the ground for disqualification ceases to exist, the director or officer concerned shall be eligible to become director or officer of any institution regulated or supervised by the Central Bank only upon prior approval of the Governor of the Central Bank. SECTION 3144. Biodata ; List of Directors and Officers . All rural banks shall submit to the Department of Rural Banks and Savings and Loan Associations a bio-data of their incumbent directors and officers including a list of relatives of legal age within the second degree of consanguinity or affinity. Any subsequent change in the composition of the directors or officers of a rural bank, together with the bio-data of the new officers, shall be submitted to the Department of Rural Banks and Savings and Loan Associations within seven (7) days. All banks, including building and loan associations, are requested to submit to the appropriate supervising and examining department within twenty-five (25) banking days following the date of the annual election of the board of directors as provided in the bank's by-laws a list of the members of the board of directors and officers. The list shall be submitted whether or not the annual election results in a change in the composition of the board of directors. The following procedures shall be followed in the submission of the bio-data: a. The submission of the bio-data of incumbent directors and officers as of December 31, 1978 within twenty-five (25) banking days from year-end, as required shall be considered compliance with the requirement under the first paragraph of this section as regards such incumbent directors. b. In the case of directors elected or appointed after December 31, 1978 and whose bio-data have not been submitted as required, the deadline for submission shall be within seven (7) banking days after election or appointment. In case of transfers to other banks, the director need only update the pertinent sections in the pages of the report (CBP 7-19-42 RB, see App. I.) Submission shall be within seven (7) banking days from election or appointment. c. A report on changes in the composition of the board of directors shall be submitted within seven (7) banking days after such change. d. For purposes of showing compliance with the minimum qualification requirements in case of promotion, only the updated data need be there in the section and page affected. The page shall be submitted within seven (7) banking days after promotion. e. The bio-data shall be submitted only once. Thereafter in the annual updating only the pertinent sections and-pages in the report form shall be submitted within twenty-five (25) banking days after the end of every calendar year. SECTION 3145. Management Contracts . The Monetary Board on January 4, 1985 adopted a policy to the effect that: a. Management contracts of banks with management firms shall be limited to consultancy and advisory services; and b. Only a natural person may be elected or appointed as an officer of a bank, without prejudice to such person being a nominee of a management corporation; provided that the responsibility and/or accountability of anyone elected or appointed to an officer position shall be personal in nature and cannot be delegated to a corporation Existing contracts contrary to this policy should be rescinded or, if rescission is not possible, the same should not be renewed upon their expiration. Any bank entering into such contracts contrary to this policy shall be denied the credit facilities of the Central Bank ( Effective Jan . 29, 1985 ). SECTION 3146. Interlocking Directorships and/or Officerships . In order to safeguard against the exercise by the same person or group of persons of undue influence over the policy-making and/or management functions of similar financial institutions that could have an adverse effect on competition or which could result in conflict or interest situations to the detriment of others the following regulations shall govern interlocking directorships and/or Officerships within the financial system. SUBSECTION 3146.1 Interlocking directorships . While concurrent directorships may be the least prejudicial of the various relationships cited in this section to the interests of the institutions involved, certain measures are still necessary to ensure against the disadvantages that could result from indiscriminate concurrent directorships. a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorships between banks or between a bank and a non-bank financial intermediary. b. Without the need for prior approval of the Monetary Board, concurrent directorships between the following entities shall be allowed in the following cases: (1) banks not belonging to the same category: Provided , That not more than one of the banks shall have quasi-banking functions; (2) a non-bank financial intermediary other than an investment house not performing quasi-banking functions, and a bank; (3) a bank not performing quasi-banking functions and a non-bank financial intermediary, other than an investment house, performing quasi-banking functions; and (4) a bank with expanded commercial banking authority or a commercial bank, and one or more financial institutions other than investment houses in each of which majority interest is held by the bank. SUBSECTION 3146.2 Interlocking directorships and officerships . In order to prevent any conflict of interest resulting from the exercise of directorship coupled with the reinforcing influence of an officer's decision-making and implementing powers, the following rules shall be observed: a. Except as may be authorized by the Monetary Board or as otherwise provided hereunder, there shall be no concurrent directorships and officerships between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions. b. Without the need for prior approval of the Monetary Board, concurrent directorships and officerships in a bank with expanded commercial banking authority or a commercial bank and one or more financial institutions other than investment houses in each of which majority interest held by the bank shall be allowed. SUBSECTION 3146.3 Interlocking officerships . Concurrent officerships in different financial intermediaries present a most serious conflict of interest problem. Considering the full-time nature of officer positions, the difficulties of serving two offices at the same time, and the need for effective and efficient management, the following rules shall be observed: a. There shall be no concurrent officerships between banks or between a bank and a non-bank financial intermediary, whether or not performing quasi-banking functions, except as otherwise provided hereunder. cdll b. With prior approval of the Monetary Board, concurrent officerships may be allowed in the following cases: (1) between a bank with expanded commercial authority or a commercial bank and one or more financial institutions majority of the equity of which is owned by the bank with expanded commercial banking authority or commercial bank; (2) between or more banks and non-bank financial intermediaries other than investment houses, whether or not performing quasi-banking functions, majority of the equities of which is owned by a bank with expanded commercial banking authority or a commercial bank; and (As amended by Section 1 of CBP Circular 1115 dated September 16, 1986) (3) between banks or between a bank and a non-bank intermediary other than an investment house: Provided , That at least twenty per cent (20%) of the equity of each of the banks and non-bank financial intermediaries is owned by a holding company, or a bank, and the interlocking arrangement is necessary for the holding company or bank to provide technical expertise or managerial assistance to its affiliates; subject to the following conditions: (a) that the positions do not involve any functional conflict of interests; (b) that the position of chief executive officer may be held by a person in only one financial intermediary; (c) that the officer involved, or his spouse or any of his relatives within the first degree of consanguinity or affinity or by legal adoption, or a corporation, association or firm wholly or majority-owned or controlled by such officer or his relatives enumerated above, does not own in his/its own capacity more than twenty percent (20%) of the subscribed capital of the entities in which the bank has equity investments; and (d) that where any of the positions involved is held on a full-time basis, adequate justification shall be submitted to the Monetary Board. (As amended by Section 2 of CBP Circular 1115 dated September 16, 1986) SUBSECTION 3146.4 Representatives of Government The foregoing prohibitions shall not apply to persons appointed to such positions as representatives of the Government or government-owned or controlled entities. SUBSECTION 3146.5 Categories of banks . The categories of banks are the following: a. Banks with expanded commercial banking authority and commercial banks which shall belong to the same category; b. Thrift banks, composed of savings and mortgage banks, stock savings and loan associations and private development banks; and c. Rural banks. SUBSECTION 3146.6 Definition of directors ; officers a. Directors shall refer to the bank directors duly holding their positions as such in accordance with the corporate by-laws and pertinent provisions of law. b. Officers shall include the President, Vice-Presidents, and others mentioned as officers of the bank, or those whose duties as such are defined in the by-laws, or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank: Provided , That a person holding the position of Chairman or Vice-Chairman of the board or another position in the Board shall not be considered as an officer unless the duties of his position in the Board include functions of management such as those ordinarily performed by regular officers: Provided, further , That members of a group committees, including sub-groups or sub-committees whose duties include functions of management such as those ordinarily performed by regular officers, shall likewise be considered as officers for the purpose of this section: Provided , finally , That for purposes of the rules on interlocking directorships, a husband and his wife shall be considered as one person SECTION 3147. ( Reserved ) SECTION 3148. Bonds, Training of Officers and Employees . Every officer and employee handling funds or securities amounting to P5,000.00 or more in any one year shall be bonded in an amount approved by the Central Bank. All accountable officers and employees of the rural bank may post real estate or surety bonds or reputable companies duly approved by the Central Bank. Directors, officers and other personnel of rural banks shall undergo such training in banking as may be required by the Central Bank. SECTION 3149. Salary and Compensation Benefit Programs . This following guidelines shall be observed on the salary and compensation benefit programs of rural banks: SUBSECTION 3149.1 Salaries . Subject to prior approval of the Department of Rural Banks and Savings Loan Associations, the board of directors of a rural bank shall determine the different essential positions, the scale and expenditures for salaries, per diems, transportation, traveling, representation and other allowances as the exigencies of its operations may demand: Provided , That the bank shall operate on an annual budget approved by the board of directors whereby total expenses shall not exceed seventy five per cent (75%) of the estimated gross income for the year, the basis of which shall be the average annual gross income over the last three (3) years: Provided , further , That expenditures for salaries, per diems, transportation, traveling representation and other allowances, including the monthly emergency allowances prescribed under P.D. No. 525, as amended by P.D. No. 1123, shall at no time exceed forty-five per cent (45%) of total operating expenses; Provided, furthermore , That a yearly increase in salary not exceeding thirty per cent (3%) of the latest actual basic salary appertaining to the position may be allowed: Provided, finally , That new rural banks may base their budget on reasonable and feasible estimates. SUBSECTION 3149.2 Allowances and per diems . An officer holding a position purely in an honorary capacity shall only be entitled to actual transportation expenses and per diems for attending board meetings. For purposes of this section, the term "honorary capacity" shall mean that the officer is not actively and directly participating in the management or business operations or day-to day activities of the bank. SECTION 3150. Profit Sharing Programs . The following rules shall govern the profit sharing of directors, officers and employees of banks and non-bank financial intermediaries authorized to Perform quasi-banking functions (NBQBs): SUBSECTION 3150.1 Inclusion of program in by-laws . Profit sharing programs adopted in favor of directors, officers, and employees shall be reflected in the by-laws of the bank or the NBQB concerned: Provided , That these rules shall apply during the interim period that the bank or NBQB has not effected these changes in its by-laws. SUBSECTION 3150.2 Base for computation . The base in any profit sharing program shall be the net of the following: a. All cumulative dividends accruing to preferred stock to the extent not covered by earned surplus; b. Accrued for interest receivable credited to income but not yet collected, net of reserves already set up for uncollected interest on loans; c. Unbooked valuation reserves on loans or an amount required to update valuation reserves in accordance with the schedule approved by the Monetary Board, as well as all amortizations due on deferred charges; and d. Provision for current year's income taxes. e. Income tax deferred for the year. Provided, however , That in case of reversal of deferred income taxes which were deducted from net income in computing for profit sharing of previous years, the deferred income tax reversed to expense shall be added back to net income to arrive at the base for profit sharing for the year during which the reversal is made. ( Effective April 23, 1985 ). SUBSECTION 3150.2.f (Additional provision as provided by CBP Circular 1170 dated January 13, 1988) SUBSECTION 3150.3 Others priorities . The bank/NBQB may provide in its by-laws for other priorities in the computation of net profits for purposes of profit sharing: Provided , That in no case shall profit sharing take precedence over any of the items in the preceding paragraph. SUBSECTION 3150.4 Prior Monetary Board approval . Prior approval of the Monetary Board shall be necessary before a bank/NBQB which has received financial assistance from the Central Bank may implement its profit sharing program in favor of its directors, officers and employees. Financial assistance shall refer to emergency loans and advances and to availments under the lender of last resort facility in the form of loans, advances, rediscounts and such other forms of credit accommodations which are intended to provide banks and NBQBs with liquidity in times of need. G. BANKING OFFICES SECTION 3151. Establishment of Banking Offices . Rural banks may establish banking offices including branches, sub-branches, agencies and extension offices. For the time being, the establishment of branches and other banking offices shall be limited to the region where the applicant bank is located. A region, for purposes of this Title, shall refer to such regional groupings as may be provided by the Monetary Board. In addition, rural banks located in the National Capital Region may choose either Region III or IV as the site wherein to locate its branch. Note: Amendments to Section 3151 as provided by the following BSP Circulars: 1) Section 2 of BSP Circular 71 dated May 5, 1995; 2) Section 1 of BSP Circular 95 dated October 30, 1995 SUBSECTION 3151.1 Prior Monetary Board approval a. No rural bank shall establish, open or operate branches and other banking offices, or transact business outside the premises of its duly authorized principal office, without the prior approval of the Monetary Board. b. Interim policy guidelines/clarification as regards the establishment/transfer or relocation by banks of branches/other banking units: 1. The establishment of new branches/other banking units in places classified under the following service area categories shall be suspended: a. Service Area Category I (Heavy overbranched areas) b. Service Area Category II (Overbranched areas) c. Service Area Category III (Ideally branched areas) Where there are existing branches/banking units of a closed bank located therein, the same shall be available for purchase by applicant banks. 2. The establishment of new branches/other banking units in places classified under Service Area Categories IV (Underbranched) and V (Encouraged) shall be allowed subject to existing guidelines, except that where there are existing branches/banking units of a closed bank located therein, no new branch/banking unit shall be established in said areas. Instead, the existing branches/banking units of the closed bank shall be available for purchase by applicant banks. 3. Transfers/relocations of branches/other banking units presently located in places classified under any of the service area categories shall be allowed only within the physical boundaries of the area which is classified under a particular category (I, II, III, IV or V) where the branch/other banking unit sought be transferred/relocated is presently situated. (As amended by Section 2 of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.2 Capital requirements . A rural bank may be considered for branching privileges after full compliance with the minimum capital requirements as provided under existing regulations: Provided , That any rural bank applying for authority to establish a branch or banking unit in any of the classified service areas shall immediately comply with the prescribed minimum paid-in capital unimpaired by (a) unbooked valuation reserves and capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodations directors, officers, stockholders, and their related interest (DOSRI): Provided , That rural banks establishing branches in areas inadequately served by rural banks shall be provided government counterpart capital of up to P50,000 per branch to match the unmatched private paid-up capital. ( Effective June 3, 1983 ) (As amended by Section 3 of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.3 Other requirements/factors to be considered . Other requirements/factors to be considered are the following: a. The applicant's general compliance with laws, rules, regulations and policies of the Central Bank such as: (1) Capital adequacy and solvency; (2) Profitability and capacity to absorb losses; (3) Reserve and liquidity position; and (4) Qualifications of the proposed officers of the banking office. b. The service area of the proposed banking office is not over-banked and shows economic growth or reasonable prospects thereof. A service area is defined as an area of interrelated and interacting local economic activities. The service area is overbanked if (1) the rates of return are so depressed by an excess of banks in the area that adequate banking performance for the customers' benefit is threatened in the long-run; and (2) the overall level of deposits of banks in the area or their growth indicates no reasonable prospects that the situation in (1) above will be reversed in the short-run. c. Proposed banking offices shall not be allowed in premises purchased, acquired or leased to the disadvantage of another bank under circumstances attended by bad faith. d. No proposed banking office shall be established in a place adjoining the premises of an existing rural bank/branch: Provided , That a rural bank/branch is not precluded from establishing a banking office adjoining the premises of any existing banking office or of an approved but not yet opened banking office. * application for the establishment of the additional banking office. (2) Sketch of the area to be served showing the following information: (a) Proposed site of the banking office to be established; (b) Names and location of existing banking Offices in the area, if any, and approximate distance from the proposed banking office; (c) Distance from the head office or mother branch in case the additional banking office applied for is a money shop and (d) Distance from the market in case of a money shop. (3) Banking facilities and services to be offered. (4) Business or economic justification stating facts and figures (such as population and growth of population, number and names of the principal industrial, commercial and other establishments within the effective area f operations, deposit and loaning potentials, traffic flow and other information) tending to show that the establishment of the proposed banking office is justified on the basis of local public need therefor. (5) Projected statement of condition at the end of the first and second semesters of operations of the proposed banking office. (6) Statement of estimated earnings and expenses for the first twelve (12) months of operation. (7) Organizational setup of the proposed banking office showing the proposed positions and annual pay for each and the names, qualifications and experience of the proposed manager and other officers. (8) Bank premises and initial outlay. g. Applications for authority to transfer/relocate banking offices shall be accompanied by the following information/papers/documents: (1) Certified true copy of the resolution of the bank's board of directors authorizing the transfer/relocation. (2) Sketch of the area of operations showing the present location and the new location and the approximate distance between the two as well as from other banking offices. Note: Amendments to Subsec. 3151.3 as provided by the following BSP Circulars: 1) Section 3 of BSP Circular 71 dated May 5, 1995; 2) Section 4 of BSP Circular 95 dated October 30, 1995 SUBSECTION 3151.4 Conditions precluding acceptance of application . The application for the establishment of additional offices shall not be accepted by the Central Bank from an applicant bank which has six (6) approved but unopened banking offices (including savings agencies and money shops): Provided , That applications which may be accepted at any given time from a bank shall be such that if all these applications were approved, the applicant shall not have authorized but unopened offices in excess of the limitations herein prescribed. The prescribed ceiling on applications may be increased on a case-to-case basis upon prior approval of the Governor, on the basis of resources, personnel capability and, generally, a demonstration of the capability of the bank to organize and staff an increased number of banking offices within a reasonable time. (As amended by Section 5 of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.5 Conditions precluding processing of application . The existence of any of the following conditions shall preclude/suspend processing of the application: a. Unprofitable operations of the applicant bank during the year immediately preceding the filing of application; b. Non-compliance with ceilings on credit accommodations to directors, officers, and/or stockholders; c. Deficiency in its combined capital accounts for five (5) or more times within a thirty (30-day period during the last six (6) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next sixty (60) calendar days without prejudice to the re-submission of its application after said period; cdta d. Continuous deficiency in its net worth for a period of thirty (30) days or more during the last twelve (12) months immediately preceding the date the application was received, in which case its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the re-submission of its application after said period; e. Net deficiencies in reserves against deposit liabilities for four (4) consecutive weeks, in which case its application shall be processed only after it shall have had no net reserve deficiencies for eight (8) consecutive weeks; Provided , That in case of net deficiencies in reserves for eight (8) consecutive weeks during the last twelve (12) months immediately preceding the date the application was received, its privilege to establish banking offices shall be suspended for the next twelve (12) months without prejudice to the re-submission of its application after said period; and f. Transfer of location of any banking office without Central Bank authority, in which case the receipt/processing of applications shall be suspended for a period of at least six (6) months from date of knowledge of the Central Bank. (As amended by Section 6 of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.6 Priority in processing a. Only applications complete with the minimum documents required by the appropriate supervising and examining department shall be accepted for any area on a first-come first-served basis, regardless of whether or not there are approved but unopened banking offices in the area. Banks with expanded commercial banking authority and consolidated or merged rural banks and multi-town rural banks shall be given priority in the processing of applications to establish banking units in areas inadequately served by rural banks: Provided, however , The among such applicants the first-come-first-served basis shall also apply. ( Effective June 3, 1983 ) b. The mere filing pendency of an application for the establishment of a banking office in a particular area shall not give an applicant priority over other applicants with respect to such area. Preference shall be given to the application which satisfies all Central Banks requirements. If two or more applications satisfy all Central Bank requirements, the application which was filed first shall be given preferential consideration. (As amended by Section 7 of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.7 Date of opening . Approved banking offices shall be opened within six (6) months from the date of approval thereof Provided , That an applicant bank may be given a final extension of another three (3) months subject to presentation of justification and valid reason for the bank's failure to open the six (6)-month period and proof banking office can be opened within the succeeding three (3)-month period. (As amended by Section 8 of BSP Circular 95 dated October 30, 1995) Subsecs. 3151.8, 3151.9 and 3151.10 (Additional provisions as provided by Sections 9, 10 and 11, respectively, of BSP Circular 95 dated October 30, 1995) SUBSECTION 3151.8 Lease expenses prior to authorization to establish branch . Contracts of lease of premises for a proposed branch which are entered into prior to approval of the application for the establishment of such branch shall be at the risk of the bank concerned, considering that there is no assurance that the covering application to establish a branch will be approved. The bank's having incurred expenses in connection with their proposed establishment of branches, such as for acquisition/improvement or rental of premises, purchase/installation of equipment and furniture, employment/training of personnel, and acquisition of materials and supplies, is not a basis for, and does not entitle them to, the approval of applications to establish branches. SECTION 3152. Money Shops . Existing money shops shall be classified as extension offices and shall be subject, among others, to the reporting requirements of a regular branch if they maintain separate books of accounts. ( Effective July 25, 1983 ) SECTION 3153. Savings Agencies . Existing savings agencies shall be classified as extension offices and shall be subject, among others, to the reporting requirements of a regular branch if they maintain separate books of accounts. ( Effective July 25, 1983 ) SECTION 3154. Relocation of Banking Offices . In cases of transfers of location of agencies, extension offices, sub-offices or any office without prior approval by the Monetary Board, such violation shall constitute sufficient ground to suspend the receipt and/or processing of applications to establish new agencies, extension offices, sub-offices or any office by the bank concerned for a period of at least six (6) months. SECTION 3155. Establishment of Extension Offices . A rural bank may be authorized to open extension offices, subject to the following conditions: a. That there is a justification for the establishment of the extension office; b. That the applicant bank is in sound financial condition and that it has substantially corrected the deficiencies in its operations; c. That the applicant bank has complied with the law and the rules and regulations of the Central Bank; and d. That the extension office shall be located within the same municipality/city where the principal office is located: Provided , That said extension office shall be at least ten (10) meters away from any existing bank or branch thereof or from any approved but not yet opened bank/branch, except where they are separated by a street. SUBSECTION 3155.1 ( Deleted by Circular 939 ). SUBSECTION 3155.2 Conditions for processing applications . The application to open an extension office shall be processed only if: a. The applicant bank has had at least one (1) year of profitable operations; b. The applicant bank has no past due obligations with the Central Bank, both rediscounting and special financing; and c. The applicant bank has had no reserve deficiency for the last three (3) months preceding the filing date of application. If it has, it must show excess reserves for the next succeeding three (3) months. H. BANKING DAYS AND HOURS SECTION 3156. Banking Days and Hours . Effective June 1, 1984, all banks, their branches, agencies and extension offices (including money shops and savings agencies) doing business in the Philippines with the exception of banks located in the Manila International Airport and the Malabon, Navotas fishports, shall observe a five-day banking week for the conduct of their business, the banking days during which each banking unit may be opened to be, selected by the bank concerned; Provided, however , That the Monetary Board, may authorize exemptions therefrom, if warranted, by areas. Special holidays proclaimed for local governments shall be considered as regular banking days. Thus, banks should open on such days if the same fall on regular banking days selected and need not give the notice prescribed under subsections 1156.4 (Book I), 2156.2 (Book II) and 3156.4 (Book III). In the case of special holidays for special purposes under Section 4 of LOI No. 1087 such as elections and related events, which, by the terms of their proclamation, are specifically declared as non-working days, banks, may at their discretion open on such days if the same fall on regular banking days selected, provided they shall comply with the reporting requirement prescribed under subsections 1156.4 (Book I), 2156.2 (Book II) and 3156.4 (Book III). ( Effective May 15, 1984 ) All banks, including their agencies and extension offices doing business in the Philippines, shall transact business for not less than six (6) hours a day, to be selected by the bank concerned, between 8:00 o'clock in the morning and 8:00 o'clock in the evening: Provided , That in the exercise of the option granted herein banks may transact business for less than six (6) hours. SUBSECTION 3156.1 Banking hours beyond minimum . For purposes of servicing deposits and withdrawals, rural banks may, at their discretion and after prior written notice to the appropriate supervising and examining department Central Bank, remain open beyond the minimum six (6) hours and for as long as they find it necessary, even before 8:00 o'clock in the morning or after 8:00 o'clock in the evening. Rural banks may, after prior written notice, also remain open beyond the minimum six (6) hours for banking services other than the servicing of deposits and withdrawals but in no case shall such banking hours start earlier than 8:00 o'clock in the morning nor extend beyond 8:00 o'clock in the evening. SUBSECTION 3156.2 Report of, and changes in, banking days and hours . The banking days and hours for each of the offices of banks shall be reported in writing to the appropriate supervising and examining department of the Central Bank. Banks may change the banking days and hours previously reported to the Central Bank by giving prior written notice to the appropriate supervising and examining department of the Central Bank; Provided, That except in emergencies, changes in banking days or hours shall not be made oftener than once every thirty (30) days. SUBSECTION 3156.3 Emergencies . Banks shall not close for business during the banking days and hours as reported to the Central Bank, nor shall they open for business outside said days and hours without the prior written notice prescribed in Subsec. 3156.4 except when such closing or opening is due to an emergency as herein defined. For purposes of these regulations, emergency shall mean (1) a condition of an area or locality proclaimed by the President of the Philippines as in a state of emergency, or (2) an event or occasion or a combination of circumstances equivalent to a public calamity resulting from fire, flood, or like disaster, or through some unusual occurrence or pressing necessity, not reasonably subject to anticipation and calling for immediate action or remedy. SUBSECTION 3156.4 Reports . The prior written notice to the Central Bank on changes in banking days and hours as required in this section shall be given through the fastest means of communication, at least seven (7) banking days before the intended effectivity of the change in banking hours or days. In case a bank, due to an emergency, has to open outside, or close during, the banking hours or days reported to the Central Bank, a written report submitted within twenty four (24) hours from opening or closing, as the case may be, will suffice. The report shall state the specific nature of the emergency and the period the bank opened or closed or shall open or close by reason of the emergency. SUBSECTION 3156.5 Existing authorizations and notifications . Except as otherwise provided hereinabove, existing authorizations and notifications regarding banking days inconsistent with the five-day banking week are hereby revoked. ( Effective May 16, 1984 ) SUBSECTION 3156.6 Posting of schedule . The schedule of banking days and hours reported to the Central Bank shall be posted conspicuously at all times in the bank's premises. SECTIONS 3157-3160. (Reserved) . I. INTERNAL CONTROL SECTION 3161. Records and Reports . All rural banks shall have a true and accurate account, record or statement of their daily transactions in accordance with the uniform accounting system prescribed by the Central Bank for use of the rural banks. The commission of any false entry or the omission to make an entry on any such transactions shall be a ground for the Monetary Board to order the removal from office of any officer, director, agent or employee responsible therefor, without prejudice to their criminal liability under Section 22 of Republic Act No. 720, as amended and Sections 33 and 34 of Republic Act No. 265, as amended, and/or the applicable provisions of the Revised Penal Code. All rural banks are required to use and follow strictly the forms prescribed by the Central Bank for the use of rural banks for their statements and/or periodic reports required to be submitted to the Department of Rural Banks and Savings and Loan Associations (App. 1). Any willful delay in the submission of reports/refusal to permit examination shall subject the erring rural bank to the specific administrative sanctions. Effective July 1, 1977, however, all banks shall strictly adopt/implement the Uniform System of Accounts prescribed in the corresponding Central Bank Manual. For meeting reportorial requirements and for purposes of published statements, the accounts specified in the Manual shall be adopted on October 1, 1976. The following penalties/sanctions, whenever applicable, shall be imposed upon any bank for failure or refusal to adopt the prescribed Uniform System or any of the applicable accounts contained therein or for using/adopting any ledger account not specified in the Uniform System without prior written approval of the Governor of the Central Bank: a. Penalties prescribed under Sections 34 and 34-A of Republic Act No. 265 as amended; b. Suspension or revocation of the authority to engage in quasi-banking functions; and c. Such other penalties/sanctions authorized by law. SUBSECTION 3161.1 Categories of, and signatories to, bank reports . Certain weekly, monthly, quarterly, semi-annual and annual statements/reports required to be submitted to the Central Bank by rural banks are grouped into Category A-1, Category A-2, and Category B. a. Categories of reports (1) Category A-1 report is the quarterly published/condensed statement of condition (CBP 7-19-08A). (2) Category A-2 report is the consolidated monthly statement of condition (CBP-7-19-04A). (3) Category B reports the those required to be submitted to the Central Bank and which are not included in Categories A-1 and A-2. The complete listing of these reports is in App. 1. b. Authorized signatories (1) Category A-1 reports shall be signed by the institution's president or senior executive vice-president, and by the chief finance officer (i.e., chief accountant), who shall be authorized under a resolution approved by the board of directors (sample form of resolution is shown in App. 1-a). (2) Category A-2 reports of head offices of financial intermediaries shall be signed by the institution's president or senior executive vice-president. Reports of offices/units (such as branch, sub-branch, agency, etc.) in this category shall be signed by its respective manager/officer-in-charge. Likewise, the signing authority in this category shall be contained in a resolution approved by the board of directors (sample of resolution is shown at the App. 1-b). cdt (3) Category B reports (App. 1-a) shall be signed by officers or their alternates, who shall be duly designated by the board of directors. A copy of the board resolution (sample form is shown in App. 1-c) covering the initial designation and subsequent change(s) in signatories and alternates, shall be submitted to the Department of Rural Banks and Savings and Loan Associations within three (3) days from date of resolution. SUBSECTION 3161.1.b.(4) (Additional provision as provided by CBP Circular 1216 dated December 20, 1989) c. Sanctions If a report is submitted to the Central Bank under the signature of an officer who is not listed or included in any of the resolution(s) mentioned above, the Department of Rural Banks and Savings and Loan Associations shall refuse to acknowledge the report as valid or consider the report as not having been submitted at all. If such a report is not re-submitted by the institution under the signature of a duly authorized signing officer, administrative sanctions/penalties shall be imposed on the erring institution for late reporting or failure to submit the required reports, as the case may be. SUBSECTION 3161.2 Sanctions for wilful delay in submission of reports; refusal to permit examination . For wilful delay in the submission of reports or refusal to permit examination, specific sanctions shall be imposed in accordance with the following rules: a. Definitions of terms . For purposes of this subsection, the following definitions shall apply: (1) Report shall refer to all written reports/statements, (such as report on required and available reserves against deposit liabilities, annual statement of condition) required of a banking institution to be submitted to the Central Bank periodically or within specified period. (2) Wilful delay in submission of reports shall refer to the failure of any banking institution to submit on time the report defined in number (1) above. Failure to submit a report on time due to fortuitous events such as fire and other natural calamities, and public disorders, shall not be considered as wilful delay. (3) Examination shall include, but need not be limited to, the verification, review, audit, investigation and inspection of the books and records, business affairs, administration, and financial condition of any banking institution including the reproduction of banking records as well as the taking possession of the books and records and keeping them under Central Bank's custody after giving proper receipts therefor. It shall also include the interview of the directors and personnel of any banking institution. (4) Refusal to permit examination shall mean any act or omission which impedes, delays or obstructs the duly authorized Central Bank officer/examiner/employee from conducting an examination, including the act of refusing to accept or honor a letter of authority to examine presented by any officer/examiner/employee of the Central Bank. b. Fines for wilful delay in the submission of reports (1) Amount of fine . Any rural bank which shall willfully delay the submission of reports as defined above within the periods prescribed for each particular report, shall pay a fine in accordance with the following schedule: Per banking day of default for the first 5 banking days of default P10 Per banking day of default for the next 5 successive banking days of default 20 Per banking day of default for the succeeding days of default 30 In the implementation of the foregoing rules, delay or default shall start to run on the day following the last day required for submission of the reports. However, should the last day of filing fall on a non-working day in the locality where the reporting bank is situated, delay or default shall start to run on the day following the next working day. (2) Manner of filing . The submission of the reports shall be effected by filing the same personally with the Department of Rural Banks and Savings and Loan Associations or with the Central Bank regional offices or by sending them by registered mail or special delivery, unless otherwise specified in the circular or memorandum of the Monetary Board or the Central Bank. In the first case, the date of acknowledgement by the Department of Rural Banks and Savings and Loan Associations or the Central Bank regional office, appearing on the copies of such reports filed or submitted and in the second case, the date of mailing postmarked on the envelope or the registry receipt, shall be considered as the date of filing. (3) Manner of payment or collection of fines . The following rules shall govern the collection of fines imposed on banks for wilful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor: (a) Banks shall, within thirty (30) calendar days from receipt of the statement of account from the Central Bank, pay the fines imposed thereon for wilful failure or refusal to comply with, or violation of, any banking law or any order, instruction or regulation issued by the Monetary Board, or any order, instruction or ruling by the Governor. (b) For banks which maintain demand deposit accounts with the Central Bank, fines which are unpaid after the lapse of the thirty-day period shall be automatically debited against the corresponding demand deposit account of the bank concerned: Provided , That if the balance of the bank's account is insufficient to cover the fines due, such fines shall be paid not later than the following banking day. For the purpose of this section, banking day means a day on which the Central Bank head office and the head office of the bank are open for business. (c) Outstanding bills for fines which are unpaid after thirty (30) calendar days from April 10, 1980, shall be automatically debited against the bank's demand deposit account with the Central Bank. Where a bank does not maintain a demand deposit account with the Central Bank, it shall pay the full amount of outstanding fines within thirty (30) calendar days from above said date. (d) Failure to settle the full amount of the fines within the period or on the day prescribed herein shall make a bank, its directors and officers liable to the sanctions imposed under Sections 34 and 34-A of R.A. No. 265, as amended. (As amended by CBP Circular 1206 dated July 7, 1989) c. Fine for refusal to permit examination (1) Amount of fine . Any banking institution which shall willfully refuse to permit examination as defined above, shall pay a fine of P500 daily from the day of refusal and for as long as such refusal lasts. (2) The Central Bank officer/examiner employee shall report the refusal of the banking institution to permit examination to the Director of the Department of Rural Banks and Savings and Loan Associations, who shall forthwith make a written demand upon the banking institution concerned for such examination. If the banking institution continues to refuse said examination without any satisfactory explanation therefor, the Central Bank officer/examiner/employee concerned shall submit a report to that effect to the Director of the Department of Rural Banks and Savings and Loan Associations. (3) The fine shall be imposed starting on the day following the receipt by the Department of Rural Banks and Savings and Loan Associations of the written report submitted by the Central Bank officer/examiner/employee concerned regarding the continued refusal of the banking institution to permit the desired examination. (4) Manner of payment or collection of fine . The same procedure as in Item b(3) hereof shall be followed. d. Other penalties . The foregoing penalties shall not preclude the application of, or be without prejudice to, the other administrative sanctions as well as to the filing of criminal cases as provided for in other provisions of law, and as may be warranted by the nature of the offense. e. Appeal to the Monetary Board . Any aggrieved banking institution may appeal to the Monetary Board from a ruling of the appropriate department of the Central Bank imposing a fine. SUBSECTION 3161.3 Submission of certain required information . All rural banks shall submit within ten (10) days from receipt of CB Memorandum to All Banks and Non-Bank Financial Intermediaries dated October 28, 1975, the information required in App. 2. Any change in any of the required information submitted, after the initial submission shall be immediately reported to the Department of Rural Banks and Savings and Loan Associations. Likewise, all rural banks shall submit within thirty (30) days from receipt of CB Circular Letter to All Banks and Non-Bank Financial Intermediaries dated October 18, 1976, any or all of the documents/information available in their banks required in App. 3. Any subsequent changes/issuances on the above should be furnished the Department of Rural Banks and Savings and Loan Associations within fifteen (15) days from such change/issuance. SUBSECTION 3161.4 Reports on crimes/losses . All banks shall report on crimes against property and other crimes involving loss/destruction of their property including crimes involving bank personnel through the appropriate supervising and examining department as follows: a. Crimes whether consummated, frustrated or attempted against property/facilities (such as robbery, theft, swindling or estafa, forgery, and other deceits) and other crimes involving loss/destruction of their property when the amount involved in each crime is P1,000 or more, in the case of rural banks. Crimes involving bank personnel, even if the amount involved is less than above specified, shall likewise be reported to the Central Bank whenever the bank initiates judicial or extrajudicial action, or imposes sanctions against such bank personnel. (As amended by CBP Circular 1268 dated December 28, 1990) b. Incidents involving material loss, destruction or damage to the institution's property/facilities, other than that arising from a crime, when the amount involved per incident is P5,000 or more. c. The following guidelines shall be observed in the preparation and submission of the report: (1) The report shall be prepared in two (2) copies and shall be submitted within forty-eight (48) hours from knowledge of the crime or incident with the details contained in CBP 7-19-50A, the original to the appropriate supervising department and the duplicate copy to the Central Bank Security Coordinator, thru the Director of Security and Transport: Provided , That in the cases mentioned in the second paragraph of Item a, the report shall be submitted as specified above, within forty-eight (48) hours from initiation of judicial or extrajudicial action or from the imposition of sanctions against such bank personnel; (2) Where a thorough investigation and evaluation of facts is necessary to complete the report, an initial report submitted within the 48-hour deadline may be accepted: Provided , That a complete report is submitted not later than fifteen (15) days from termination of investigation; (3) Proof of submission of the report within the 48-hour deadline shall be determined by the date of postmark, if the report was sent by mail, or by the date received, if hand-carried to the appropriate supervising and examining department, Manila, or, in applicable cases, to the unit of the supervising and examining department in any of the regional offices of the Central Bank. (As amended by No. 1 of CBP Circular 1216 dated December 20, 1989) SUBSECTION 3161.5 Report on real estate transactions between a bank and its directors, officers, stockholders or any firm substantially owned by one or more of such directors, officers or stockholders . The board of directors of the bank shall, through the Department of Rural Banks and Savings and Loan Associations: a. Report to the Monetary Board any real estate transaction (such as, but not limited to, rentals or leases, purchases, and sales, or foreclosed assets) by and between the bank and its directors, officer/s, stockholder/s owning at least two per cent (2%) of the bank's subscribed capital stock or any firm substantially owned (in the aggregate of at least twenty per cent (20%) of the paid-in capital of such firm) by one or more of such directors/officers/ stockholders; and b. Certify to the Monetary Board that such transaction has been thoroughly reviewed and verified as having been entered into in the best interest of the bank. SUBSECTION 3161.6 Consolidation of financial statements of financial intermediaries and their allied undertakings/subsidiaries/affiliates . The following guidelines shall govern the consolidation of financial statements of financial intermediaries and their allied undertakings, subsidiaries/affiliates: a. Definitions . As used in this subsection, the definitions of the following terms are hereby adopted: (1) Consolidated financial statements shall refer to the combined statement of condition/balance sheet and statement of income and expenses of two (2) or more corporate entities as they would appear if they were one organization, after eliminating the effects of inter-company transactions. (2) Financial allied undertakings refer to enterprises or firms with homogenous or similar activities/business/functions with the financial intermediary and may include but not limited to leasing companies, banks, investment houses, financing companies, credit card operations, financial institutions addressed/catering to small and medium scale industries, and such other similar activities as the Monetary Board may declare as appropriate from time to time. Non-financial allied undertakings may include but not limited to warehousing, companies, storage companies, safe deposit box companies, companies engaged in the management of mutual funds but not in the mutual funds themselves, management corporations engaged or to be engaged in activities similar to the management of mutual funds, insurance agencies, companies engaged in home building and home development, and companies providing drying and/or including facilities for agricultural crops such as rice and corn and such other similar activities as the Monetary Board may declare as appropriate from time to time. (3) Equity investments refer to investments in the capital stock of companies, firms or enterprises, made for purposes of control, affiliation or other continuing business advantage. LLpr (4) Subsidiary refers to a corporation or firm more than fifty per cent (50%) of the outstanding voting stock of which is directly or indirectly owned, controlled or held with power to vote by a financial intermediary (bank and non-bank). A domestic subsidiary is any subsidiary domiciled in the Philippines and incorporated under the laws of the Philippines, while a foreign subsidiary is any subsidiary incorporated and organized under the laws of a foreign country. (5) Affiliate refers to an entity linked directly or indirectly to a financial intermediary by means of (a) ownership, control or power to vote, of ten per cent (10%) or more of the outstanding voting stocks of the entity, or vice-versa; (b) interlocking directorship or officership; (c) common stockholders owning ten per cent (10%) or more of the outstanding voting stocks of each of the financial intermediary and the entity; (d) management contract or any arrangement granting power to the financial intermediary to direct or cause the direction of management and policies of the entity, or vice-versa; or (e) permanent proxy or voting trust in favor of the financial intermediary constituting ten per cent (10%) or more of the outstanding voting stocks of the entity, or vice-versa. (6) Cost method refers to the accounting method of recording at cost, and continuously carrying at cost, equity investment, regardless of increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertaking/affiliate subsidiary. (7) Equity method refers to the accounting method of recording equity investments at cost and adjusting the balance of the account to reflect increases or decreases in the underlying value of the investments resulting from earnings or losses of the allied undertakings/affiliate/subsidiary. b. Consolidation requirements (1) The financial statements of allied undertakings shall be consolidated with those of the investing financial intermediary only when the allied undertaking is a subsidiary and a financial allied undertaking as defined herein. (2) In the case of non-financial allied undertakings and affiliates, consolidation may be required on a case-to-case basis as may be determined by the appropriate supervising and examining department of the Central Bank. (3) Financial statements of all domestic and foreign subsidiaries shall be consolidated with those of the investing financial intermediary (domestic parent), except (a) subsidiaries about to be disposed of; (b) subsidiaries where control is being exercised on a temporary basis; (c) subsidiaries whose financial statements bear a closing date different from that of the investing financial intermediary's financial statements and/or (i) the difference in closing dates exceeds three (3) months or more; (ii) the closing dates of all the statements are not expressly indicated; (iii) the necessity of the difference to closing date is not explained; and (iv) changes in accounting periods of the affiliate/constituent companies are not disclosed, together with their financial statements. (d) subsidiaries whose business activities are so dissimilar from those of the investing financial intermediary that the presentation of separate financial statement would provide better information; and (e) foreign subsidiaries located in places where (i) there are foreign exchange restrictions; (ii) the rates of exchange fluctuate widely; (iii) there are unfavorable legislations in force; and (iv) the foreign government concerned is undergoing a process of change. c. Consolidation procedures (1) Consolidation of the financial statements shall involve the following procedure: (a) Consolidation shall be on a line-by-line basis; i.e. accounts of the investing financial intermediary and its subsidiaries to be consolidated are combined by adding together like item of assets, liabilities, revenue and expenses, except in the case of foreign currency of the host country where the allied undertaking/subsidiary/affiliate is located, which shall be shown under "Other Assets." (b) The following are eliminated in consolidation; (i) All intercompany transactions; for instance, rental income of a subsidiary from its premises should be netted against rent expense incurred by the investing financial intermediary for occupying said premises; (ii) All intercompany accounts/transactions that reflect the existence of a debtor-creditor relationship between the investing financial intermediary and its subsidiaries and/or between subsidiaries. (iii) All asset accounts of the investing financial intermediary, which represent ownership of investments in subsidiaries against the capital accounts of the consolidated subsidiaries. (c) All income and expense accounts shall be closed to the capital accounts of each subsidiary. (d) All the remaining assets and liabilities of the subsidiaries shall be transferred to appropriate accounts of the investing financial intermediary. (e) For not wholly-owned subsidiaries, segregate the share of minority stockholders/interest in the capital stock and retained earnings of such subsidiaries and lodge the same under "Minority Interest in Subsidiary" account which shall be shown as a separate section between the Liabilities and Stockholders' Equity sections of the Consolidated Statement of Condition. (f) other generally accepted consolidation principles/procedures not inconsistent herewith may be adopted. (g) Consolidating adjustments and eliminations shall appear only on working papers and shall not be recorded in the books of the individual entities concerned. (2) For consolidated statement/report purposes, the following accounts shall be used for the differences, between cost and book value of equity investments on date of acquisition; (a) "Excess of Cost Over For excess of cost of equity Book Value of investments over its book Equity Investments" value (b) "Excess of Book Value For the excess of book value Over Cost of Equity of equity investment over Investments" its cost The first account shall be shown under OTHER ASSETS caption while the second account shall be shown between PAID-IN SURPLUS and SURPLUS (FREE) captions in the consolidated statement of condition. (3) The investments (which are recorded at the cost method) of the investing financial intermediary in allied undertakings/subsidiaries/affiliates whose financial statements are not consolidated shall be adjusted for their share in the earnings or losses of such entities, with the use of the equity method as defined in Item "a(7)" above. However, these adjustments shall appear only in working papers and shall not be recorded in the books of the individual entities concerned. d. Disclosures . The following schedules/disclosures shall be attached to/made in the consolidated financial statements: (1) An appropriate list/schedule of the allied undertakings/subsidiaries/affiliates showing the following information: (a) Name and nature of business; (b) Original cost of the investment; outstanding balance, book value and difference, if any, and accounting treatment of the differences; (c) Percentage of ownership/equity investment; (d) Differences in reporting dates from that of the reporting financial intermediary; (e) Whether or not their financial statements have been consolidated; and (f) Reasons for not consolidating in the case of the unconsolidated entities; (2) Where the unconsolidated subsidiaries are, in the aggregate, material/significant in relation to the consolidated financial position or operating results, summarized information as to their assets, liabilities and operating statements should be presented/indicated/shown in footnotes, or separate financial statements should be presented for such subsidiaries, either individually or in groups, where appropriate. (3) Any information on: (a) Exposure to exceptional risks of operating in other countries, including the risk of foreign currency exchange rate fluctuations. (b) The extent to which there are statutory or contractual restrictions on the distribution of the accumulated retained income of the group. e. Submission of financial statements The investing financial intermediary shall, within one hundred twenty (120) days after the end of the reference calendar year, that is, at the end of December 31st of each year, submit to the appropriate supervising and examining department of the Central Bank the consolidated annual financial statements which shall be supported with the individual annual financial statements of the allied undertakings/affiliates/subsidiaries in a report form to be circularized on or before 30 April 1982. The strict implementation of these guidelines or full compliance therewith, subject to penalties/sanctions, shall be effective 1 January 1983. SECTIONS 3162-3164. (Reserved) . SECTION 3165. Audits . The boards of directors of banking institutions whose primary responsibility is to exercise general supervision over the affairs of their banks, in order to determine whether operations are carried out with maximum effectiveness and economy, are hereby required to cause once every two (2) years for commercial banks and specialized government banks, and once every three (3) years for thrift banks an operations/management audit or an overall review and appraisal of management methods and performance, specifically on plans and objectives, organizational structure, systems or procedures, methods of control, means of operation, human and physical facilities, to deliberate and act on the audit report; and to submit a report (with special emphasis on management performance, policies and procedures) on the board's action to the Central Bank. Such operations/management audit (once every two or three years, as the case may be) shall be conducted simultaneously with the financial audit. The financial audit shall, however, be conducted annually. SUBSECTION 3165.1 Procedural guidelines a. Each bank shall cause an annual financial audit as required under Section 6-D of Republic Act No. 337, as amended, not later than thirty (30) days after the close of the calendar year or the fiscal year adopted by the bank. b. The board of directors, in a regular or special meeting, shall consider and act on the operations/management audit and financial audit reports and shall submit within thirty (30) days after receipt of the reports, a copy of its resolution to the appropriate supervising and examining department of the Central Bank. The resolution shall show, among other things, the names of the directors present and absent, the actions taken on the findings and recommendations as well as the measures adopted by the board of directors to improve or update the bank's managerial/operational performance, policies and practices, and its system and procedures. SUBSECTION 3165.2 Exemptions . a. Rural banks shall be exempted from the requirement of operations/management audit under Sec. 3165 and Subsec. 3165.1a. In lieu thereof, the boards of directors of rural banks shall be required to cause the submission of accomplished survey forms/questionnaires to the Department of Rural Banks and Savings and Loan Associations (DRBSLA) not later than ninety (90) days after the close of each calendar year as basis for an overall review and appraisal of management's methods and performance. For this purpose, DRBSLA shall furnish the rural banks with the necessary survey forms/questionnaires. b. Rural banks shall be exempted from the requirement of financial audit under Item (a) of Subsec. 3165.1 except the following: (1) Those whose past due accounts with the Central Bank reach fifteen percent (15%) or more at any time during the year; and (2) Those with Central Bank exposure in the form of counterpart capital, outstanding rediscounting, and special time deposits totalling P2 million or more. SECTION 3166. Internal Control System . All rural banks shall review existing internal controls in their respective banks and adopt and implement such improvements as are essential in accordance with the minimum internal control standards provided hereunder. For purposes of this section, the following records/data shall be compiled and made available for the inspection of Central Bank examiners: a. Records showing compliance with independent balancing procedures. These records should indicate the accounts and the periodic balancing procedures performed; b. Statements of actual duties of persons assigned to handle cash and securities; c. All internal control audit reports or their equivalent; and d. Information/data on the direct and/or indirect equity holdings and/or connection with any firm, partnership or corporation organized for profit, of all the bank's directors, officers and major stockholders as defined in Sec. 3326. SUBSECTION 3166.1 Proper accounting records a. All banks should maintain proper and adequate accounting records. b. These records should be kept currently posted and should contain sufficient detail so that an audit trail is established. c. All tickets should bear official approval and should be initiated by the person originating and another person checking them. SUBSECTION 3166.2 Independent balancing a. independent balancing shall mean that records posted by a person or cash held by a teller or cashier shall be balanced or counted by another person. b. The minimum independent balancing procedures which should be adopted are the following: (1) Monthly reconcilement of general ledger balances against their respective subsidiary and supporting records and documentations by someone other than the bookkeeper or the person handling the records; (2) Irregular and unannounced count of teller's cash and checks and other cash items at least twice a month and vault cash at least once a month by the auditor/control officer or by an officer not connected with the cash department; (3) Monthly reconcilement of due from banks/cash in banks accounts (domestic and foreign) and due from/to head office/branches by someone other than the person handling the records or posting the general ledger entries; (4) Periodic verification of securities and collaterals by someone other than their custodians; (5) Periodic verification of the accuracy of the interest credits to deposit liabilities accounts. SUBSECTION 3166.3 Division of duties and responsibilities a. The duties of all the officers and employees should be segregated, clearly defined, understood, documented and manualized if possible. No individual shall have complete authority and responsibility for handling all phases of any transaction from beginning to end without some check or balance from some other part of the organization. b. The physical handling of a transaction should be separated from its recording and supervision as follows: (1) A person handling cash should not be permitted to post the ledger records nor should posting of the general ledger be performed by an employee who posts the depositor's subsidiary ledgers. casia (2) A loaning officer should never be allowed to disburse proceeds of notes, accept note payment nor process loan ledgers. (3) The functions of issuing, recording and signing of drafts/checks should be separated. (4) Checks and other cash items should be maintained either by an employee not handling cash or by the Rack/Distributing Department provided that adequate control as to custody and disposition of funds are properly maintained. (5) The receipt of statements from depository bank should be assigned to an employee other than the one connected with the preparation, recording and signing of bank drafts. (6) Custodians of securities should not be allowed to handle security transactions. (7) Collateral appraisals should be done by an employee/officer other than the ones approving the loans. (8) Incoming checks and other cash items should be recorded chronologically in a register by an employee other than the bookkeeper before they are forwarded for posting purpose. (9) Credit reports should be obtained by someone other than lending officers. (10) Mailing of customers' statements and delinquent notices should be done by an employee other than the one who granted the loan or the one handling the records. (11) Dispatching and delivery of current account statements should be done by someone other than those who have something to do with current account operations such as tellers and bookkeepers. d. Extensive background checking of persons intended to be assigned to handle cash and securities should be conducted. Frequent follow-up checking after their employment should also be made. SUBSECTION 3166.4 Joint custody a. joint custody shall mean the processing of transactions in the presence of and under the direct observation of a second person. Both persons shall be equally accountable for the physical protection of the items and records involved. b. Physical protection should be deemed established through the use of two locks or combinations on a file chest or vault compartment. c. Two or more persons should be assigned to each half of the control so that operating efficiency is not impaired if one person is not immediately available. d. Persons who are related to each other within the third degree of consanguinity or affinity should not be made joint custodians. e. The following should be under joint custody: (1) Cash in vault (2) All accountable forms (3) Collaterals (4) Securities (5) Documents of title and/or ownership of properties or fixed assets (6) Dormant or inactive deposit ledgers and corresponding signature cards (7) Import documents (8) Trust receipts (9) Collection items (10) Duplicate keys, safe deposit, spare locks and keys, unrented keys to safe deposit boxes. (11) Safekeeping items (12) Vault doors and safe combinations (13) Unissued specimen signature books (14) Test key fixed numbers unissued (15) Correspondent's and institution's own telegraphic or cable test keys currently in use. SUBSECTION 3166.5 Signing authorities . Signing authorities for the different levels of officers to sign for and in behalf of the institution should be approved by the board of directors and the extent of each level of authority should be clearly defined. The signing authorities should include but need not be limited to the following: a. Lending b. Investment c. Approval of expenses d. Various supervisory reports e. Bank drafts, manager's/cashier's checks, bank money orders and certificate of time deposits. SUBSECTION 3166.6 Dual control a. Dual control shall mean the work of one person it to be verified by a second person to determine (1) that proper authority has been given to handle the transaction, (2) that the transaction is properly recorded, and (3) that proper settlement of the transaction is made. b. The routine of each transaction should be designed so that at least two (2) or more individuals are involved in the completion of every transaction. c. The following accounts/transactions should be under dual control: (1) Cashier's/Manager's checks and telegraphic transfers The signature of at least two (2) officers should be required in the issuance of cashier's/manager's checks and telegraphic transfers. The board of directors may however prescribe a certain pre-determined amount by which one senior officer could sign checks or telegraphic transfers, subject to appropriate control measures. (2) Certificate of time deposits All certificates of time deposits issued should be signed jointly by two (2) authorized officers. (3) Bank drafts The signature of two (2) authorized officers should be required in the issuance of bank drafts. (4) Borrowing The signature of at least two (2) authorized officers should be required. (5) All transactions giving rise to "due to" or "due from" account and all instruments of remittances evidencing these transactions, particularly those involving substantial amounts, should be approved by two (2) authorized officers. SUBSECTION 3166.7 Number control a. Sequence number controls should be incorporated in the accounting system and should be used in registering notes, in issuing official checks and in other similar situations. Number control should be policed by a person designated by senior management who should be detached from the particular operations involved. b. The following are the forms, instruments and accounts that should be number-controlled: (1) Bank drafts (2) Manager's and/or Cashier's checks (3) Promissory notes (4) Savings deposit accounts (5) Demand deposit accounts (6) Time deposit certificates (7) Letters of credit (8) Collection items (9) Official and provisional receipts (10) Certificate of stocks (11) Loan accounts (12) Expense vouchers c. A common practice among some banks to enter into agreement with financial institutions not authorized to engage in quasi-banking functions which would allow the latter parties to hold a bank's presigned or unsigned debt instruments, such as regular certificates of time deposits (CTDs), negotiable certificates of time deposits (NCTDs), promissory notes (PNs), repurchase agreements (RPs), and certificates of assignments/participation with recourse (CPs), prior to the actual receipt of funds by the bank is deemed contrary to minimum internal control standards and should not be allowed. Being accountable forms, all debt instruments shall remain in the custody of banks at all times and shall be issued only upon receipt of funds equivalent to their face value. Effective Feb 9, 1984 ) SUBSECTION 3166.8 Rotation of duties a. The duties of personnel handling cash, securities and bookkeeping records should be rotated. b. Rotation assignment should be irregular, unannounced and long enough to permit disclosure of any irregularities or manipulations. c. Tellers should be relieved of their duties during the actual count of their cash accountabilities performed during annual bank examinations. SUBSECTION 3166.9 Independence of intern auditor a. The position of internal auditor should be provided for in the by-laws together with the duties and responsibilities, scope and objectives of internal auditing. b. The internal auditor should report directly to the Board of Directors or to an Audit and Examining Committee composed of directors who are not connected with the management. c. The internal auditor should not install nor develop procedures, prepare records or engage in other activities which he normally reviews or appraises. SUBSECTION 3166.10 Direct verification a. Direct verification shall mean the confirmation of accounts or records by direct correspondence with the institution's customers. b. The following accounts, among others, should be subject to direct verification by the internal auditing staff at least once a year: (1) Balances of loans and credit accommodations of borrowers; (2) Deposit account balances, particularly new deposit accounts, inactive or dormant accounts and closed accounts; (3) Outstanding balances of borrowings and other liabilities; (4) Outstanding balances of receivables/payables. SUBSECTION 3166.11 Other internal control standards a. Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. b. Dormant accounts should be segregated from active account ledgers with a separate subsidiary control. c. Signature cards for dormant accounts should be removed from active files. d. All new current accounts should be approved by a designated officer. e. Signature cards and deposit ledger sheets should be authenticated by some form of validation. Subsequent changes should also be validated. f. Signature cards and deposit ledger sheets should be accessible only to authorized persons. g. Dates appearing on deposit tickets should be occasionally examined at irregular intervals after they have been posted to determine that posting was made on the actual date deposit is received. h. Withdrawals against uncleared check deposits should be allowed only upon prior approval of a responsible officer within the limits of authority set by the board of directors. However, rural banks should not, under any circumstances, allow withdrawals against uncleared check deposits. i. Checks should be cancelled as soon as they have been paid and posted. k. All current account statements should be mailed direct to the depositors. Undelivered statements should be retained by an organizational unit not responsible for demand deposit account processing. l. An officer should be designated to attend to customers who report differences on their statements. m. Checkbooks should be issued only against requisition forms signed by an authorized signatory to the account. SUBSECTION 3166.12 Dormant/Inactive accounts a. Definition of dormant or inactive accounts: (1) Current or checking accounts showing no activity (deposit or withdrawal) for a period of one (1) year. (2) Savings accounts showing no activity (deposit or withdrawal) for a period of two (2) years. b. Procedure for classification . Initially review all deposit ledgers and segregate accounts that fall under a (1) and a(2) above. At the end of every semester thereafter, review all deposit accounts and segregate those accounts that became dormant during the semester just ended. c. Internal control measures (1) As a matter of policy, banks should exert all efforts to prevent checking and savings accounts from becoming dormant. When it becomes apparent that an account is inactive, a short letter should be sent to the depositor encouraging him to use his account. In case of checking accounts, the bank should exert effort to assure itself that the monthly statement of accounts reach the depositors. If the depositors cannot be located, the following steps should be undertaken: (a) Check any significant changes or fluctuations in the depositor's account balance over a period of time with emphasis on accounts with decreasing balances. (b) Verify apparent reactivation entries, represented either by deposit or withdrawal, that appears to have prevented the account from being classified as dormant. (c) Investigate any obvious alteration of the ledger records. (2) Segregated dormant accounts should be placed under joint custody of two responsible officers/employees. (3) A separate ledger control for dormant accounts should be maintained. (4) Signature cards for dormant accounts should also be segregated from active files and held under joint custody. (5) Entries to dormant account ledgers should be verified and approved by a designated officer. His initials should be placed next to the entry on the ledger sheet. (6) All inquiries on dormant accounts should be coursed to one officer who should obtain sufficient identification from the inquirer to assure that he is entitled to the information. (7) A trial balance of dormant account ledgers should be taken periodically and balanced with the general control account by an employee other than the bookkeeper. (8) Dormant or inactive accounts should be verified directly with depositors. (9) All transactions affecting dormant accounts should be subject to audit by the internal auditor. (10) A semestral report on deposit accounts transferred to dormant should be rendered to bank management. SUBSECTION 3166.13 Miscellaneous a. Loan applications and related documents should be spot checked to insure their authenticity, including verification of name, residence, employment and current reputation of the borrower. b. Employees paying checks for strangers should obtain positive identification of the person and when a large sum is involved the account on which the check is drawn should be verified. c. No employee should be permitted to process transaction affecting his own account. d. Tellers and other employees having contact with customers should be prohibited from preparing deposit ticket or other records for the customer. e. All banks should have a sound recruitment policy since internal control begins from point of hiring. SECTION 3167. Bank Protection . All banks are required to observe the rules and regulations on bank protection as follows: SUBSECTION 3167.1 Objectives . These regulations are designed to: a. Insure maximum protection of lives and property against bank robberies; b. Prevent bank robberies by making it difficult for or discouraging would-be robbers from carrying out their nefarious plans; and c. See to it that, if robberies are indeed committed, bank employees and other witnesses can effectively help law-enforcement authorities in the identification, eventual apprehension and successful prosecution of the perpetrators thereof. SUBSECTION 3167.2 Definitions . For purposes of these regulations, the following definitions are adopted unless the context clearly indicates otherwise: a. Banking office means the main office of a bank or a branch and includes an extension office, sub-office, agency or a moneyshop. b. Banking hours means the time during which a banking office is open for the normal transaction of business with the public. c. Teller's station or window means a location in a banking office at which bank customers routinely conduct transactions with the bank including a walk-up or drive-in teller's station or window. SUBSECTION 3167.3 Designation of security officers Within sixty (60) days from April 27, 1977, the board of directors of each bank shall appoint or designate a qualified security officer who shall be under the direct supervision of the president and shall be responsible for the development and administration of a security program and the installation, maintenance and operation of security devices in accordance with the standards prescribed by the Central Bank in separate rules and regulations. The security officer must be at least twenty-five (25) years of age, a college graduate, with at least two (2) years experience in the field of law-enforcement/police matters, of unquestionable integrity and of good moral character. SUBSECTION 3167.4 Security program . The security program of each bank shall be in writing, approved by its board of directors and retained in such form as will readily permit determination of its adequacy and effectiveness and shall contain provisions as may be prescribed by the Central Bank. SUBSECTION 3167.5 Security devices . Within thirty (30) days from the designation of the security officer in the case of a bank with less than ten (10) branches; sixty (60) days in the case of a bank with ten (10) but less than twenty (20) branches; and ninety (90) days in the case of a bank with twenty (20) or more branches, the security officer shall, under the direction of the bank's president, conduct a security survey and submit a report on the needed security devices in each of the bank's banking offices. Within one (1) year from April 27, 1977, banks shall effect the installation, maintenance and operation, as individually appropriate, of the following in each banking office existing as of April 27, 1977: a. A lighting system for illuminating, during the hours of darkness, the area around the vault, if the vault is visible from outside the banking office; b. Tamper resistant locks on exterior doors and windows designed to be opened; c. An alarm system or other appropriate device for promptly notifying the nearest law-enforcement officers of an attempted or perpetrated robbery; and d. Such other devices as the security officer shall determine to be appropriate for discouraging robberies and for assisting in the identification and apprehension of persons who commit such acts: Provided , That the security officer shall consider, among other things, the following: (1) The incidence of crimes against the particular banking office and other business establishments in the area in which the banking office is located; (2) The amount of currency or other valuables exposed to robbery; (3) The distance of the banking office from the nearest law-enforcement officers and the time ordinarily required for such law-enforcement officers to arrive at the banking office; (4) The cost of the security devices; (5) Other existing security measures in effect at the banking office; and (6) The physical characteristics of the banking office structure and its surroundings. LexLib Each bank shall install, maintain and operate security devices which are expected to give a general level of bank protection equivalent, at least, to the standards prescribed by the Central Bank in separate rules and regulations. SUBSECTION 3167.6 Reports . Within fourteen (14) months after April 27, 1977 and as of the last business day of December of every year thereafter, each rural bank shall file with the Department of Rural Banks and Savings and Loan Associations a statement certifying to its compliance with the requirements of Central Bank rules and regulations on bank protection in accordance with the format shown in App. 16. SUBSECTION 3167.7 Corrective action . The Governor of the Central Bank shall designate a representative or representatives who shall be knowledgeable in bank protection to personally determine if the security measures, devices or procedures used or adopted by a bank meet the requirements of these regulations and their suppletory regulations, and if based on the report of the representatives the bank fails to meet the standards herein set forth, the Governor may direct or require the bank to take necessary corrective actions. SECTIONS 3168-3170. (Reserved) . J. MISCELLANEOUS PROVISIONS SECTIONS 3170-3174. (Reserved) . SECTION 3175. General Requirements on Organization and Operation . SUBSECTION 3175.1 Who may organize a rural bank . The following may be organizers (incorporators or subscribers) of a rural bank; a. Natural persons who meet the qualifications prescribed in Subsec. 3175.2a. b. Duly registered cooperatives, i.e. registered or re-registered under Presidential Decree No. 175; and c. Corporations primarily organized to hold equities in rural banks in accordance with Section 4 of the Rural Banks Act. SUBSECTION 3175.2 Qualifications of organizers a. Natural persons . To be an organizer of a rural bank, a natural person must be a Filipino citizen who is of good moral character and integrity, possessed of good credit standing, and with the financial capacity to meet his commitments in the proposed rural bank. b. Cooperatives . In order to be an organizer of a rural bank, a cooperative must be duly established and registered or re-registered with the Bureau of Cooperatives Development of the Department of Local Government and Community Development (DLGCD) in accordance with Presidential Decree No. 175 and Letter of Implementation No. 23. For purposes hereof, the following shall be considered cooperatives: (1) Kilusang bayan (cooperatives as defined in Presidential Decree No. 175, and Letter of Implementation No. 23); (2) All samahang nayon (barrio associations) and other registered pre-cooperative organizations which enjoy the status of provisional cooperatives, as certified to by the Bureau of Cooperatives Development, DLGCD; and (3) Credit cooperatives registering as rural banks under Letter of Implementation No. 23. c. Corporations . In order to be qualified as an organizer of a rural bank, a corporation must be: (a) primarily organized to purchase equities in rural banks located within a particular region as stated in the purpose clause of its articles of incorporation; (b) one hundred per cent (100%) Filipino-owned; and (c) partly owned by the residents of the region where the rural bank is to be established. The term "region" as used herein shall refer to any of the administrative regions defined in Presidential Decree No. 1. SUBSECTION 3175.3 Disqualifications of organizers . Persons who have been convicted of any crime involving moral turpitude, or who are officers or employees of a government agency, instrumentality, department or office charged with the supervision of, or the granting of loans to, rural banks, are disqualified from becoming organizers of rural banks. SUBSECTION 3175.4 Procedural requirements . Before a rural bank can be formally organized, a permit must be obtained from the Monetary Board, through the appropriate department in the Central Bank which shall conduct necessary economic survey and credit investigations. cdta SUBSECTION 3175.5 Application for permit to organize . The following documents, which shall be filed with the Central Bank, shall constitute the formal application for a permit to organize a rural bank: a. Articles of incorporation properly accomplished and duly notarized in five. (5) copies in the prescribed form (App. 4); b. Information sheets accomplished in the prescribed forms under oath and in triplicate by each of the incorporators and subscribers; and c. List in triplicate of proposed principal officers of the rural bank. SUBSECTION 3175.6 Form of organization . Rural banks shall be organized in the form of a stock corporation in accordance with Republic Act No. 720, as amended, and the Corporation Code. SUBSECTION 3175.7 Requisites in formal organization a. Within thirty (30) days from receipt of advice of approval by the Monetary Board of their application for permit to organize, the organizers shall effect the registration of the proposed rural bank's articles of incorporation with the Securities and Exchange Commission. b. Within thirty (30) days from the date of registration of the articles of incorporation, the organizers shall register the rural bank's by-laws. ( MISSING PAGES 45 & 46 ) d. Rural banks shall not accept donations, directly or indirectly, of whatever form and nature covering motor vehicles, office equipment and/or other commodities subject of these guidelines. e. Motor vehicles so acquired shall be registered with the Land Transportation Commission agency located within the province of the rural bank concerned in the name of the rural bank and not in the name of any official or employee thereof or of any other person. f. Only rural banks in sound financial condition may be granted authority to acquire motor vehicles, office equipment and/or other commodities under these guidelines: Provided, however , That no rural banks shall be allowed to invest more than fifteen per cent (15%) of its private paid-in capital and surplus (excluding government investment) in furniture, office and transportation equipment and similar types of assets normally used in its banking operations. g. Only office equipment and/or other commodities inherently connected with bonafide rural banking operations may be acquired under these guidelines. Luxury items, such as television sets and stereo sets and air conditioners for cars are definitely banned. However, air conditioners for bank buildings may be allowed within the purview of these guidelines. h. Only a jeep or a similar type of motor vehicle, light-type automobile or station wagon (per Land Transportation Commission classification) whose engine capacity must not exceed six cylinders with a single carburetor may be allowed, and such vehicle shall be used solely for normal banking operations. Sports cars and other types of luxury cars are definitely banned. i. In general, rural banks may be authorized to acquire and possess only one motor vehicle. A rural bank, however, may be allowed to purchase a second motor vehicle: Provided , That in addition to all the other conditions imposed in these guidelines, the following requirements are strictly complied with: (1) The private paid-in capital by the common stockholder must not be less than P250,000.00; (2) The average yearly net income for the last two years must not be less than P50,000.00; (3) The loan portfolio as of the date of application must not be less than P1,500,000.00 with at least 1,000 outstanding borrowers; (4) The average savings deposit for the last six months preceding the application for a second vehicle must not be less than P500,000.00; and (5) The yearly reserve requirements must be fully complied with. The authority to purchase two motor vehicles under these guidelines shall be deemed to mean a car and a jeep-type motor vehicle suitable for rural banking operations. A rural bank may be allowed to purchase a third motor vehicle: Provided , That in addition to the conditions provided in this subsection, the following requirements are strictly complied with: (1) The average resources for the last twelve (12) immediately preceding the date of the application shall not less than P4,000,000.00; (2) The average yearly income for the last three (3) years immediately preceding the filing of the application shall not be less than P80,000,000; (3) The loan portfolio as of the date of application must not be less than P2,500,000.00 with at least 1,500 outstanding borrowers; and (4) The average savings deposits for the last twelve (12) months preceding the filing of application for authority to acquire a third vehicle must not be less than P700,000.00. Under this authority, rural banks may acquire one (1) car as defined in Item "h" above, and two (2) jeep-type motor vehicles suitable for rural banking operations. j. Each motor vehicle of rural banks the purchase of which is duly approved by the Supervision and Examination Sector Department III, shall be allowed a maximum of 300 liters of fuel (gasoline/diesel) plus other usual expenses necessary for the maintenance thereof, not to exceed 20% of the allowed total cost of fuel every month. All expenses incurred for the aforesaid items shall be supported by receipts/invoices and properly recorded in the books of account of the bank. ( Effective Jan . 1 4, 1985 ) k. Office equipment, motor vehicles and/or other commodities of rural banks shall be disposed of only with the prior written approval of the Department of Rural Banks and Savings and Loan Associations. l. Non-compliance with these guidelines shall mean the withdrawal of financial assistance and/or other privileges enjoyed by the rural bank(s) concerned. SUBSECTION 3175.14 Contributions to expansion of RBAP building . Donations and contributions towards the expansion of the existing Rural Bankers Association of the Philippines building may be charged as rural bank expense, subject to the following conditions: a. The donations and contributions shall not exceed one per cent (1%) of net worth of the rural bank as of June 30, 1976 or P2,000.00 whichever is lower: Provided , That in the case of rural banks which are not exempt from the payment of income tax, contributions shall in no case exceed six per cent (6%) of the taxable net income; and b. The donations and contributions shall not impair the liquidity or profitability of the rural bank concerned: Provided , That no rural bank incurring or continuing to incur losses, or in distress, or whose financial position is precarious may be allowed to charge such contributions as rural bank expense. SUBSECTION 3175.15 Central Bank Policy on change of corporate name of rural banks . For the present the change of corporate name of a rural bank which would delete the name of the municipality where the head office of said rural bank is located is prohibited. ( Effective Feb . 28, 1983 ) SECTIONS 3176-3198. (Reserved) . SECTION 3199. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas PART TWO Deposit and Borrowing Operations A. DEMAND DEPOSITS SECTION 3201. Authority to Accept Create Demand Deposits . Upon prior approval of the Monetary Board, a rural bank may open current/checking accounts. A rural bank desiring to accept or create demand deposits shall submit its application to the Central Bank through the appropriate supervising and examining department. Rural banks with paid-in capital inclusive of government capital of at least P50 million may offer demand deposit facilities to all types of depositors; Provided , That rural banks with paid-in capital of less than P50 million which had been authorized to accept or create demand deposits as of October 7, 1983 shall be allowed to continue servicing such deposits. The total of paid-in capital (including government counterpart capital, if any, and paid-in surplus), earned surplus and undivided profits, net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank and (b) total outstanding unsecured credit accommodation, both direct and indirect, to directors, officers, stockholders, and their related interests (DOSRI), shall not be less than P50 million. Any appraisal surplus or appreciation credit as a result of appreciation or an increase in book value of banks assets shall be excluded. ( Effective Oct . 21, 1983 ). cdti SUBSECTION 3201.1 Prerequisites to accept or create demand deposits . A rural bank applying for authority to accept or create demand deposits shall meet the following: a. The applicant must not have incurred any capital deficiency in any day computed under Section 30 of Republic Act No. 337, as amended, and the pertinent rules and regulations on any day during the six (6) months period immediately preceding the filing of its application, and/or any capital deficiency from the date of grant of authority to the day before checking accounts services are offered or extended to the public; b. It must not have incurred any net deficiency in reserves against deposit liabilities in any week during the six (6) months period immediately prior to the filing of its application and/or any net reserve deficiency from the grant of authority to the day before checking account services are offered or extended to the public; and c. It must have had profitable operations during the last three (3) years immediately preceding the filing of its application. SUBSECTION 3201.2 Permit to accept or create demand deposits . A rural bank may accept demand deposits after a permit therefor shall have been issued by the Central Bank upon the recommendation of the appropriate supervising and examining department. The permit shall be issued only after the bank shall have shown satisfactory proof: a. That its personnel who may handle demand deposits possess the necessary training or experience. b. That its facilities are adequate to service demand deposits; c. That it has adopted appropriate and adequate systems, procedures and internal control system; and d. That it has complied with all other conditions herein imposed. For purposes of the required training and/or experience, attendance at appropriate seminars, on the job training and/or experience of an officer/employee designated to handle the demand deposit operations for at least six (6) months may be considered. SUBSECTION 3201.3 Number of accounts . A depositor may have only one current and one savings deposit account in his own name in one rural bank (in the same capacity) although he may have various deposits in different capacities as guardian, agent or trustee for others. SUBSECTION 3201.4 Bonding of officers and employees . Officers and employees who have direct and immediate responsibility in handling of transactions and/or records pertaining to demand deposits shall be adequately bonded and/or covered by an adequate blanket insurance. SUBSECTION 3201.5 Applicability of other rules and regulations. Other applicable rules and regulations on demand deposits shall apply to demand deposits of rural banks. SECTION 3202. Interest on Demand Deposits . No interest shall be paid-on demand deposits. SECTION 3203. Reserves Against Demand Deposits . The required reserves against demand deposit liabilities of rural banks shall be twenty-two percent (22%) of such deposit liabilities effective April 25, 1984. Note: Amendments to Section 3203 as provided by the following CBP Circulars: 1) Section 5 of CBP Circular 1112 dated August 4, 1986; 2) Section 9 of CBP Circular 1209 dated September 9, 1989; 3) Section 6 of CBP Circular 1261 dated November 9, 1990 SECTION 3204. Temporary Overdrawings ; Drawings Against Uncollected Deposits . The following regulations shall govern temporary overdrawings and drawings against uncollected deposits. SUBSECTION 3204.1 Temporary overdrawings . Temporary overdrawings against current accounts shall not be allowed unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). Any violation shall be subject to a fine of one-tenth (1/10) of one percent (1%) per day of violation, computed on the basis of the amount of overdrawing, without prejudice to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. SUBSECTION 3204.2 Drawings against uncollected deposits . As a matter of policy, drawings against uncollected deposits shall be prohibited except when the drawings are made against uncollected deposits representing manager's/ cashier's treasurer's checks, treasury warrants, postal money orders and duly funded "on us" checks which may be permitted at the discretion of each bank. Overdrafts shall not be allowed on accounts with positive balances and existing overdrafts balances in individual accounts shall not be increased. Existing overdraft balances shall be eliminated within six (6) months from November 15, 1976. SECTION 3205. Checks Without Sufficient Funds . The following regulations shall complement the provisions of Batas Pambansa Blg. 22, an act penalizing the making or drawing and issuance of a check without sufficient funds or credit: a. The drawee bank shall stamp, write or print on a dishonored check or on a paper attached thereto the date the check is presented for payment and the reason for the refusal to pay the same to the holder thereof. b. Where the reason for the dishonor of a check is stamped, written or printed on a paper attached to the check, the drawee bank shall indicate the pertinent details, such as the names of the drawer, the payee and the drawee bank, the date and amount of the check, the check number and the date of dishonor. c. The drawee bank shall use only the remark or notation "Drawn Against Insufficient Funds", "No Sufficient Funds", or "Insufficient Funds" stamped, written, or printed on, or attached to the check dishonored or returned by reason of insufficiency of funds or credit. d. Notwithstanding receipt of an order to stop payment, the, drawee bank shall likewise stamp, write, or print on, or attach to the check any of the remarks or notations mentioned in Item "c" above, indicating that there were no sufficient funds in/or credit with such bank for the payment in full of such check, if such be the fact. The bank shall also indicate receipt of a stop payment order. e. For local exchanges, a check dishonored by reason of insufficiency of funds or credit shall be returned by the drawee bank to the negotiating bank not later than the next regular clearing. For out-of-town exchanges, a check so dishonored shall be returned by the drawee bank to the negotiating bank within the period specified in the Central Bank Memorandum announcing the opening of clearing facilities in each of the authorized regional clearing centers. A check dishonored by reason of insufficiency of funds or credit which was not coursed through the Central Bank clearing system shall be returned by the drawee bank to the holder or the negotiating bank, as the case may be, not later than the business day following the date the check is presented for payment with the drawee bank. The negotiating bank shall, in turn, return a check dishonored by reason of insufficiency of funds or credit to the holder not later than the business day following its receipt of the dishonored check from the drawee bank. f. The foregoing shall not be deemed or construed to modify or amend the provisions of the Negotiable Instruments Law. For purposes of compliance with Subsec. 3205.b on the information which shall be stamped, written or printed by drawee banks on the attachment to dishonored checks, the details on the check number, the date of the dishonor of the check and the reason for such dishonor shall be considered sufficient compliance with the provisions of said subsection. SECTION 3206. Current Accounts of Bank Officers and Employees . The following regulations shall govern the maintenance of demand deposits or current accounts by officers and employees of rural banks with the banking institution where they are employed as such: The following officers and employees of rural banks are prohibited from maintaining demand deposits or current accounts with the banking office, such as the head office or branch, in which they are assigned: a. Officers and employees of the cash department; LibLex b. Officers of banking offices other than head offices, such as branches, extension a offices and money shops; and c. Other officers and employees who have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts. The prohibition prescribed in the preceding paragraph shall include the spouses and minor children under the parental authority of the officers and employees covered by the prohibition, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships, or partnership or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation. Officers and employees of rural banks who do not have direct and immediate responsibility in the handling of transactions and/or records pertaining to demand deposits or current accounts, including their spouses and minor children under their parental authority, and the business interests of such officers and employees, their spouses and minor children under their parental authority, in single proprietorships or partnerships or corporations in which such officers and employees, individually or as a group, own or control at least a majority of the capital of the partnership or the outstanding subscribed capital stock (voting and non-voting) of the corporation, may maintain such deposits or accounts in any office of the banking institution where they are employed as such, including the offices in which they are assigned; officers and employees who are so responsible and those mentioned in the second paragraph hereof may maintain such deposits or accounts only in offices in which the officers and employees are not assigned. SECTIONS 3207-3211. (Reserved) . B. SAVINGS DEPOSITS SECTION 3212. Authority to Accept Savings Deposits . A rural bank, upon issuance of a certificate of authority, may accept savings deposits pursuant to the provisions of Republic Act No. 720, as amended, and of pertinent rules and regulations. SECTION 3213. Interest on Savings Deposits . Savings deposits shall not be subject to any interest rate ceiling. SECTION 3214. Reserves Against Savings Deposits . The required reserves against savings deposit liabilities shall be Fourteen percent (14%) of such deposit liabilities effective April 25, 1984. SECTION 3215. Servicing Deposits Outside Bank Premises . As a general policy, all banks may be authorized to solicit and accept deposits outside their bank premises subject to the following conditions: a. The proposed area where applicant bank intends to solicit should be clearly defined; b. Solicitation of deposits should be confined within a locality where there are no other banks in operation, except applicant bank, or where it can be clearly established that the deposit potentials of the said locality are still untapped; c. Applicant bank shall institute and maintain the following minimum safeguards: (1) All deposit solicitors shall be initially bonded for at least P1,000.00, subject to the increase thereof to approximate their daily collections. (2) Deposit solicitors shall be provided with proper identification cards with photograph and signature of each respective solicitor certified to by the appropriate officer of the bank. Said identification cards shall be worn by each solicitor at all times at the upper left breast of his outer garment when soliciting deposits; (3) Adequate insurance coverage for funds in transit (representing deposits collected outside banking premises) should be secured by applicant bank from insurance companies not included in the list of companies blacklisted by the Insurance Commissioner; (4) Deposit slips, different from that issued by tellers in the counter, shall be in booklet form, prenumbered, in triplicate copies and in three (3) colors the original to be issued to the depositor, the second copy to be used for posting reference and the third copy to be retained in the booklet; LexLib (5) All collections shall be turned over to the cashier at the end of each day, accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: date of the report; names and addresses of the depositors; deposit slip numbers; amounts of deposit; savings account and passbook numbers; name and signature of solicitor rendering the report; (6) Depositors shall always be required to accomplish "Signature Cards" when opening an account, which cards shall be used always as reference in checking the genuineness/authenticity of signatures affixed on withdrawal slips or authorizations for withdrawals; (7) Deposits/withdrawals shall be recorded by the bookkeeper or any ledger clerk, except any bank solicitor, in the depositors' ledger cards and passbooks on the same day that such deposits/withdrawals are accepted/approved by the bank. Passbooks shall be returned to the depositors not later than the following business day; (8) At the end of each month, depositors shall be advised in writing of the balances of their deposits with the bank, the advice slips of which shall never be hand carried by the solicitors themselves; (9) Places of assignments of bank solicitors shall be rotated, at least quarterly. d. The Department of Rural Banks and Savings and Loan Associations shall certify that the financial condition of the bank applying for authority to solicit and collect savings deposits outside its bank premises is sound and that the operations and the quality of management thereof could reasonably assure the safety of funds which may be entrusted to its deposit collectors and/or solicitors. SUBSECTION 3215.1 Solicitation of deposits under the TIPID movement . Banks participating in the TIPID movement shall be authorized to solicit deposits of students within the premises of schools assigned to these banks through the appointment of savings deposit solicitors who shall be properly bonded. The solicitation of such deposits shall be in accordance with App. 6 and the following guidelines. a. Participation of banks in the movement All banks are eligible to participate in the TIPID movement. However, a participating banks shall have to notify the Central Bank Committee on Savings. This notification may be in the form of a letter of manifestation (sample copy in App. 6-a) to be submitted by the bank together with the advice of the school savings club that it has been chosen the depository bank. A bank which is not the official depository bank of any school savings club but which services deposits of school children may also participate in the movement by notifying the Central Bank Committee on Savings. When promoting the TIPID movement, participating banks may distribute gifts or giveaways beyond the 30-day limit stipulated under Subsec. 3261.2 and may be allowed to do so even on occasions other than (a) the inauguration of transfer of office; (b) a bank anniversary celebration; and (c) the Christmas season. However, all other provisions of Subsec. 3261.2 governing the distribution of gifts or giveaways shall be complied with. Banks are urged to encourage and support school projects which will help generate income for students. Banks officers are also encouraged to appear in symposia and other less formal gatherings inside the school premises for the purpose of motivating school children to save. (1) Depository bank (a) Any bank may be the depository of the accumulated savings of the members of the school savings club. (b) In areas where there exists only one bank, that bank shall, as a matter of course, be the depository bank. (c) In towns/cities where there is more than one bank, the depository bank shall be the one chosen by the school savings club. (2) Solicitation The depository bank is authorized to solicit deposits of students within the premises of the school. Whenever practicable or within its means, therefore, the depository bank should send a solicitor to the school to service deposits and withdrawals of the students. The following shall be observed by the solicitor when servicing deposits and withdrawals: (a) The authorized solicitor who shall be properly bonded, shall present a letter of introduction addressed to the head of the school together with the bank's prescribed identification card which the solicitor shall wear at all times during the solicitation. (b) Depositors shall be required to accomplish "Signature Cards" when opening an account. (c) Pre-numbered deposit slips, in duplicate, shall be used. The duplicate shall be given to the depositor and the original retained to serve as posting medium. (d) With proper safeguards, withdrawals may also be effected through the bank solicitor. (e) At the close of every solicitation day, a Report of Deposit Collection * shall be accomplished in triplicate (original to bank, and a copy each to solicitor and school) by the solicitor. Inclusive number of used deposit slips, accomplished withdrawal and collection slips as shown in the report shall be turned over to and acknowledged by the cashier. (f) Passbooks shall be returned to the depositors not later than the following soliciting day. A copy of the Report of Deposit Collection of the last soliciting day shall be submitted to the head of the school. (g) The bank shall arrange with the school the dates, place and time of solicitation and shall post notices thereof in a conspicuous place in the school premises. b. Segregation of TIPID accounts . To effectively monitor the growth in savings and time deposits under the TIPID movement the school savings project of the National Commission on Savings banks are hereby required to identify and segregate TIPID accounts from other accounts. TIPID accounts shall refer to savings and time deposit accounts of elementary and high school students. Accounts of school children held in trust or opened by parents or guardians, however, shall be treated as regular deposit accounts. To facilitate identification of TIPID accounts, banks shall require new depositors to indicate on the signature card, among other information, the date of birth; whether or not a student; and grade level if a student. To avoid including in the TIPID accounts the savings and time deposits of high school graduates, age eighteen (18) years shall be presumed the age at which students finish high school. Savings or time deposit accounts, therefore, of students who are 18 years old and above shall not be considered as TIPID accounts, but treated as regular deposit accounts. In the case of old accounts, banks shall exert effort to identify and segregate TIPID accounts from regular deposit accounts until all TIPID accounts shall have been brought up-to-date. Rural banks shall submit their report on TIPID accounts to the DRBSLA in the appropriate report form (CBP-7-19-04A). In the report, banks should ensure that the totals of the number and amount tally (a) under Savings Deposits as to size and source and (b) under Time Certificates of Deposits as to size, source and maturity. Banks are no longer required to submit copies of the TIPID report to the Secretariat, Central Bank Committee on Savings. Rules governing the solicitation of deposits under the TIPID movement shall be applicable only to banks in the entire Luzon area (including the provinces of Batanes, Marinduque, Occidental Mindoro, Oriental Mindoro, Romblon, Palawan, Catanduanes and Masbate) Central, Eastern and Western Visayas Regions servicing the movement. Banks authorized to participate in the movement are exempted, for the duration of the pilot project, from securing prior Central Bank approval to conduct raffles and give away gifts as required under Subsecs. 3261.1 and 3261.2: Provided , The other provisions of these same subsections are first complied with. With regard to the adoption of plans, schemes, or campaigns designed to promote the TIPID movement and attract deposits in connection therewith, authorized banks are exempted from the provisions of Subsec. 3261.2 Provided, however , That all the other requirements of Sec. 3261 shall be complied with. SUBSECTION 3215.2 Solicitation of deposits under the barangay savings movement . Banks in the Provinces of Batangas, Negros Occidental and other provinces where the barangay savings movement may be implemented and which may wish to participate in the pilot barangay savings program may be authorized, on a case-to-case basis, to solicit deposits in designated places outside their premises on certain specific days, subject to the following rules and regulations. a. The solicitor shall be a regular employee of the depository bank; b. Solicitation will be allowed only in those areas or localities where the distance between the bank and barangay makes it difficult or otherwise impractical for a depositor to deal directly with the bank; c. Banks shall make prior arrangements with barangay officials as to the dates, place, and time of solicitation and shall post notice thereof conspicuously in the agreed place of solicitation; d. The solicitor shall be initially bonded for at least P1,000.00, subject to increase to approximate the average daily collections; e. The solicitor shall be provided with an identification card with his photograph and signature, certified to by an officer of the bank. This identification card shall be worn by the solicitor at all times at the upper left breast of his outer garment when soliciting deposits; f. Adequate insurance coverage for funds in transit representing deposits collected outside banking premises shall be secured by the bank concerned from insurance companies not included in the list of companies blacklisted by the insurance Commissioner; g. Deposit slips, different from that issued by counter tellers, shall be pre-numbered in booklet form, in triplicate and in three colors the original to be used for posting reference, the second copy to be issued to the depositor, and the third copy to be retained in the booklet; h. All collections shall be turned over to the Cashier at the end of each day accompanied by a "Collection Summary Report" to be accomplished in duplicate which shall contain the following minimum information: date of the report; names and addresses of the depositors; deposit slip numbers; amounts of deposits; savings account numbers; and the name and signature of the solicitor rendering the report; i. The depositor shall be required to accomplish a "Signature Card" when opening an account. The card shall be used as reference in checking the genuineness or authenticity of the signature affixed on withdrawal slips or authorization for withdrawals; j. With proper safeguards, withdrawals may also be effected through the bank solicitor; k. Deposits and withdrawals shall be recorded by the bookkeeper in the depositor's ledger cards and passbooks on the same day that such deposits or withdrawals are accepted or approved by the bank. Passbooks shall be returned to the depositors not later than the next scheduled solicitation day; and l. No bank shall avail itself of this solicitation facility unless it has been previously authorized by the Central Bank. For purposes of this subsection, banks concerned may submit their request for authority to solicit deposits to the pertinent supervising department in the Central Bank. SECTION 3216. Deposits and Withdrawals . The following shall govern deposits and withdrawals in savings accounts. SUBSECTION 3216.1 Withdrawals of Samahang Nayon funds . All rural banks are required to allow Samahang Nayons to withdraw their respective Barrio Savings Fund and Barrio Guarantee Fund in accordance with the following guidelines. a. Barrio Savings Fund (BSF) (1) All deposits made prior to December 27, 1976, in the BSF may be withdrawn in full, without any restrictions whatsoever, upon approval of the Samahang Nayon (SN) board of directors and the Ministry of Agriculture. The proceeds of such withdrawal may be used for the purpose of investing in the equity of the cooperative rural bank in the province where the depository rural bank is located or with the approval of the Ministry of Agriculture, for projects of the Kilusang Kabuhayan . (2) Deposits made in the BSF beginning December 27, 1976, may be withdrawn by the SN, upon approval, as provided in Item (1) above, the following manner: (a) If a member of the SN does not have any outstanding loans with the depository rural bank, full and unrestricted withdrawal shall be allowed. (b) In case such member has an existing loan obligation with the depository rural bank, withdrawal shall be authorized only up to the extent of fifty per cent (50%) of the SN deposit for the account of such member. In both instances, the withdrawal shall be for the purposes enumerated in Item (4), below. (3) Where withdrawal may endanger the liquidity position of the depository rural bank, the bank concerned shall borrow from the Central Bank of the Philippines under the latter's emergency credit operations such amounts equal to sums being withdrawn by SN from the BSF. The emergency loan shall be granted only after the Monetary Board has ascertained that the rural bank is not insolvent and has clearly realizable assets to secure the emergency advances. (4) The proceeds of withdrawal of deposits made beginning December 27, 1976, from the BSF shall be directly remitted to the cooperative rural banks in the area for disposition, as follows: (a) Twenty-five per cent (25%) to be invested in its equity or with the approval of the Ministry of Agriculture, in any Kilusang Kabuhayan project. (b) Twenty-five per cent (25%) to be invested in the Area Marketing Cooperative (AMC), or in the absence of an organized AMC and with approval of the Ministry of Agriculture, in any Kilusang Kabuhayan project. (c) Fifty per cent (50%) to be deposited with said cooperative rural bank to guarantee the loans obtained by SN members under any of the supervised credit programs, and the deposit can not be withdrawn except for payment of such loans. Provided , That immediately upon the effectivity of these revised guidelines, BSF deposits with a cooperative rural bank as referred to under Item (1) hereof shall be invested in its equity; Provided, further , That those deposits mentioned in Item (2) hereof shall be used only for the purposes under this item. In the provinces where no cooperative rural bank has yet been established, such proceeds shall be deposited, in the name of the SN concerned, with the nearest branch of the Philippine National Bank therein and withdrawal therefrom can be made only for the purposes as provided under Item (4) hereof. b. Barrio Guarantee Fund(BGF) . Deposits of the BGF shall be treated like other deposits and therefore may be withdrawn in full with no restrictions, upon approval of the SN board of directors and the authorized representative of the Ministry of Agriculture. SECTION 3217. Dormant Savings Accounts . Banks may impose service or maintenance fees on dormant or inactive savings accounts. However, the rate of service charges or maintenance fees, the prescribed period of dormancy and the minimum balance of deposits before such charges or fees may be imposed, shall be properly disclosed among the terms set forth in the passbook of every depositor. ( Effective June 27, 1985 ) SECTION 3218. Special Savings Deposits of Farmer-Borrowers . Authority shall be automatically granted to any accredited banking institution which may participate in the supervised credit program to accept special savings deposits from farmer-borrower, subject to the following conditions: cdpr a. Only the balance of loans granted under the supervised credit program shall be deposited in the special savings deposits of farmer-borrowers, as an exception to Subsec, 3301.6c. b. Withdrawals against such special savings deposit accounts shall be allowed only (1) in amounts specified in the approved farm plan and budget, and (2) upon certification by the technician either of the Central Bank and/or banking institution that previous releases were used in accordance with the farm plan. c. The special savings deposit shall earn interest at the same rate that the rural bank charges the borrower for such loans. d. The special savings deposit shall be exempt from the legal reserve requirement, as an exception to the existing policies of the Monetary Board on the matter. Rural banks participating in the short-term supervised credit program which do not utilize special time deposit to initially fund their short term supervised loans are not authorized to set up special savings deposit account. Any rural bank which violates this regulation shall be automatically denied financial assistance from the Central Bank. 5 SUBSECTION 3218.1 Barrio savings fund a. The barrio savings fund is constituted out of the three per cent (3%) deduction from every production loan granted by a rural a bank to a samahang nayon member under any of the supervised credit programs as his contribution to said fund, pursuant to Letter of implementation No. 23, as amended by Letter of Implementation No. 53, implementing Presidential Decree No. 175. This shall be placed in a deposit account in the name of the samahang nayon for the account of the member thereof. This deposit shall be subject to the guidelines in Apps. 8 and 9. b. Effective April 2, 1982, the collection of the compulsory deduction from farmer loans under the special financing program is suspended. Deductions may be made, however, on a voluntary basis and when authorized in writing by the samahang nayon member . All outstanding deposits to the barrio savings fund as of April 2, 1982 shall continue to be governed by the provisions of Subsec. 3216.1 and other rules thereon. SUBSECTION 3218.2 Barrio guarantee fund . Contributions of samahang nayon members to the barrio guarantee fund provided for in Regulation No. 9 of Letter of implementation No. 23, as amended by Letter of Implementation No. 53, implementing Presidential Decree No. 175, shall be accepted by rural banks in the form of time deposits in the name of the samahang nayon with its president and its treasurer as authorized signatories in accordance with the guidelines set forth under Apps. 8 and 9. SECTION 3219. Rental Deposits of Lessees . The following guidelines shall govern the opening and handling by banking institutions of deposits made by lessees pursuant to Section 5(b) of Batas Pambansa Bldg. 25, otherwise known as the Rental Control Law. a. The deposit made by the lessee shall only be accepted by the bank under a special savings account in the name of the lessor. b. The bank shall require the lessee to submit a copy of the written notice sent to the lessor for the deposit made, stating, among others, the date and amount of the deposit and the name and address of the lessor. c. The bank, at its option, may require the lessee to submit any supporting document, such as the lease contract or official receipt of previous rentals paid, which will show the specimen signatures of the lessor, or other papers to identify the lessor; d. The bank shall segregate from its regular savings deposit accounts, and maintain a separate subsidiary control ledger for, deposits made under Section 5(b) of Batas Pambansa Bldg. 25; e. Any withdrawal against these special savings deposit accounts may only be allowed in favor of the lessee concerned before the amount deposited under consignation has been accepted by the lessor, or when authorized by the lessor; f. The expenses which may be incurred by the bank with respect to such rental deposits shall be charged against the lessor; g. All the minimum internal control standards applicable to savings deposit accounts prescribed in Sec. 3166 shall be complied with; and h. The acceptance of such rental deposits, however, shall be optional or discretionary only upon the bank concerned. SECTIONS 3220-3222. (Reserved) . C. NOW ACCOUNTS SECTION 3223. Authority to Accept NOW Accounts . Upon prior approval of the Monetary Board, a rural bank may accept NOW accounts. NOW accounts are saving accounts from which funds may be withdrawn by means of "Negotiable Orders of Withdrawal." The privilege to maintain NOW accounts shall be limited to natural persons. A permit therefor shall be issued upon recommendation of the appropriate supervising and examining department after the applicant bank shall have presented satisfactory proof of compliance with the requirements set forth in Subsec. 3223.1. SUBSECTION 3223.1 Prerequisites to accept NOW accounts . A rural bank applying for authority to accept NOW accounts shall meet the following requirements: a. Its paid-in capital, inclusive of government counterpart capital, shall be at least P5 million; b. It must not have incurred on any day during the six (6) months period immediately preceding the filing of the application, any capital deficiency computed pursuant to Section 30 of Republic Act No. 337, as amended, and its implementing rules and regulations; c. It must not have incurred any net deficiency in its reserves against deposit liabilities in any week during the six (6) months period immediately preceding the filing of the application; and d. It must have had profitable operations during the last three (3) calendar years prior to the filing of the application. SECTION 3224. Interest of NOW Accounts . NOW accounts shall not be subject to any interest rate ceiling. SECTION 3225. Reserves Against NOW Accounts . The required reserves against NOW accounts shall be eighteen per cent (18%) of such deposit liabilities effective April 25, 1984. (As amended by Section 7 of CBP Circular 1261 dated November 9, 1990) SECTION 3226. Rules on Servicing NOW Accounts . The following rules shall be observed in servicing NOW accounts: a. Prior to, or simultaneously with, the opening of a NOW account, the bank shall inform the depositor of its terms and conditions; b. The bank shall be responsible for the proper identification of its depositors; it shall require, among other things, two (2) specimen signatures and other pertinent information; c. Deposits shall be covered by deposit slips in duplicate duly validated and initialed by the teller receiving the deposit. A copy of the deposit slip shall be furnished the depositor; d. NOW accounts shall be kept and maintained separate from the regular savings deposits; e. Blank negotiable order of withdrawal forms shall be pre-numbered and shall be controlled as in the case of unissued blank checks: f. A bank statement shall be sent to each depositor at the end of each month for confirmation of balances; g. Banks must use the forms prescribed by present rules for NOW accounts. Nothing in these rules shall be construed as precluding a rural bank from applying for authority to accept both demand deposits and NOW accounts or, with prior approval of the Monetary Board, from offering both services simultaneously. SECTIONS 3227-3229. (Reserved) . D. TIME DEPOSITS SECTION 3230. Authority to Accept Time Deposits . A rural bank, upon issuance of a certificate of authority to operate, may accept time deposits pursuant to the provisions of Republic Act No. 720, as amended, and of pertinent rules and regulations. SECTION 3231. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SECTION 3232. Reserves Against Time Deposits . The required reserves against time deposit liabilities with original maturities of 730 days or less shall be fourteen percent (14%) of such deposit, liabilities and the required reserves against time deposits with original maturities of more than 730 days shall be six percent (6%). ( Effective April 25, 1984 ) Note: Amendments to Section 3232 as provided by the following: 1) Section 5 of CBP Circular 1122 dated November 28, 1986; 2) Section 5 of CBP Circular 1207 dated August 4, 1989; 3) Section 10 of CBP Circular 1209 dated September 1, 1989; 4) Section 8 of CBP Circular 1261 dated November 11, 1990 SECTION 3233. Minimum Size and Term of Time Deposits . Banks shall not impose a minimum amount of time deposit greater than P1,000.00 and no time deposits shall be accepted for a term of less than ninety (90) days. SECTION 3234. Special Time Deposits . The funds for the special financing program shall be deposited with the participating rural bank in the form of special time deposits to be utilized for extending agricultural production. Such special time deposits shall be placed in rural banks for a period of three (3) years or as may be determined by the Monetary Board, subject to recall at any time in case the rural bank violates any of the terms and conditions in the grant of said deposit or any provision of law or the rules, regulations, and instructions promulgated by the Monetary Board. Rural banks shall pay interest on special time deposits at the rate prescribed by the Monetary Board. Every rural bank shall at all times keep special time deposits under separate deposit account. a. Application for special time deposits Rural banks desiring to participate in the special financing program shall file an application for special time deposits with the Central Bank in the form prescribed for the purpose, together with the following supporting documents and papers. (1) One set of blank special time deposit certificates duly signed by the manager and other authorized officers of the rural bank; (2) Certification of the rural bank that it has availed itself of the services of supervised credit technicians hired by it or of government production technicians assigned to it, who are competent and qualified to supervise the project to be financed; (3) Statement of utilization of outstanding special time deposit, if any; (4) Financial statements of the rural bank; (5) A certification of the rural bank technician or government technician assigned to the rural bank stating that the farm plan and budget of the borrowers has been duly accomplished. In case of livestock, poultry, fishery, and other similar projects, a list of borrowers to be financed, and the number of stock and the loan amount applied for; and (6) Other documents and papers as may be required by the Central Bank. All loan applications must be endorsed by the Central Bank agricultural credit supervisor or examiner assigned in the area. b. Utilization of special time deposits The rural bank shall utilize the special time deposits only for the purpose stated in the application, except when otherwise authorized by the Central Bank. Any unused portion of the special time deposit shall be returned by the rural bank to the Central Bank within thirty (30) days from receipt of such deposit. A rural bank which fails to return the unused portion of the special time deposit within the period mentioned above shall pay interest on the amount unreturned at the rate of fourteen per cent (14%) per annum until said amount is remitted in full to the Central Bank. Similarly, any unauthorized use of the special time deposit by any rural bank shall subject such bank to interest on the amount involved at the rate of fourteen per cent (14%) per annum for the duration of such unauthorized use. c. Rediscounting of special time deposits Papers covering loans granted out of the special time deposits under the special financing program shall be rediscountable with the Central Bank, subject to the rules and regulations issued by the Central Bank governing the rediscounting of rural bank papers. d. Penalty on past due special time deposits . A penalty of five per cent (5%) per annum shall be imposed on all outstanding past due special time deposits of rural banks unremitted to the Central Bank. In the event of national calamities, however, the Central Bank may suspend the imposition of the five per cent (5%) penalty on past due special time deposits provided that: (1) The special time deposits affected were used by the rural bank to finance loans guaranteed on those in the process of restructuring; and (2) The rural bank files a notice in writing with the Department of Rural Banks and Savings and Loan Associations within ten (10) days after the occurrence of the calamity and the extent of damages on crops financed, etc. The exemption from the penalty shall be limited to the amount of loans, restructured by the rural bank as recommended by the Central Bank's agricultural credit supervisor and approved by the Department of Rural Banks and Savings and Loan Associations. e. Checks in payment of special time deposits or rediscounting obligations . Checks representing remittances of rural banks for the payment of (1) Special Time Deposits (STDs) or (2) rediscounting obligations with the Department of Loans and Credit, Central Bank, shall be clearly marked as follows: (1) For time deposits The phrase "FOR PAYMENT OF STD No. ______ dated ________" shall be typewritten at the left-hand corner of the check; and (2) For rediscounting obligations with DLC The phrase "FOR PAYMENT OF REDISCOUNTING OBLIGATIONS DLC" shall also be typewritten as stated above. All remittances to pay STDs shall be addressed directly to the Director, Department of Rural Banks and Savings and Loan Associations, while those made to pay rediscounting obligations shall be addressed to the Director, Department of Loans and Credit, Central Bank of the Philippines, Manila. SECTION 3235. Negotiable Certificates of Time Deposit . Rural banks shall not issue negotiable certificates of time deposit except upon prior approval by the Central Bank. The issuance of negotiable certificates of time deposit shall be governed by the following rules: ( Effective July 20, 1984 ) SUBSECTION 3235.1 Minimum features a. Form, denomination Negotiable certificates of time deposits may be issued in bearer or other form denoting negotiability and shall have a standard format to be prescribed by the Central Bank which shall be prenumbered serially, predenominated and printed on security paper by the Security Printing Plant of the Central Bank. The minimum denomination shall be at the discretion of the issuing bank. No certificate payable to bearer shall contain words prohibiting its negotiation. ( Effective Jan . 1, 1984 ). b. Term The minimum maturity of the certificates shall be 731 days. c. Manner of issuance The certificates shall be issued only upon receipt of funds equivalent to their face value. d. Manner of Printing . Negotiable Certificates of Deposits shall be printed on security paper by the Security Printing Plant (SPP) of the Central Bank. ( Effective Nov . 9, 1983 ) Orders for the printing of the desired forms shall not exceed a total value equivalent to 20% of the issuing bank's capital accounts (based on the quarter immediately preceding the request for printing) at any one time. Additional orders for printing which shall result in an excess over the prescribed benchmark shall require prior Central Bank approval. ( Effective Nov . 9, 1983 ) SUBSECTION 3235.2 Insurance coverage . The negotiable certificates of time deposit shall be insured with the Philippine Deposit Insurance Corporation (PDIC), subject to applicable rules and regulations, among others, on maximum insurance coverage, and on the requirement that banks issuing bearer certificates shall have imprinted on the instrument the following: For purposes of deposit insurance by the Philippine Deposit Insurance Corporation, the holder shall have his name registered in the books of the issuing bank. ( Effective April 18, 1983 ) SUBSECTION 3235.3 Pre-qualification and other requirements Rural banks applying for authority to issue negotiable certificates of time deposits shall comply with the following requirements: 1. Minimum paid-in capital of P150 million. For this purpose, capital shall refer to the total of the unimpaired paid-in capital (including paid-in surplus), earned surplus and undivided profits net of (a) such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, and (b) total outstanding unsecured credit accommodations both direct and indirect, to directors, officers, stockholders and their related interests (DOSRI); 2. Net profitable operations during the last three (3) years immediately preceding the date of issuance of negotiable certificates of time deposits; and 3. General compliance with banking laws, Central Bank rules and regulations, and policies and instructions of the Monetary Board. Negotiable certificates of time deposit shall be subject to applicable rules and regulations governing regular time deposits, including the twenty per cent (20%) final withholding tax and the rules on pretermination. ( Effective July 20, 1984 ) SUBSECTION 3235.4 Thrift banks and rural banks with outstanding negotiable certificates of time deposit shall immediately desist from issuing new negotiable certificates of time deposit . All outstanding negotiable certificates of time deposit of thrift banks and rural banks shall be valid and negotiable up to their maturity dates and shall not be subject to renewal. ( Effective July 20, 1984 ) SECTION 3236. Reserve requirements . A five per cent (5%) reserve shall be maintained against all issues of negotiable certificates of time deposit including any outstanding amount as of April 18, 1983. ( Effective April 18, 1983 ). SECTIONS 3237-3238. (Reserved) . E. GOVERNMENT DEPOSITS/FUNDS SECTION 3239. Authority to Service Government Deposits/Funds . Except as may be authorized by existing statutes, no private bank shall, without prior approval of the Monetary Board, accept as depository, any fund or money from the Government, its branches, agencies, subdivisions, instrumentalities, including government-owned or controlled corporations, hereinafter referred to as 'Government and government entities'; nor shall a private bank or non-bank financial intermediary, whether or not performing quasi-banking functions, borrow any fund or money from the Government and government entities, through the issuance or sale, of its acceptances, notes or other evidences of debt. ( Effective Sept . 12, 1983 ). SUBSECTION 3239.1 Banks which may accept government funds . The Philippine National Bank (PNB), the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP), the Philippine Amanah Bank (PAB) and any private bank duly authorized by the Monetary Board as required under Sec. 3239 in cities or municipalities where there are no existing branches, agencies or extension offices of the above-named government-owned banks, may accept demand, savings or time deposits from the Government and government entities: Provided, however . That only minimum working balances to meet monthly payroll requirement, project outlays or office operational needs of the Government or government entity may be held by authorized private banks: Provided, further , That for purposes of this section, the Philippine Veterans Bank (PVB), a private bank which by its charter is a depository of government funds, need not secure prior approval of the Monetary Board to accept deposits of, and borrowings from the Government and government entities. Banks may not receive or hold as trustee, agent, administrator, financial manager, or other similar capacity any fund or money from the Government and government entities ( Effective Sept. 12, 1983 ) SUBSECTION 3239.2 Definition of terms . For purposes of this Subtitle, the following terms shall have the meaning indicated unless the context clearly indicates otherwise: a. The term government-owned or controlled corporations shall refer to government-owned or controlled corporations which are created by special laws. It shall exclude government financial institutions such as the PNB, DBP, LBP and PAB, corporations which are organized as subsidiaries of government-owned or controlled corporations under the provisions of Act 1459, as amended or the New Corporation Code, and private corporations which are taken over by government-owned or controlled corporations. b. The term fund or money from the Government and government entities includes public moneys of every sort, whether pertaining to the National Government, province, city, municipality or other branch or agency of the government, including government-owned or controlled corporations as above defined, and shall comprise "revenue funds", "trust funds" and "depository funds" as these terms are defined under Section 658 of the Revised Administrative Code, to wit: Revenue Funds comprise all government funds derived from the income of the Government in any of its branches and available for appropriation of expenditure according to law. Trust funds are government funds which have officially come into the possession of the Government or of a government officer as trustee; agent or administrator, or which have been received as a guaranty for the fulfillment of some obligations. xxx xxx xxx Depository funds are government funds over which the officer accountable therefor may retain control for the lawful purposes for which the same came into his possession being subject to his official check for such purposes. The term embraces moneys in the National Treasury in its capacity as a depository of all government moneys in depository banks. SUBSECTION 3239.3 Liquidity floor . Unless otherwise provided by the Monetary Board, deposits and/or borrowings from the Government and government entities by authorized banks, including those which are government-owned or controlled, shall not be subject to a liquidity floor: Provided , that if government deposits and/or borrowings held by a bank, net of and/or borrowings of the government agency that controls the bank's management, exceed fifty per cent (50%) of the bank's total deposits and/or borrowings, the amount in excess thereof shall be subject to a thirty per cent (30%) liquidity floor. ( Effective December 22, 1982 ). Note: Amendments to 3239.3 as provided by the following CBP/BSP Circulars: 1) CBP Circular 1386 dated March 3, 1993; 2) BSP Circular 100 dated December 28, 1995) SUBSECTION 3239.4 Exempt transactions . Compliance with the provisions of Sec. 3239 and Subsec. 3239.3 is not required with respect to the following deposits and/or borrowings: a. Deposits of, and/or borrowings from PNB, DBP, LBP and PAB; (As amended by Section 5 of CBP Circular 1190 dated November 10, 1988) b. Deposits of the National Grains Authority (NGA) with banks incident to the credit lines extended by them to NGA in connection with the financing of its rice program; c. Marginal deposits on importations; d. Proceeds of DBP bonds sold by DBP-accredited sales and service agencies for the bond marketing operations of DBP; e. Funds received by private development banks as collecting agents of DBP pursuant to Monetary Board Resolution No. 1223 dated June 30, 1972; f. Collections representing premium contributions to the Social Security System: Provided , That funds thus collected shall be remitted to the System within thirty (30) days from receipt thereof: Provided, further , That such premium contributions shall not earn interest while in the custody of the banks nor shall any service charge be collected thereon; g. National internal revenue taxes, customs and tariff duties and export premium duties collected by authorized agent banks; * b. Any bank with deficiency in the required liquidity floor against deposits of, and/or borrowings from, the Government and government entities or with excess holdings of such deposits shall (1) be denied the credit facilities of the Central Bank; and (2) if the deficiency lasts for four (4) consecutive weeks, the bank shall be prohibited from declaring cash dividends and making new loans and investments, except investments in government securities. The prohibition shall be lifted by the Governor or the Senior Deputy Governor upon certification by the appropriate supervising and examining department that the bank has had no deficiency in its liquidity floor and no excess holdings of government deposits for at least four (4) consecutive weeks; c. In the case of non-bank financial intermediaries, the authority to engage in quasi-banking functions, by the entity concerned may be suspended for such period of time as may be determined by the Monetary Board, which shall in no case be less than thirty (30) calendar days from receipt of the advice to this effect; and d. The withdrawal of previously granted authority to accept government funds. The foregoing sanctions shall be without prejudice to the imposition of other administrative sanctions prescribed under Sections 34, 34-A and 34-B of Republic Act No. 265, as amended. SECTIONS 3240-3241. (Reserved) . F. INTEREST ON DEPOSITS SECTION 3242. Interest on Demand Deposits . No interest shall be paid on demand deposits. SECTION 3243. Interest on Savings Deposits and NOW Accounts . Savings deposits, including NOW accounts, shall not be subject to any interest rate ceiling. SUBSECTION 3243.1 Computation of interest . In the computation of interest on savings deposits where interests are computed daily/monthly/quarterly, the basis shall be 360 days which is considered as the number of days comprising a year. SECTION 3244. Interest on Time Deposits . Time deposits shall not be subject to any interest rate ceiling. SUBSECTION 3244.1 Computation of interest a. In the computation of interest on time deposits, the number of days comprising a year shall be based on the following: (1) When the term is one (1) year or more, a year shall mean 365 days; and (2) When the term is less than one (1) year, the interest shall be computed on the basis of 360 days in a year. SUBSECTION 3244.2 Time of payment . Interest on time deposits may be paid at maturity or upon withdrawal or in advance: Provided, however , That interest paid in advance shall not exceed the interest for one (1) year. SUBSECTION 3244.3 Treatment of matured time deposits . A time deposit not withdrawn or renewed on its due date shall be treated as a savings deposit and shall earn an interest from maturity to the date of actual withdrawal or renewal at a rate applicable to savings deposits. SUBSECTION 3244.4 Pretermination . The interest of a time deposit terminated before the maturity date fixed in the certificate of time deposit shall be as follows: a. Any time deposit terminated within the first half of its maturity period shall be paid an interest rate equivalent to twenty-five per cent (25%) of the interest stipulated in the contract; b. Any time deposit terminated within the second half of its maturity period shall be paid an interest rate equivalent to fifty per cent (50%) of the interest stipulated in the contract; c. The provisions of this subsection shall not apply in the case of time deposits with maturities of more than 730 days which are preterminated more than 730 days after the date of deposit: Provided , That if interest has been paid in advance, the corresponding rebate shall be charged against the principal of the time deposit. SECTION 3245. Payment of Interest in Kind . Banks shall not pay interest in kind on deposits. SECTION 3246. Special Savings and Time Deposits . The special savings deposit of farmer-borrowers under the special financing program of the government for agricultural production shall earn interest at the same rate that the rural bank charges the farmer-borrower for loans under such financing program. Interest rate on special time deposits for special financing programs under Sec. 3351 shall be lower than the rate allowed on time deposits accepted from the general public. SECTION 3247. Employees Provident Fund Contributions . Provident fund contributions of and for the benefit of bank employees and deposited in their own banks are exempted from the provisions of regulations on interest rates on deposits. SECTION 3248. Disclosure of Effective Rates of Interest . a. Rural banks are required to disclose to depositors the following information on interest computation and payment: (1) Type/kind of deposit; (2) Nominal rate of interest and period covered; (3) Manner of interest payment, i.e., whether credited in advance or otherwise; (4) Basis of interest payment, i.e., whether based on average daily balance compounded quarterly or otherwise; (5) Effective rate of interest expressed as a simple annual rate, on the basis of the information above given and indicating the formula used to arrive at the effective rate of interest; and (6) Illustration of basis of computing interest on a hypothetical deposit account. b. Copies of the above-mentioned information shall be made available to each and every depositor by attaching these copies to savings deposit passbooks and to time deposit certificates. Posters disclosing the above information shall also be displayed conspicuously within the bank premises. c. Banks are also required to disclose to depositors upon request, the effective interest rates on their deposits. d. Non-compliance with this subsection shall subject the banking institution concerned to such administrative sanctions as the Monetary Board shall impose. SECTIONS 3249-3252. (Reserved) . G. RESERVES AGAINST DEPOSIT LIABILITIES SECTION 3253. Accounts Subject to Reserves . The required reserves against deposit liabilities in local currency of rural banks shall be as follows: a. Against demand deposits . Twenty two per cent (22%) of such deposit liabilities effective April 25, 1984. b. Against NOW accounts . Eighteen per cent (18%) of such deposit liabilities effective April 25, 1984. c. Against savings deposits other than NOW accounts . Fourteen per cent (14%) of such deposits liabilities effective April 25, 1984. LLcd d. Against time deposits : (1) With original maturities of seven hundred thirty (730) days or less fourteen per cent (14%) of such deposit liabilities effective April 25, 1984. (2) With original maturities of more than seven hundred thirty (730) days six per cent (6%) of such deposit liabilities regardless of remaining maturities. Effective April 25, 1984, the reserve requirement on time deposits of all banks with a original maturities of more than seven hundred thirty (730) days shall be six per cent (60%). Note: Amendments to Section 3253 as provided by the following CBP Circulars: 1) Section 5 of CBP Circular 1122 dated November 28, 1986; 2) Section 5 of CBP Circular 1207 dated August 4, 1989; 3) Section 10 of CBP Circular 1209 dated September 1, 1989; 4) Section 6, 7 and 8 of CBP 1261 dated November 9, 1990 SECTION 3254. Form or Composition of Reserves . All Banks and non-bank financial intermediaries are enjoined to deposit cash with the Central Bank to form part of the reserve assets. ( Effective June 1, 1984 ). The form in which required reserves against deposit liabilities in local currency will be held shall be as follows: a. Deposits with the Central Bank . At least twenty-five per cent (25%) of the required reserves shall be in the form of deposits with the Central Bank. Effective January 1, 1982, deposits with the Central Bank of rural and thrift banks and the Development Bank of the Philippines shall be thirteen per cent (13%) of the required reserves and shall be increased at the rate of four percentage points every semester thereafter until the minimum requirement shall have been reached. In areas where the Central Bank has no regional offices, deposit balances of the required reserves of banks with the Central Bank shall be deposited with branches of the Philippine National Bank authorized to accept such deposits in trust for the Central Bank. (As amended by CBP Circular 1131 dated January 30, 1987) b. Government securities and cash in vault The remaining portion of the required reserves may be held by all banks in the form of cash in vault and/or government securities or evidences of indebtedness of the Republic of the Philippines. For purposes of this section, government securities which may form part of the reserves against peso deposit liabilities of banks shall refer to bonds or other evidences of indebtedness representing direct obligations of the Government of the Republic of the Philippines. Provided , That such securities shall have the following minimum features/conditions: (1) The securities must bear in interest rate of not more than four per cent (4%) per annum, must be non-negotiable, and shall carry Central Bank support; and (2) The amount, maturity date and rate of interest must be definite and stated in the certificate itself. Premyo Savings Bonds (Regular and Biglang Bahay Series) shall continue to be eligible as reserves of banks against deposits liabilities in accordance with the following schedule: Per Cent of Reserve Required Requirement Ceiling on Government Securities July 1, 1983-June 30, 1984 37.5 50 July 1, 1984-June 30, 1986 18.75 25 Effective July 1, 1986, said bonds shall no longer be eligible as reserves. ( Effective Jan . 13, 1984 ) Other government securities being used for reserve purposes shall continue to be eligible as such: Provided , That whenever said securities shall have matured, they shall be replaced by securities carrying the above features. Only the buying/lending bank in the resale agreement covering eligible government securities may use such securities as reserves against deposits. Conversely, the selling/borrowing bank in a repurchase agreement covering eligible government securities may not use such securities as reserve against deposits. Securities held as reserves shall be valued at cost of acquisition and the bank may keep physical possession of such securities. It may freely alter its composition: Provided , That any substitution or acquisition satisfies the eligibility requirements, prescribed in the second paragraph of this subsection: Provided, further , That the bank notifies the Central Bank of any such change in the prescribed forms not later than the reporting day following the change as provided in Sec. 3257. Securities counted as reserves may not be hypothecated or encumbered in any way or earmarked for any other purpose without automatically losing their eligibility as reserves. For ready reference, a listing of reserve eligible and non-eligible securities may be found in Appendix 43. SUBSECTION 3254.1 Allowable drawings against reserves . Bank reserves on deposit with the Central Bank to comply with legal requirements are not regular current accounts. The use, therefore, of Central Bank checks for drawings against reserve deposits shall be limited to the settlement of obligations with the Central Bank and withdrawals to meet cash requirements. SUBSECTION 3254.2 Interest Income on Reserve Deposits . Deposits maintained by banks with the Central Bank as part of their reserve requirement shall be paid an interest at the rate of four per cent (4%) per annum based on the average daily balance of said deposits to be credited quarterly. ( Effective June 1, 1984 ) SUBSECTION 3254.3 Book-entry Method for Reserve Securities . All purchases of Treasury Bonds, Treasury Notes and PW & ED Bonds for legal reserve purposes shall already be serviced under the book-entry procedure. All transactions on book-entry securities shall be entered in the bank's/non-bank's securities accounts and evidenced by debit and/or credit advices. No physical certificates shall be issued for any purpose, and transactions between banks/non-banks on book-entry securities shall not be recognized. Interest and redemption payments on book entry securities shall be made by the Securities Servicing Department of the Central Bank on interest payment dates and at maturity through automatic credit to the bank's/non-bank's demand deposit account with the Central Bank. ( Effective May 30, 1983 ) Documentation of outright sales transactions with the Central Bank on such securities shall be in accordance with the following procedures: 1. Banks and NBQBs shall accomplish the Confirmation of Sale in the prescribed form in quadruplicate and signed by two (2) authorized signatories of the institution. 2. The accomplished COS form shall be forwarded to the Securities Servicing Department not later than 2:30 p.m. of value date for certification. An SSD authorized officer shall certify to the existence of the securities in the Securities Account of the bank/NBQB concerned by appending his signature on all copies. * SUBSECTION 3256.2 Failure to cover overdrawings with the Central Bank . In case a commercial bank fails to cover any overdrawings in its deposit account with the Central Bank not later than the next clearing day, it shall be excluded from such clearing, and it shall also be denied the credit facilities of the Central Bank. Such exclusion from clearing shall continue for as long as it has not maintained credit balances with the Central Bank for at least five (5) consecutive banking days. If its clearing account is overdrawn for five (5) consecutive banking days, it shall be prohibited from (a) making new loans or investments, except investments in government securities with Central Bank support; and (b) declaring cash dividends until it has maintained credit balances in its Central Bank clearing account for at least fifteen (15) consecutive banking days. The denial from availment of credit facilities of the Central Bank shall continue for as along as the bank has not maintained credit balances with the Central Bank for at fifteen (15) consecutive banking days. For purposes of computing the total available reserves against deposit/deposit substitute liabilities, the total amount of overdrawing in the clearing account with the Central Bank shall be deducted from available reserves after the required reserves against marginal deposits and deposit substitute liabilities shall have been satisfied. Where the overdrawing is in excess of available reserves, interest at twelve per cent (12%) per annum shall be collected on the excess. SUBSECTION 3256.3 Unpaid fines . Where a bank maintains a demand deposit account with the Central Bank, fines, if unpaid within fifteen (15) days from receipt of the assessment, shall be charged against its demand deposits with the Central Bank: Provided , That where the bank's credit balance is insufficient and it fails to settle the assessment within fifteen (15) days from receipt, the Monetary Board may limit or prohibit the making of new loans or investments by the bank. SECTION 3257. Report on Compliance . Every bank shall make a weekly report to the Central Bank of its daily required and available reserves on deposit/deposit substitute liabilities to be submitted not later than the close of the fourth banking day following the reference week. This report shall be accomplished in the prescribed forms. SECTIONS 3258-3260. (Reserved) . H. SUNDRY PROVISIONS ON DEPOSIT OPERATIONS SECTION 3261. Schemes to Attract Deposits . Banking institutions shall observe the rules embodied in this section in their promotional and other campaigns to attract deposits. SUBSECTION 3261.1 Raffles and lotteries . Any raffle or lottery conducted by any rural bank shall conform with the following guidelines: a. The raffle/lottery can be offered only once every quarter; b. All savings accounts, except those in which no deposits or withdrawals have been made for a period of at least two (2) years as of the week before the holding of the raffle/lottery, and time deposits shall qualify; c. The disqualification of savings accounts inactive for two (2) years shall be clearly indicated in all announcements, promotions or advertisements concerning the raffle/lottery; d. Each deposit account shall be entitled to only one prize; e. Accounts of personnel of the bank holding the raffle/lottery and those of their relatives within the first degree of consanguinity or affinity shall be disqualified; f. The total value of prizes, including donated prizes, in the raffle/lottery of each banking unit shall not exceed P10,000.00 for banks in cities and Metropolitan Manila, and P5,000.00 for banks in all other areas; g. The results of the raffle/lottery shall be appropriately announced; the list of winners and the corresponding prizes shall be posted in a conspicuous place within the bank premises and the winners shall be duly notified; and h. The results of such raffle/lottery shall be attested to by two authorized bank officers and reported to the Department of Rural Banks and Savings and Loan Associations of the Central Bank within thirty (30) days from the date of the raffle/lottery. No promotional plan involving raffles/lotteries shall be advertised, promoted, or implemented unless notification thereof has been submitted to the Central Bank at least fifteen (15) days prior to the holding of the raffle/lottery or the start of the distribution of the gifts or giveaways. The said notification shall contain the following minimum information: (1) The date and place of the raffle/lottery (2) The list and value of each prize (3) Other essential features (requirements for qualification, the determination of the winners, etc.) of the raffle/lottery. SUBSECTION 3261.2 Gifts or giveaways . As used in this subsection the term gift or giveaway shall mean anything of value given at no charge to a depositor by the depository bank as an inducement for the opening of a new, or the maintenance of an existing, deposit account. The distribution of gifts or giveaways by rural banks shall conform with the following guidelines: a. The period for the distribution of gifts or giveaways shall not exceed thirty (30) days and may be allowed only in connection with (1) the inauguration or transfer of office, (2) a bank anniversary celebration, and (3) the Christmas season. The distribution of gifts or giveaways on any occasion other than in (1), (2) or (3) shall require prior Central Bank approval. b. No cash, or check, certificate, or instrument (except government securities) which can be exchanged for cash, shall be allowed as gift or giveaway . c. The cost of each gift or giveaway shall not exceed twenty pesos (P20.00), including donations. d. In no case shall the money value of the gift or giveaway be credited to the deposit account. e. Each deposit account shall be entitled to only one gift or giveaway . f. No promotional plan involving the distribution of gifts or giveaways shall be advertised, promoted, or implemented unless notification thereof has been submitted to the Central Bank at least fifteen (15) days prior to the holding of the raffle/lottery or the start of the distribution of the gifts or giveaways . The said notification shall contain the following minimum information: (1) The period and manner of distribution; (2) The value and type, or form, of the gift or giveaway : (3) The occasion for the distribution of the gift or giveaway. With regard to the TIPID movement, see Sec. 3215. SUBSECTION 3261.3 Other promotional schemes . Other plans, contests, or campaigns designed to attract deposits not falling under the provisions of Subsecs. 3261.1 and 3261.2 shall be subject to prior approval by the Central Bank. To provide sufficient time for consideration thereof, such campaign proposals shall be submitted to the Department of Rural Banks and Savings and Loan Associations of the Central Bank at least thirty (30) days before the intended date of implementation by banks in Metropolitan Manila, and at least forty (40) days by banks situated outside this area. SUBSECTION 3261.4 Sanctions . Non-compliance with the provisions of this section shall constitute sufficient grounds for the immediate suspension of the promotional activity and/or subject the bank concerned to administrative sanctions by the Central Bank. LLphil (As amended by CBP Circular 1156 dated September 22, 1987) SECTION 3262. Miscellaneous Rules on Deposits . The following are supplementary rules on opening of deposit accounts: SUBSECTION 3262.1 Opening of deposit accounts, prohibitions . The cashier, bookkeeper and their assistants, and other personnel of a rural bank whose duties consist of handling cash, checks and other cash items are prohibited from opening deposit accounts with the bank where they are employed as such. SUBSECTION 3262.2 Specimen signatures; ID photos . All banking institutions are required to set a minimum of three (3) specimen signatures to be simultaneously required from each of their depositors and to update the specimen signatures of their depositors every two (2) years or sooner, at the discretion of the bank. Banks may, at their option, require their depositors to submit ID photos together with the specimen signatures. (As amended by CBP Circular 1175 dated April 26, 1988) SUBSECTION 3262.3 Signature card ; deposit slip . When an applicant has been accepted by a rural bank as depositor, he shall accomplish the depositor's signature card and the deposit slip forms prescribed by the Central Bank. The depositor's signature card shall contain the following: (a) name and address; (b) age and other personal circumstances; (c) signature; and (d) right thumb mark. The card shall be accomplished in triplicate and, to forestall substitution, must be identified by the cashier's signature and seal of the bank and kept in the vault as a permanent reference record of the bank. SUBSECTION 3262.4 Insurance on deposits . All banks are required to indicate the coverage of the Philippine Deposit Insurance Corporation (PDIC) in each passbook, certificate of time deposit and/or cover of checkbook for demand deposit/"NOW" account, stating among others, the maximum amount of the insurance. SUBSECTION 3262.5 Certification on deposit . Rural banks are required to use the prescribed form (App. 10) in confirming the deposit of the paid-up capital of a proposed corporation registering with the Securities and Exchange Commission. The certification shall be signed by a responsible authorized official of the rural bank confirming the deposit and must be notarized. SUBSECTION 3262.6 Withholding tax on deposits of foreign diplomatic establishments . For information and guidance on interest income on bank deposits of foreign diplomatic establishments and their individual diplomatic and non-diplomatic staff members, see opinion of Acting Commissioner, Bureau of Internal Revenue, embodied in App. 13. SECTION 3263. (Reserved) . SECTION 3264. Unclaimed Balances . All unclaimed balances, which include credits or deposits of money, bullion, securities or other evidences of indebtedness of any kind, and interest thereon, already reported to the Treasurer of the Philippines in accordance with the Unclaimed Balances Act (Act No. 3936, as amended by Presidential Decree No. 679 dated April 2, 1975) shall be transferred/reclassified from the deposit liability/other credits accounts to the liability account, "Due to the Treasurer of the Philippines," until they are deposited with or turned over to the Treasurer of the Philippines upon order of the court that the same have been escheated in favor of the Government of the Republic of the Philippines and, as such, the unclaimed balances-deposit liabilities shall no longer be covered by reserves required of deposit liabilities. SECTIONS 3265-3268. (Reserved) . I. BORROWINGS FROM THE CENTRAL BANK SECTION 3269. Rediscount Ceilings ; Eligibility of Papers ; Maturities SUBSECTION 3269.1 Concept of rediscounting . The term rediscounting refers to the privilege of a rural bank to negotiate its customer's eligible papers with the Central Bank, by transferring the ownership thereof to the creditor Central Bank. Rediscounting may also be referred to as the process of securing advances from the Central Bank by a rural bank on the security of the borrowing bank's eligible papers. The privilege to rediscount is given by the Central Bank to a rural bank to supplement its operating capital which may be insufficient to meet the demands for credit financing in the community where it operates and when additional funds are needed to develop the economy of the community and increase its productivity. The proceeds of rediscounting or advances shall be used exclusively in accordance with paragraphs (a) and (b) of Subsec. 3291.1e: Provided , That proceeds of rediscounting of papers covering loans extended by rural banks under the third paragraph of Section 16 of Republic Act No. 6390 shall be channeled only to beneficiaries of agrarian reform. Operating capital shall include cash in vault, checks and other cash items, due from other banks, and certificates of indebtedness excluding customers' promissory notes and bonds held to cover legal reserves against deposit liabilities and trust funds such as special savings deposits. A rural bank which has utilized, in the process of its operations, approximately fifty per cent (50%) of its paid-up common capital stock may apply for a loan or rediscount, or a rural bank with big deposit liabilities may apply for a loan if in the process of its operations its operating capital has been depleted to a level equal to forty per cent (40%) of its total deposit liabilities (exclusive of special time deposits). The term normal credit refers to the requirements of eligible borrowers for short term credit with maturities not in excess of one (1) year to finance productive operations undertaken during the year or to meet operating expenses of an annual recurring nature repayable out of the results of such operations or with current income from the project being financed. SUBSECTION 3269.2 Eligible papers . An eligible paper is a promissory note, draft, or a bill of exchange which has the following characteristics: a. It arises out of agricultural, commercial or industrial transactions: it is issued or drawn and the proceeds thereof used for production, purchase, transportation, or marketing of goods, such as agricultural products, merchandise or wares, on one or more steps of the processes of production, manufacturing or merchandising, provided for in Secs. 3341 and 3342 including credit instruments arising from transactions authorized under Sections 15 and 16 of Republic Act No. 6390. b. It has a maturity period of not more than 360 days on the date of rediscount, discount or acquisition by the Central Bank in the case of agricultural, industrial or production credits, including the marketing of the produce, except papers covering loans granted to small merchants which must have maturities of not more than 180 days. For papers covering loans under the Masagana 99 and Masaganang Maisan and Food grains Program, the maximum loan amount per hectare shall be P1,600.00 for Masagana 99; P500.00 for corn and sorghum and P650.00 for soybeans. As regards commercial credits, the maturity date of said instruments shall not exceed 180 days from date of rediscount, while for production credits, it shall not exceed 360 days also from the date of rediscount or acquisition by the Central Bank. c. Notwithstanding the provisions of the preceding paragraphs, the following papers are not eligible/acceptable for rediscounting: (1) Those whose proceeds are used or shall be used for permanent or fixed investments, such as land, building or machineries, except small machineries and equipment for cottage and agro-industrial production, except when otherwise expressly provided by law or regulation; (2) Those whose proceeds have been used for investments of purely speculative character; (3) Those which represent the balance of a renewed loan or advance, or which are overdue; (4) Those whose covering mortgages are not registered; (5) Promissory note(s) drawn by a borrower covering non-supervised credit/non-food production supervised credit loans aggregating over P40,000.00 if the total loans of over P40,000.00 extended by the rural bank for non-supervised/non-food production supervised credit loans during the past four (4) months ending at the end of the month immediately preceding the date the rediscounting or loan application is filed exceed sixty per cent (60%) of the total of such loans granted during the same period. (6) Those which are incomplete or defective and/or with incomplete or defective supporting documents. SUBSECTION 3269.3 Maturities . The maximum periods for rediscounting or advances against eligible papers shall be as follows: a. For loans secured by agricultural papers for the production of rice not exceeding 270 days; and for corn and commercial papers not exceeding 180 days. b. For loans secured by other production credit papers not exceeding 360 days. It is understood that the terms of the loans granted by institutional borrowers shall be synchronized with the maximum maturities of their own loans from the Central Bank as outlined in App. 11. SUBSECTION 3269.4 Loan ceiling . The rediscount ceiling of rural banks shall be three hundred percent (300%) of their networth, plus three hundred percent (300%) of their average savings and time deposits during the four (4) months immediately preceding the date of application for Central Bank refinancing. A rural bank may avail itself of the privilege of access to the Central Bank's credit facilities for any number of times during any calendar year, subject to the provisions of the 4th paragraph of Sec. 3269 on operating capital. A credit rating plan has been devised by the Department of Loans and Credit as a means of evaluating the credit performance of a rural bank based on such factors as (a) management (b) loan rediscounting. Under each main factor and sub-factors which are rated according to the degree of conformity with the standards set by the Department of Loans and Credit. The total score for each bank is determined by adding the number of points obtained under the various factors. A rural bank obtaining from 90 to 100 points is given a rating of "A"; 80 to 89 points "B"; 70 to 79 points "C" and below 70 points "D". The Department or Loans and Credit may waive, without notice to the rural bank concerned, its right of examination (pre-audit) prior to the release of the loans applied for if such bank obtained a credit rating of "A" or "B". A rural bank may submit an application for a rediscount or loan in an amount not exceeding the following except for loans granted for food production under the supervised credit scheme: (a) P250,000.00 for rural banks with a credit rating of "A" or "B"; (b) P200,000.00 for rural banks with a credit rating of "C"; and (c) P100,000.00 for rural banks with a credit rating of "D" and for newly-established rural banks which have been in operation for not more than one year. SUBSECTION 3269.5 Application procedures . Rural banks applying for a loan with the Central Bank shall observe the procedures in App. 12. Rediscounting availments under 3270.1 shall be governed by the procedures in App. 17. SECTION 3270. Qualifications/Disqualifications for Availment ; Penalties SUBSECTION 3270.1 Qualifications a. Eligible supervised credit food papers Rural banks with a rating of "A" or "B" may rediscount their eligible supervised credit food papers under a special rediscounting scheme which will do away with the review/examination of each of the collaterals offered as listed in the applicant bank's rediscount schedule: Provided, That (1) The risk assets ratio is not below ten per cent (10%); (2) Ratio of past due loans to total port-folio does not exceed twenty-five per cent (25%); and (3) The rural bank has not exceeded its rediscount ceiling. b. Rural banks with a rating of "A" or "B" may rediscount their eligible papers covering non-traditional export at the Central Bank Regional offices at San Fernando, La Union, Cebu City and Davao City: Provided , That (1) The risk assets ratio is not below ten per cent (10%); (2) Ratio of past due loans to total port-folio does not exceed twenty-five per cent (25%); (3) The rural bank has not exceeded its rediscounting ceiling; and (4) There are no material exceptions noted by the DRBSLA. SUBSECTION 3270.2 Temporary disqualification . The following rural banks shall be temporarily disqualified from the credit facilities of the Central Bank; a. A rural bank which has not submitted a plan or schedule for the payment of the unpaid subscriptions to its capital (common stock) or which has not complied with the said plan or schedule; b. A rural bank with a past due ratio in excess of twenty-five per cent (25%) of its total outstanding loans. For the purpose of accelerating the implementation of the credit program in the settlement areas under the Second Rural Development-Land Settlement Project, rural banks in the project areas may be exempted from the application of the maximum twenty-five per cent (25%) past due ratio as an eligibility requirement in order to be able to avail of financial assistance from the Central Bank. Such exemption may be granted under the following conditions: (1) Whatever financial assistance may be availed of by rural banks shall be used exclusively for credit extension to settlers; and (2) The risk-asset ratio of rural banks seeking financial assistance shall not be less than ten per cent (10%). c. A rural bank which is in default in its obligations with the Central Bank or with collateral deficiencies due to unremitted collections/matured notes, except those obligations covered by a duly approved plan of payment whose terms and conditions are faithfully complied with; d. A rural bank with deficiency in legal reserves; e. A rural bank which is deficient in capital requirements (risk assets ratio should not be less than 10%); LLjur f. A rural bank which has over-invested in its bank premises (more than 35% of private paid-in capital) as well as in furniture, office and transportation equipment (more than 15% of private paid-in capital) as set forth in Subsec. 3175.11; g. A rural bank which is in excess of the maximum credit limit under Subsec. 3269.4; and h. A rural bank the rediscounting privilege of which has been suspended. SUBSECTION 3270.3 Denial of credit facilities . Rural banks shall be denied the privilege of access to the credit facilities of the Central Bank without prejudice to the imposition of appropriate administrative sanctions under Section 34-A of Republic Act No. 265, as amended, for deliberate or negligent failure to observe provisions of laws, rules and regulations and sound banking practice, including, but not limited to, violations which result in the (a) extension of indirect/fictitious loans; (b) diversion of the proceeds of special time deposits/rediscounting to other purposes; (c) misrepresentations in connection with applications for special time deposits/rediscounting; (d) non-remittance of collections on rediscounted notes within the prescribed period; and (e) simulation of payments to qualify for rediscounting. SUBSECTION 3270.4 Other requirements . Whenever the total direct accommodations of a rural bank to parties mentioned in Sec. 3329 reach fifty per cent (50%) of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon recommendation of the Department of Rural Banks and Savings and Loan Associations, require as a condition for the extension of the credit facility the designation of a comptroller in the rural bank to protect the interest of the Central Bank. SUBSECTION 3270.5 Effects of natural calamities . In case a rural bank is adversely affected by natural calamities such as earthquake, typhoon, drought and other natural occurrences, the Central Bank shall not consider paragraphs "b" and "c" of Subsec. 3270.2 as disqualifying grounds, based on the results of the survey to be made by the Department of Rural Banks and Savings and Loan Associations, which results should justify said waiver. A supplementary agreement should be executed between the Department of Loans and Credit of the Central Bank and the affected rural bank. Rural banks in areas which may suffer damages on account of force majeure may restructure their corresponding rediscounting liabilities with the Department of Loans and Credit secured by restructured notes of these borrowers for a period of one (1) year: Provided , That in meritorious cases, a second and third restructuring, to cover the maximum period of three (3) years, may be allowed for reasons of force majeure , in the absence of which, however, farmer-borrowers' delinquent accounts may be restructured under this scheme: Provided , That payment of thirty per cent (30%) of principal, plus accrued interest due thereon, shall be made on each of the first and second restructuring. Rural banks may continue to avail themselves of their rediscounting privilege during the life of the restructured loans. SUBSECTION 3270.6 Credit examination of borrowing rural banks . Credit examination of all borrowing rural banks shall be undertaken regularly by the Department of Loans and Credit at which time promissory notes used as collateral for loans with the Central Bank are examined together with the supporting documents. a. Pre-audit system . The amount allowable for each loan application is determined after deducting all items which have been found ineligible or unacceptable as collateral. b. Post audit (automatic) system . In the case of loans granted before actual credit examination, the loan value of all collateral promissory notes found to be ineligible or unacceptable for rediscounting, plus accrued interest, must be remitted immediately by the rural bank to the Central Bank. The Central Bank may also debit the reserve account of the rural bank without prior notice in an amount corresponding to the loan value of papers found to be ineligible or unacceptable plus accrued interest. Misrepresentations, violations of the terms and conditions of the loans, etc, committed by borrowing rural banks are subject to the penalties contained in their respective letters of application (DLC Form No. 3 Revised) and Subsec. 3270.1. SECTION 3271. Loan Values; Rediscount and Lending Rates . The following rules and regulations shall govern the loan values and rediscount rates of the Central Bank for preferential rediscounting and the lending rates that may be charged by banks on paper rediscounted with the Central Bank. SUBSECTION 3271.1 Loan Value, Rediscount and Lending Rates . The loan value and rediscount rate for the rediscount facility of the Central Bank shall be as follows: Loan Rediscount Value Rate (In %) Eligible Papers (In %) Per Annum Agricultural Production, Cottage and Small Industries Credits, General 80 12.75 Purpose Working Capital Financing and Other Short-Term Credits "The lending rates that the banks may charge on their rediscounted papers shall not be subject to any ceiling. However, the spreads made by banks shall be closely monitored periodically by the Central Bank to ensure that these are consistent with the prevailing market rates. ( Effective Nov . 29, 1985 ) Note: Amendments to Subsec. 3271.1 as provided by the following CBP Circulars: 1) CBP Circular 1114 dated September 1, 1986; 2) CBP Circular 1125 dated December 15, 1986; 3) CBP Circular 1203 dated June 29, 1989; 4) CBP Circular 1252 dated September 14, 1990; 5) CBP Circular 1260 dated October 30, 1990; 6) CBP Circular 1363 dated October 29, 1992; 7) CBP Circular 1387 dated March 17, 1993) SUBSECTION 3271.2 Scope/Definition of Areas of Rediscounting (a) Agricultural production credits are short-term credits granted for rice, corn, sugar cane, sugar (inclusive of sugar quedan), coconut, feed grains, livestock, poultry, vegetable, aquaculture, tobacco, cotton and other products as may be determined by the Central Bank. (b) Loans generated from Special Time Deposits (STDs) shall not be eligible for rediscounting. ( Effective Nov . 29, 1985 ) (c) Financing to cottage industries shall include supervised and non-supervised credits as well as CIGLF credits. (d) All other existing preferential areas of accommodation, including traditional exports shall fall under a general purpose rediscount window. (e) Short-term rediscounts cover eligible papers with original maturity of one year or less, while medium and long-term rediscounts cover eligible papers with original maturity of over one year. (f) Special programs shall include food quedans and trading operations of the National Food Authority and Food Terminal, Inc. (Effective Mar. 9, 1984) SUBSECTION 3271.3 Interest rate ceiling . Except with respect to papers with original maturities of more than three hundred sixty-five (365) days, referred to in Subsec. 3271.2b above, the maximum bank lending rate shall be the effective rate, inclusive of service and other charges as herein prescribed. The interest rate ceiling shall apply to the entire amount of the loan granted, and not only to the rediscounted portion thereof. SUBSECTION 3271.4 Unsecured loans . Unsecured loans to beneficiaries of agrarian reform under the Masagana 99 and Masaganang Maisan financing programs shall have an agricultural guarantee fund coverage to be eligible for rediscounting at the preferential rate of one per cent (1%). SUBSECTION 3271.5 Liquidated damages . In addition to the rediscount or interest rates specified in Subsec. 3271.2, the Central Bank shall impose liquidated damages at the rate of five per cent (5%) per annum on past due accounts of rural banks with the Central Bank. SUBSECTION 3271.6 Authority to rediscount with designated branches of the Philippine National Bank (PNB), Land Bank of the Philippines (LBP) and Amanah Bank (AB) . Rural banks in the provinces of Cagayan, Isabela, Misamis Oriental, Misamis Occidental, Zamboanga del Norte and Zamboanga del Sur may rediscount with branches of the PNB, LBP and AB in accordance with the guidelines in App. 30. SUBSECTION 3271.7 Increase in interest rates . Rural banks may include in their promissory notes a provision authorizing them, in the event the notes are disallowed for rediscounting with the Central Bank, to increase the annual rates for non-supervised credit loans from fourteen per cent (14%) to sixteen per cent (16%) for secured loans or to eighteen per cent (18%) for unsecured loans. SUBSECTION 3271.6 Authority to rediscount with designated branches of the Philippine National Bank (PNB), Land Bank of the Philippines (LBP) and Amanah Bank (AB) . Rural banks in the provinces of Cagayan, Isabela, Misamis Oriental, Misamis Occidental, Zamboanga del Norte and Zamboanga del Sur may rediscount with branches of the PNB, LBP and AB in accordance with the guidelines in App. 30. SUBSECTION 3271.7 Increase in interest rates . Rural banks may include in their promissory notes a provision authorizing them, in the event the notes are disallowed for rediscounting with the Central Bank, to increase the annual rates for non-supervised credit loans from fourteen per cent (14%) to sixteen per cent (16%) for secured loans or to eighteen per cent (18%) for unsecured loans. (5) Special programs (a) National Food Authority (NFA) (i) Local purchases and local procurement 3 6 for corn sorghum, soy- beans and mongo (b) Food Terminal, Inc. (FTI) (c) Food Quedans 3 10 b. The rediscount rates of the Central Bank and the lending rates that may be charged by rural banks for eligible papers with more than one (1) year maturity shall be as follows: Maximum bank lending rate, inclusive of service and CB rediscount other charges rate (in percent (in percent per annum) per annum) (1) Pledge or assignment of payments, installments or amortizations on papers involving supervised credits listed in Item "a(1)" above 3% 12% (2) Pledge or assignment of payments, installments 10 16 (for 365 days or amortizations or less original on projects of high maturity) priority as determined by the Central Bank Lending rate Interest rate provided that this minus 6 stipulated pursuant privilege shall also to Sec. 3303 (more extend to non-bank than 365 days financial intermediaries original maturity) performing quasi-banking functions (NBQBS) c. The Central Bank shall charge rediscount or interest rates against promissory notes and other eligible credit instruments pertaining to agrarian reform credit as defined under Presidential Decree No. 717 extended by any banking institution to beneficiaries of agrarian reform in accordance with the foregoing. SUBSECTION 3271.3 Interest rate ceiling . Except with respect to papers with original maturities of more than three hundred sixty-five (365) days, referred to in Subsec. 3271.2b(1) above, the maximum bank lending rate shall be the effective rate, inclusive of service and other charges as herein prescribed. The interest rate ceiling shall apply to the entire amount of the loan granted, and not only to the rediscounted portion thereof. SUBSECTION 3271.4 Unsecured loans . Unsecured loans to beneficiaries of agrarian reform under the Masagana 99 and Masaganang Maisan financing programs shall have an agricultural guarantee fund coverage to be eligible for rediscounting at the preferential rate of one per cent (1%). SUBSECTION 3271.5 Liquidated damages . In addition to the rediscount or interest rates specified in Subsec. 3271.2, the Central Bank shall impose liquidated damages at the rate of five per cent (5%) per annum on past due accounts of rural banks with the Central Bank. SUBSECTION 3271.6 Authority to rediscount with designated branches of the Philippine National Bank (PNB), Land Bank of the Philippines (LBP) and Amanah Bank (AB) . Rural banks in the provinces of Cagayan, Isabela, Misamis Oriental, Misamis Occidental, Zamboanga del Norte and Zamboanga del Sur may rediscount with branches of the PNB, LBP and AB in accordance with the guidelines in App. 30. SECTION 3272. (Reserved) . SECTION 3273. Remittance of Collections/Repayments ; Arrearages . The following rules shall govern the remittance of collections or repayments of notes used as collateral for loans with the Central Bank and arrearages thereon: SUBSECTION 3273.1 Remittance a. The rural bank shall remit to the Central Bank one hundred per cent (100%) or eighty per cent (80%), as the case may be, of all repayments received from the makers of the notes used as collateral for loans. b. Upon maturity of the collateral promissory notes, their corresponding loan values shall be paid to the Central Bank. c. In remitting payments to the Central Bank, the rural bank shall enclose with such remittances a duly accomplished DLC Form No. 5 wherein the application of such payments is indicated and the promissory notes to be released are listed. DLC Form No. 5 shall be accomplished in quadruplicate and distributed as follows: original and second copy to the Central Bank; third copy to designated depository commercial bank; and the fourth copy to the rural bank. d. Remittance to the Central Bank covering payment of loans shall be in cash, bank drafts or by authority to debit the current account of the rural bank's designated depository commercial bank. SUBSECTION 3273.2 Arrearages . To reduce arrearages of rural banks with the Central Bank and to place such rural banks in a position to adequately meet the credit requirements of the special financing programs of the government, rural banks with supervised credit rediscounting arrearages with the Central Bank not arising from mismanagement or serious irregularities in their operations, may enter into an agreement with the Central Bank for the gradual liquidation of their past due accounts through a capital buildup program and conversion scheme, and/or plan of payment. a. Definitions (1) Supervised credits shall refer to loans granted by the rural bank under the supervised credit scheme, excluding CB: IBRD and IGLF loans. (2) Borrower shall refer to the farmer-borrower of the rural bank engaged in rice, corn and other feedgrain production, poultry or livestock raising, fishing and fish production and other agricultural activities under the supervised credit scheme. (3) Conversion shall refer to the conversion of past due supervised credits of rural banks rediscounted with the Central Bank into paid-in capital of the Government in the form of preferred shares of stock issued in the name of the Development Bank of the Philippines (DBP). b. Coverage . Only past due/restructured supervised credits inclusive of accrued interest of rural bank borrowers and the corresponding past due/restructured obligations inclusive of accrued interest of rural banks with the Central Bank as of June 30, 1980 shall be covered by the Program. c. Qualification requirements . All rural banks with supervised credit arrearages may be qualified to participate under this program except those which are under receivership or those which have committed serious irregularities: Provided , That participation in the program of rural banks with rediscounting arrearages of over P3 million whose rehabilitation may not be attainable under this liberalized scheme shall be treated on a case-to-case basis subject to the approval of the Monetary Board. d. Application to participate in the program . A rural bank desiring to participate in this program shall file an application with the Central Bank in the prescribed form together with the following supporting papers and documents: (1) Resolution of the board of directors authorizing the bank's participation in the program, and in case the capital buildup program shall necessitate an increase in the bank's authorized capital, a resolution adopted in a stockholders' meeting by at least two-thirds (2/3) of the stockholders entitled to vote authorizing such increase. (2) A capital buildup program over a period not exceeding ten (10) years in accordance with Item "e" hereof. (3) A list of past due supervised credits of rural bank borrowers at the time of application in the prescribed form, provided that such loans were past due as of June 30, 1980. (4) Such other papers and documents as may be required by the Central Bank. e. Capital buildup program . The capital buildup program shall provide for an equal yearly increase in the paid-in capital stock of the rural bank over a period not exceeding ten (10) years, which shall consist of the following: (1) Common shares of stock (Private) in the amount of at least fifty per cent (50%) of the rediscounting arrearages inclusive of accrued interest covered by the program thru the sale of common shares of stock and/or declaration of stock dividends. (2) Preferred shares (Government) conversion of rediscounting arrearages with the Central Bank to match common shares of stock in Item (1) above. f. Conversion scheme . The unmatched common stock of participating rural banks as of June 30, 1980 shall be immediately matched through the conversion of an equal amount of supervised credit rediscounting arrearages into preferred stock of the Government in the name of the DBP. For every additional private paid-in capital put up by the rural bank pursuant to its capital buildup program, an equivalent amount of rediscounting arrearages shall be likewise converted into preferred shares to be issued also in the name of the DBP. g. Increase in authorized capital . In case the capital buildup program will necessitate an increase in the authorized capital, the rural bank shall effect an amendment of its articles of incorporation to increase such authorized capital stock to an amount called for under the capital buildup program and conversion scheme. h. Restructuring . Past due rediscounted supervised credits inclusive of accrued interest of rural banks may be restructured by the Central Bank for a period not exceeding ten (10) years. The past due rediscounted supervised credits which are not restructured or covered by the conversion scheme under item "f" hereof shall be covered by an acceptable plan of payment for a period not exceeding ten (10) years. i. Interest rates . All restructured supervised credits of borrowers of rural banks and corresponding restructured rediscounting arrearages of rural banks with the Central Bank shall continue to bear the same interest rates charged on the original loan obligation. j. Rediscounting privilege . The participating rural bank shall be allowed to rediscount its eligible papers in accordance with existing guidelines: Provided , That the additional preferred shares arising from the conversion scheme shall be included in the computation of net worth for the purpose of determining the rural bank's credit ceiling: and Provided, further , That the rural bank shall have complied with the yearly additional capital contribution under its capital buildup program and conversion scheme and/or with its approved plan of payment: and Provided, finally , That the past due supervised credits under the program shall not be considered in the computation of the past due ratio. k. Additional privileges . Participating rural banks shall be entitled to additional financial-assistance in the form of loan(s) under Section 90 of R.A. No. 265, as amended, with maturity not exceeding ten (10) years. The loan(s) shall be in such amount as to enable the rural bank to purchase government securities from the Central Bank that will generate income during the period of the loan/s to absorb bad accounts that may be written off in accordance with existing regulations. However, the amount of the write-offs that may be absorbed by said income shall not exceed fifteen per cent (15%) of the rural bank's past due loans as of June 30, 1980 or the valuation reserves recommended by the Central Bank in the latest examination report, whichever is lower. The income from such government securities shall be credited to the account "Reserve for Contingencies" and shall be used exclusively for the purpose herein stated. The government securities so purchased shall be deposited with the Central Bank as collateral security for the loan and shall be encashed by the rural bank to pay off the loan upon maturity. l. Special sinking fund . The rural bank shall immediately set up a special sinking fund for the specific purpose of retiring the preferred shares issued in accordance with the conversion scheme. Equal yearly installments shall be set aside for the special sinking fund from profits, collections and/or other sources which shall be sufficient to retire all such preferred shares within a period of ten (10) years from the issuance thereof. Any income of the special sinking fund shall accrue to such fund. The fund shall be in the custody and under the administration of the Central Bank. The fund shall be invested in the form of evidences of indebtedness of the Republic of the Philippines, the Central Bank of the Philippines and other evidences of indebtedness or obligations, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines or shall be placed on time deposit with the Philippine National Bank, the Land Bank of the Philippines or the Development Bank of the Philippines. m. Application of payments . All loan repayments on supervised credits under the program shall be remitted to the Central Bank by the rural bank within ten (10) banking days from receipt thereof and may be applied as follows: (1) Collections received from notes securing restructured accounts to restructured rediscounting obligations of rural banks; (2) Collections from loans securing rediscounting obligations converted into preferred shares to special sinking fund for the retirement of the government preferred shares; and (3) Collections from loans securing rediscounting obligations covered by an approved plan of payment to rediscounting obligations covered by plan of payment. However, the rural bank shall have the option to apply the collections under Item (2) above to the restructured notes.. Provided , That the yearly requirement on the special sinking fund is satisfied. n. Sanctions Failure to comply with the approved capital buildup program and repayment schedule for restructured loans and/or approved plan of payment may mean the imposition of any or a combination of the following: (1) Declaring the area of operations of the defaulting rural bank concerned open to the establishment of a new rural bank; (2) Declaring as due and demandable all restructured loans under this Program; (3) Suspension of all forms of financial assistance; (4) Sale to the public of the preferred shares of stock of the rural bank; (5) Suspension of the privilege to open extension offices, money shops and/or savings agencies; (6) Declaring as due and demandable the additional financial assistance granted under Item k of this subsection; and (7) Imposition of liquidated damages in accordance with existing guidelines. o. Requests for plans of payment to cover liquidation of past due rediscounting obligations with the Central Bank (1) Plans of payment to cover liquidation of rural banks' rediscounting arrearages may be allowed if: (a) The rural bank has no unremitted collections, which, under this special plan of payment, is defined as collections on rediscounted notes the corresponding loan values of which were not actually remitted to the Central Bank. Rural banks may be allowed, however, to include their total unremitted collections, as defined, as part of the initial installment on their proposed repayment plans, and in cases of rural banks under new management, liquidation of their unremitted collections may be amortized under a plan of payment: Provided , That the change of management was specifically authorized by the Monetary Board; (b) The rural bank has not been suspended from availing itself of financial assistance by the Governor or the Monetary Board; and (c) The rural bank's risk assets ratio is not below ten per cent (10%). (2) The repayment period shall be in accordance with the following: Amount to be covered by plan of payment, exclusive of accrued interest and liquidated damages, if any Period P100,000 P200,000 Not exceeding 6 months Over P200,000 P300,000 Not exceeding 8 months Over P300,000 P500,000 Not exceeding 1 year Over P500,000 P1 million Not exceeding 1 1/2 years Over P1 million P2 million Not exceeding 2 years Over P2 million Not exceeding 3 years (3) Plans of payment of rediscounting obligations shall be subject to the following terms and conditions: (a) Loan(s) that may be granted to the rural bank during any month that the plan of payment is in full force and effect shall be to the extent only of not more than the following percentages of whatever payments it makes to the Central Bank under the plan as applied to principal, subject to existing rules and regulations governing rediscounting; (i) For non-supervised credit and supervised credit non-food papers 60% of payments made as applied to principal (ii) For supervised credit papers under the various food production financing programs 80% of payments made as applied to principal. (b) In the event that collections of a rural bank on accounts assigned to the Central Bank for any month exceed the corresponding amount indicated in the plan, one hundred per cent (100%) (for supervised credit loans) or eighty per cent (80%) (for non-supervised credit loans) of such excess collections shall likewise be remitted to the Central Bank, if only to accelerate payments of its loans; (c) The liquidated damages of five per cent (5%) per annum shall be imposed on all outstanding past due accounts of the rural bank except on past due loans used exclusively in the financing of Masagana 99 , Masaganang Maisan and other food production programs which were suspended effective March 29, 1974: Provided , That such exemptions from liquidated damages shall be limited to the extent of damage on account of force majeure as ascertained by Central Bank agricultural examiners and project evaluators. For this purpose, the rural bank concerned shall obtain a certification on the extent of such damage from the Department of Rural Banks and Savings and Loan Associations and submit such certification to support its request for exemption from the imposition of the five per cent (5%) liquidated damages; and (d) Should the rural bank fail to comply with any of the aforementioned conditions as well as with existing rules and regulations governing rediscounting and if, upon examination of its accounts, it is verified that it has extended fictitious and/or indirect loans to its own stockholders, the rural bank shall automatically be denied the privilege of access to the rediscounting facilities of the Central Bank. cdtech It is understood that availment of this plan of payment shall be on a case-to-case basis to be determined by Central Bank examiners who have been instructed to call on the rural banks concerned. (4) The Department of Loans and Credit, Central Bank is authorized to temporarily set aside the requirement in Paragraph (1) (a) that the full amount of unremitted collections may be allowed to form part of the initial installment in their proposed repayment plans. It may allow such unremitted collections to be amortized, together with all its past due rediscounting obligations, over the allowable period not exceeding three (3) years, as provided in Paragraph (2) of this Sub-item: Provided , That the rural banks concerned had, in accordance with LOI No. 490 dated December 27, 1976, increased their collection personnel; instituted legal action against all their borrowers who maliciously refused to pay their loans: Provided, further , That these rural banks had not committed violations concerning mismanagement and extension of fictitious loans. Rural banks that are presently under suspension by the Governor/Monetary Board from obtaining financial assistance from the Central Bank may be allowed to enter into plans of payment for the gradual liquidation of their arrearages: Provided , That limited rediscounting shall not be granted until such suspension shall have been lifted. SUBSECTION 3273.3 Additional financial assistance As a complementary measure to the program to assist rural banks with rediscounting arrearages, the Monetary Board authorized the grant of additional financial assistance to rural banks participating in the special financing programs of the government under the supervised credit scheme which have maintained satisfactory rediscounting repayment records under the following rules: a. Rural Banks entitled to additional financial assistance . A rural bank participating in the special financing programs of the government under the supervised credit scheme which maintains satisfactory rediscounting repayment records with the Central Bank by paying its rediscounting obligations out of its own funds despite the failure of its borrowers to pay their corresponding loan obligations to said bank, may be granted additional financial assistance: Provided , That it meets the following requirements: (1) That the rural bank must be operating substantially in accordance with law and the rules, regulations and directives issued by the Central Bank and there are no serious exceptions or violations in its operations; (2) That the rural bank has no past due special time deposit obligations with the Central Bank; (3) That the rural bank has no unremitted collections; and (4) That there is no internal dissension in the rural bank which may seriously disrupt its operations. b. Grant of long-term loan ; government investment . A rural bank with substantial past-due loans caused by the failure of its borrowers to pay their loan obligations may be granted a long-term loan by the Central Bank for a period not exceeding ten (10) years. The loan shall be in such amount as to enable the rural bank to purchase government securities from the Central Bank that will generate income during the period of the loan to absorb bad accounts that may be written-off in accordance with existing regulations. However, the amount of such write-offs that may be absorbed by said income shall not exceed fifteen per cent (15%) of the rural bank's past due loans as of September 30, 1978 or the valuation reserves recommended by the Central Bank in the latest examination report, whichever is lower. The income from such government securities shall be credited to the account "Reserve For Contingencies" and shall be used exclusively for the purpose herein stated. The government securities so purchased shall be deposited with the Central Bank as collateral security for the loan and shall be encashed by the rural bank to pay off the loan upon maturity. Subject to the availability of funds, a rural bank which meets the foregoing requirements shall be entitled to additional government investment in the form of preferred shares in case the bank's paid-up capital in the form of common shares exceeds the government preferred shares, excluding the preferred shares previously retired. Existing guidelines on the retirement of preferred shares under this program shall apply. SUBSECTION 3273.4 Other requisites . All borrowing rural banks shall also submit to the Department of Loans and Credit the following: a. A copy of the resolution of the board of directors of the rural bank confirming and acknowledging receipt of the proceeds of the loan from the Central Bank; b. Statement of Condition as of the 15th and end of every month supported by the corresponding Statement of Income and Expenses; c. Summary of loans granted for the four-month period ending at the end of every month; d. A copy of the weekly Report on Required and Available Reserves; and e. A certification to the effect that they have not incurred net reserve deficiencies for four (4) consecutive weeks as of the date of their applications. In cases where net reserve deficiencies were incurred for four (4) consecutive weeks, applicant rural banks shall likewise submit a certification indicating the inclusive dates such net deficiencies were incurred. SUBSECTION 3273.5 Special availment of rediscounting privilege . To provide immediate assistance to rural banks which were already found qualified to participate in the rehabilitation program under Subsec. 3273.2 but have not submitted the restructured promissory notes of their borrowers, the rediscounting privilege may be availed of by said rural banks under the following conditions: a. the rural bank has submitted a capital build-up program duly approved by its board of directors/stockholders; b. The stockholders have paid to the rural bank the private capital contribution corresponding to the bank's initial amortization on its approved capital build-up program; and c. The ratio of past due loans to total loan portfolio of the rural bank exclusive of past due loans in the process of restructuring is twenty five per cent (25%) or below. The provisions of the rediscounting guidelines, as amended, shall govern the applications for loans with the Central Bank and such rediscounting privilege shall be for a maximum period of 120 days from receipt of advice of the Committee on Rehabilitation Programs for Rural Banks, unless the rural bank concerned shall have submitted all the restructured promissory notes and other requirements on or before the end of the one hundred twenty (120) days. SECTION 3274. Rediscounting of Specific Papers . The rediscounting of specific papers shall be governed by their respective programs. SUBSECTION 3274.1 Integrated agricultural financing ; cottage and small scale industry financing Loans granted under this program shall be rediscounted with the CB-DLC within 60 days from date of release of STD to the borrowers. a. The application for rediscounting shall be supported by the following: (1) Duly accomplished rediscount schedule; (2) Borrower's promissory note duly endorsed by the financing institution together with the corresponding certificate of registration/accreditation with the NACIDA and any or all collateral documents securing said loans; (3) The financing institution's advice to CB-DLC to remit rediscounting proceeds to the CB-DRBSLA to be applied in payment of the outstanding STD of the applicant financing institution; (4) The financing institution's signed promissory note in favor of the Central Bank; (5) Resolution of the board of directors authorizing the financing institution to negotiate for the loan with the Central Bank and designating the officers authorized to endorse the promissory notes and sign all papers pertaining to the loan; (6) Latest statement of financial condition and statement of income and expenses; (7) Latest report on required and available reserves together with a certification that the financing institution has not incurred net reserve deficiencies for four (4) consecutive weeks immediately preceding the date of its application; and report on average monthly savings and time deposits during the past four (4) months immediately preceding the date of its application. b. Rate and term of rediscounting . The CB-DLC shall rediscount eligible loans granted under this program at (100%) of the loan at the rate of three per cent (3%) per annum for a maximum term of 360 days: Provided , That the paper presented for rediscounting bears an effective interest rate of nine per cent (9%) per annum plus bank charge not exceeding one per cent (1%) per annum. c. Repayment of rediscounting obligations Repayment of rediscounting obligations must be in accordance with existing rules and regulations. SUBSECTION 3274.2 Cottage industry fund a. When to rediscount ; supporting paper . (1) Loans granted under this program shall be rediscounted with the CB-DLC within 60 days from the date of release of STD to the borrowers. (2) The application for rediscounting shall be supported by the following: (a) Duly accomplished rediscount schedule; (b) Borrowers' promissory notes duly endorsed by the rural bank together with the corresponding certificate of registration/accreditation with the NACIDA and any or all collateral documents securing said loans; (c) The rural bank's advice to CB-DLC to remit rediscounting proceeds to the CB-DRBSLA to be applied in payment of the outstanding STD of the applicant rural bank; (d) The rural bank's signed promissory note in favor of the Central Bank; (e) Resolution of the board of directors authorizing the rural bank to negotiate for the loan with the Central Bank and designating the officers authorized to endorse the promissory notes and sign all papers pertaining to the loan; (f) Latest statement of financial condition and statement of income and expenses; (g) Latest report on required and available reserves together with a certification that the rural bank has not incurred net reserve deficiencies for four (4) consecutive weeks immediately preceding the date of its application; and aisadc (h) Report on average monthly savings and time deposits during the past four (4) months immediately preceding the date of its application. b. Rate and term of rediscounting . The CB-DLC shall rediscount eligible loans granted under this program at one hundred per cent (100%) of the loan at the rate of three per cent (3%) per annum for a maximum term of three hundred sixty (360) days: Provided , That the paper presented for rediscounting bears an effective interest rate of nine per cent (9%) per annum plus bank charge not exceeding one per cent (1%) per annum. c. Repayment of rediscounting obligations Repayment of rediscounting obligations must be in accordance with the existing rules and regulations. SUBSECTION 3274.3 (Deleted by Circular 1003) . SUBSECTION 3274.4 Short-term financing for cotton supervised credit . CB-DLC rediscounts at one hundred per cent (100%) all eligible papers of participating bank/SLA for short-term production at a preferential rate of one per cent (1%). a. Bank/SLA rediscounts the promissory note with CB-DLC submitting with the rediscounting schedule a copy of the borrowers application and promissory note and farm plan and budget. b. Upon approval of bank/SLA application, CB-DLC automatically credits fifty per cent (50%) of the rediscounting proceeds to the bank's/SLA's STD account with CB-DRBSLA and the remaining fifty per cent (50%) to the bank/SLA depository bank and the bank/SLA is notified by telegram. SUBSECTION 3274.5 Promissory notes supported by pledges of blue chip/high grade shares of stock a. Coverage . Promissory notes held by banks secured by pledges of high grade/blue chip shares of stock shall be eligible for rediscounting with the Central Bank. b. Criteria for selecting high grade/blue chip shares . The Central Bank, in consultation with the Securities and Exchange Commission shall determine what are high-grade/blue chip shares for purposes of this subsection. c. Terms and conditions of rediscounting (1) The promissory notes shall be rediscounted at eighty per cent (80%) loan value of the face amount/outstanding balance thereof as of the date of rediscounting: Provided , That the total face amount/outstanding balance of paper belonging to one borrower which may be rediscounted with the Central Bank shall not exceed P100,000; (2) Rediscounting availments shall be assessed an interest of eight per cent (8%) per annum, in accordance with Subsec. 3271.2a(2)(b). (3) The rate of interest that may be charged by banks on paper rediscounted with the Central Bank in accordance with the provisions of this subsection shall not exceed fourteen per cent (14%) per annum inclusive of service and other charges: SECTION 3275. Guidelines to Govern the Grant by the Central Bank of Special Credit Accommodations to Banks and Non-Bank Financial Intermediaries Performing Quasi-banking Functions . The following guidelines shall govern the grant by the Central Bank of special credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions. SUBSECTION 3275.1 Nature of special credit accommodations . The Central Bank, as lender of last resort, may extend loans, advances, rediscounts and such other forms of credit accommodations to banks and non-bank financial intermediaries performing quasi-banking functions to provide them with liquidity in times of need. SUBSECTION 3275.2 Conditions to access . The loans to directors, officers, stockholders and their related interests of the bank or non-bank financial intermediary performing quasi-banking functions applying for/seeking to avail itself of this special credit accommodation shall not exceed the prescribed aggregate or individual ceiling and the ceiling on unsecured loans and such loans shall all be in current status; and (b) the loan portfolio arrearages in the bank or non-bank financial intermediary performing quasi-banking functions must not exceed one and a half times the average of arrearages in the particular sector of the industry to which the financial intermediary belongs, as of the end of the quarter preceding the application for availment. SUBSECTION 3275.3 Terms of the credit a. Interest, penalty rates . The rate of interest changeable on availment of such credit accommodation shall be an amount equivalent to a rediscount reference rate plus an additional rate. The rediscount reference rate shall be established by the Central Bank from time to time. In determining the rate, the Central Bank shall take into consideration the average effective yield rate charged or received by banks and non-bank financial intermediaries performing quasi-banking functions on the purchases of commercial paper without recourse. The additional rate to be imposed over and above the rediscount reference rate shall not be less than two (2) percentage points, with the applicable additional rate to be determined by the Central Bank on the basis of the prevailing monetary situation. This rediscount reference rate and the additional rate established for any given time shall be made public by the Central Bank and applied uniformity to all borrowers during that period. The interest/penalty rates that shall be assessed rural bank in their emergency loans/availments under the "lender-of-last-resort" facility and overdrawings in their respective demand deposit accounts with the Central Bank shall be as follows: (1) An interest rate of twelve per cent (12%) per annum plus liquidated damages of five per cent (5%) per annum for delayed payments on emergency loans; (2) Liquidated damages of five per cent (5%) per annum for delayed payments on "lender-of-last-resort" facility loans in addition to the existing rate of interest equivalent to the rediscount reference rate plus an additional rate of not less than two (2) percentage points; and (3) A minimum interest rate of sixteen per cent 16% per annum or the prevailing average interbank call loan rate, whichever is higher, plus five per cent (5%) per annum on overdrawings in the demand deposit accounts with the Central Bank. b. Security . Any paper, irrespective of maturity, eligible under Section 87 or Section 88 of Republic Act No. 265, as amended, shall be acceptable security for this credit facility. c. Loan values . The loan values of the paper offered as collateral shall be eighty per cent (80%) of the amount still due and outstanding on the paper offered as collateral. d. Repayment period . The term of the credit accommodation shall not exceed ninety (90) days. SUBSECTION 3275.4 Quota . Availment by any authorized financial intermediary under this facility shall not exceed ten per cent (10%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of application. In the case of branches of foreign banks, the quota shall be ten per cent (10%) of the assigned capital as of the date of application. Additionally, an authorized financial intermediary or a branch of foreign bank may avail itself of this facility to the extent equivalent to a further five per cent (5%) of its net worth, net of valuation reserves, as of the end of the quarter preceding the date of availment or assigned capital as the case may be. Any availment of this special credit facility shall fall within the unavailed basic rediscount ceiling of the authorized financial intermediary or the branch of a foreign bank as the case may be. SECTIONS 3276-3280. (Reserved) . J. DEPOSIT SUBSTITUTE OPERATIONS (Quasi-Banking Functions) SECTIONS 3281-3290. (Reserved) . K. OTHER BORROWINGS SECTION 3291. Borrowings from the Government . The provisions of Section 3239 on the acceptance of deposits and borrowings from the Government, its branches, political subdivisions or instrumentalities or from Government-owned or controlled corporations, shall be observed. Note: Amendments to Section 3291 as provided by the following: 1) CBP Circular 1153 dated September 3, 1987; 2) CBP Circular 1242 dated June 20, 1990 SECTION 3292. Borrowings from Trust Departments/Investment Houses . Funds borrowed by banks or non-bank financial intermediaries performing quasi-banking functions from trust departments or managed funds of banks or investment houses are not considered as interbank borrowings and, therefore, are subject to the: a. reserve requirement on deposit substitutes; b. minimum fifteen (15) day maturity period; c. minimum trading lot rule; and d. twenty per cent (20%) final withholding tax on deposit substitutes. SECTION 3293. Borrowings from the Development Bank of the Philippines . Rural banks may rediscount with the Development Bank of the Philippines (DBP) their term loans for specific socio-economic development projects at a rediscount rate of sixteen per cent (16%) per annum inclusive of service charges: Provided , That the spread between the bank lending rate and the DBP rediscount rate shall not exceed seven per cent (7%) per annum. SECTION 3294-3298. (Reserved) . SECTION 3299. General Provision on Sanctions . Any violation of this Part shall be subject to the sanctions in Sections 34 and 34-A of Republic Act No. 265, as amended. cdta * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas Footnotes * The sample of the prescribed form is App. 6-b. PART THREE Loans, Investments and Special Financing Programs A. LOANS IN GENERAL SECTION 3301. Basic Lending Policies ; Loan Limits ; Prohibition . A rural bank shall extend loans to as many qualified borrowers as possible, preference to be given to borrowers whose credit requirements are small. However, in the case of special financing programs under supervised credit, preference shall be determined in accordance with the rules and regulations implementing such programs. Notwithstanding the borrower's capacity to pay and the collateral he may be able to offer, the maximum aggregate loans which a rural bank may grant to a single borrower shall not exceed fifteen per cent (15%) of its unimpaired capital and surplus, net of deferred income tax as defined under item 'i' of Subsection 3116.2. "Funds of a rural bank, except those representing proceeds of special time deposits and rediscounting, deposited with any other bank shall at no time exceed an amount equivalent to fifteen per cent (15%) of the unimpaired capital and surplus of the Bank, net of deferred income tax as defined under item 'i' of Subsection 3116.2: Provided . That with prior clearance from the Director, Department of Rural Banks and Savings and Loan Associations (now SES Department III), a rural bank may exceed the limit herein prescribed if there is only one (1) depository bank in the locality where the rural bank is situated. ( Effective April 23, 1985 ) The liabilities to the bank of borrowers whose papers were discounted and/or rediscounted by banks with the Central Bank or any other institution shall not be deemed as having been extinguished by the discount and/or rediscount, but shall be considered as still existing and shall be included in determining the total loans to a single borrower for purposes of compliance with Section 32 of the General Banking Act until such papers are paid by the borrowers. The Kilusang Kabuhayan at Kaunlaran (KKK) loans shall be exempted from the 15% single borrower limit. ( Effective May 27, 1983 ) SUBSECTION 3301.1 Purposes . Loans may be granted for the purpose of conducting or carrying on, developing, or improving agricultural, commercial or industrial operations as well as meeting health, education and subsistence needs, and other normal credit needs of farmers and farm families owning or cultivating land dedicated to agricultural production, and merchants, or to cooperatives of such farmers and merchants, as well as other inhabitants within their service areas. Loans may also be granted for personal or household finance, home building, and home development. Preference shall be given to applications of farmers and merchants whose cash requirements are small. Rural banks are authorized to use government counterpart capital for loans other than those under the supervised credit program, at such rate of interest as may be allowed under existing regulations, subject to the condition that the loans granted by rural banks to agrarian reform beneficiaries as provided under R.A. No. 6390, as amended, shall at all times be at least equal to their individual government counterpart capital. ( Effective Mar . 15, 1983 ) SUBSECTION 3301.2 Processing, granting of loans The following shall be observed by rural banks in the processing and granting of loans: a. Rural Banks shall use the prescribed application form (CB-RB Credit Form No. 1, Revised) on their lendings. b. Credit investigations shall be conducted on all loan applications which shall include the verification of the existence of the project sought to be financed, the property offered as security, the actual credit needs and the repayment capacity of the borrower. c. In applicable cases, a responsible officer shall report to the Credit Committee and/or the board of directors the results of the investigations with recommendations as to whether or not the loan may be approved. d. Final action on the loan application shall be communicated to the applicant; Provided , That no loan proceeds shall be released without proper documentation such as the promissory note, the registration of mortgage or chattel mortgage papers and pledges. If a borrower cannot read or write, he shall be required to register his conformity with the provisions of the provisory note by imprinting his right and left thumb marks above his name in the note after the contents thereof have been read and explained to him. All notes must be signed by at least two (2) witnesses, one of whom shall be a responsible officer of the rural bank. e. Loans payable in installments, aside from the ordinary documentary requisites, shall specifically indicate the amount and due date of each installment. SUBSECTION 3301.3 Approval of loans ; delegation of power by board . The board of directors shall have final action on all loan applications. However, it may delegate to the manager and to a credit committee, composed of a director as chairman and another director and the manager as members, the power to act on loan applications of such amounts as may be authorized by the board. All loans granted under such delegated authority must be confirmed subsequently by the board. SUBSECTION 3301.4 Co-makers, sureties and guarantors . To be eligible as co-maker, surety, or guarantor, a person must have the essentials of credit provided for in Subsec. 3301.2. Loans granted under supervised credit may be secured by at least two (2) co-makers acceptable to the bank: Provided , That in case a farmer is a member of a cooperative or selda/damayan , the cooperative or selda/damayan , may act as co-maker; Provided, further , That in case of multi-purpose cooperatives, no co-maker shall be required. The term, selda/damayan , as used herein, shall refer to a joint liability group consisting of from five (5) to fifteen (15) eligible farmer-borrowers owning/cultivating farmlands in the same area. The members of the selda shall be liable jointly and severally for any loan obtained from a rural bank by any of its members. The barrio guarantee fund of the samahang nayon shall guarantee payment up to thirty per cent (30%) of loans obtained by its members from rural banks in accordance with the guidelines issued by DLGCD. SUBSECTION 3301.5 Collection of loans . A rural bank must give written notice to the borrowers at least fifteen (15) days prior to the due dates of the loans, with warning in case of default. Before a loan is referred to a lawyer for collection, the bank should have sent either through personal service or by registered mail with return card at least two (2) demand or collection letters, at an interval of one (1) month each, to the borrowers in their last known address. If no settlement of the loan is arrived at, the loan may be referred to a lawyer for collection. A lawyer who is not a regular salaried legal counsel of the rural bank shall be entitled to collect attorney's fees in case of extrajudicial or judicial proceedings to collect the loan, in an amount not exceeding ten per cent (10%) of the total amount due and payable. SUBSECTION 3301.6 Application of payments . Any payment made by a borrower to a rural bank shall first be applied to penalties imposed, then to interest due and payable, and the balance, if any, to the principal of the loan. In case a loan is litigated, payments made thereon shall first be applied to the costs of the suit and legal expenses, thence to penalties, interest and finally, the balance, if any, to the principal of the loan. SUBSECTION 3301.7 Prohibitions a. No rural bank shall grant any loan/accommodation (as the term is defined in Sec. 3327 and further limited to the types of credit a rural bank may extend) to any examiner, officer or employee of any department, bureau, office or agency of the government, who is assigned to examine, supervise, assist or render technical service to said bank. b. A rural bank cannot encash merely for accommodation purposes checks of other banks or other cash items, except those presented by payees of domestic postal money orders and treasury warrants. c. Rural banks shall, in no case, require borrowers to leave behind or deposit back with them (lending banks) a portion of the loan proceeds, whether in the form of demand, savings or time deposit. Likewise, no bank shall, during the processing of any loan application or at any time after approval thereof or release of the loan proceeds, enter into any form of agreement, irrespective of the purpose thereof under which the borrower shall be prohibited from, or limited in, making withdrawals from any of his deposit accounts with such bank while any portion of his loan is outstanding: Provided, however , That this prohibition shall not apply in cases of loans secured by a hold-out on deposit(s) to the extent of the unencumbered amount of the deposits(s) existing at the time of the filing of the abovementioned loan application. Violation of this subsection shall subject the bank concerned to Section 87 of Republic Act No. 337, as amended, without prejudice to the imposition of administrative sanctions under Section 34-A of Republic Act No. 265, as amended. However, pursuant to Regulation No. 9 of LOI No. 23, as amended (implementing PD 175), rural banks shall automatically deduct from every production loan of members of the samahang nayon an amount equivalent to three per cent (3%) of such loans to implement the barrio savings fund program. (As amended by BSP Circular 4 dated September 13, 1993) SECTION 3302. Loan Proceeds . Before granting a loan, banks shall ascertain the purpose of the loan which shall be clearly stated in the contract between the bank and the borrower. The proceeds of a loan shall be utilized only for the purpose(s) stated in the loan contract; otherwise, the bank may terminate the loan and demand immediate repayment of the obligation. Notwithstanding the next preceding paragraph, the proceeds of a loan may be utilized by the borrower for the purpose(s) other than that originally stated in the loan contract: Provided , That such other purposes(s) is/are among those for which the lending bank may grant loans under existing laws and regulations: Provided, further , That such utilization shall be with the prior written approval of duly authorized officer(s)/committee of the lending bank/its board of directors and such written approval shall form part of the contract between the bank and the borrower. Violation of any of the provisions of this subsection shall subject the person(s) responsible/bank concerned to Section 87 of Republic Act No. 337, as amended, without prejudice to the imposition of administrative sanctions under Section 34-A of Republic Act No. 265, as amended. (As amended by CBP Circular 1217 dated December 20, 1989) SECTION 3303. Interest and Other Charges . The interest, service fees and other charges chargeable by rural banks shall be governed by the following rules. SUBSECTION 3303.1 Interest a. Maximum interest rate . The effective rate of interest, including commissions, premiums, fees and other charges, on a loan or forbearance of any money, goods, or credits with a maturity of three hundred sixty-five (365) days or less, shall not exceed sixteen per cent (16%) per annum for secured loans and eighteen per cent (18%) per annum for unsecured loans, as defined respectively by Sections 2 and 3 of the Usury Law, as amended. For purpose of this item effective rate shall mean the price paid for the use of money expressed as a percentage, on an annual basis, of the amount actually received. In case the principal is amortized, the rate shall be computed on the basis of the outstanding balance. The computation assumes that interest is paid at maturity, or at the end of one (1) year, if the maturity of the loan exceeds one (1) year. The maximum rates under this item include commissions, premiums, fees and other similar charges, but exclude registration fees, mortgage redemption insurance, documentary and science taxes and such other expenses independently determinable and which do not accrue to the lending entity, its affiliates/subsidiaries, and their personnel. The interest rate on a loan or forbearance of any money, goods or credits with a maturity of more than three hundred sixty-five (365) days shall not be subject to any ceiling. The rate of interest on a loan or forbearance subject to a fixed rate of interest may be stated as a single rate or on the basis of the current reference rate mentioned in Subsec. 3303.5 on the date the loan or forbearance is granted plus a margin as may be agreed upon by the parties. b. Interest rate of loans secured by Government securities . A loan or renewal thereof or forbearance of money, goods or credits secured in whole or in part by government securities shall not earn a higher rate of interest or greater sum or value, including commissions, premiums, fines and penalties, than twelve per centum (12%) per annum. For the purposes of this item, government securities shall include only the following: (1) Securities issued by the National Government; (2) Securities issued by the Central Bank of the Philippines; and (3) Securities issued by other government entities, including government-owned and-controlled corporations, the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. c. Computation . In the computation of interest on loans and other credit accommodations as mentioned in Subsec. 3303.1, the number of days comprising a year shall be based on the following: when the term is one (1) year or more, a year shall mean 365 days; and when the term is less than one (1) year, the interest yield shall be computed on the basis of 360 days in the year. d. Interest rate in the absence of stipulation . The rate of interest for the loan or forbearance of any money, goods or credits and the rate allowed in judgments, in the absence of express contract as to such rate of interest, shall be twelve per cent (12%) per annum. * f. Reduction of interest rates . All rural banks are authorized to grant a two per cent (2%) reduction in interest rate as an incentive to farmer-borrowers under the supervised credit program involving food items who pay their loans in full on or before maturity date. Under this interest reduction scheme, the interest rate that can be imposed on the loans of such borrowers of good standing under said program shall be ten per cent (10%) plus service and bank charges not exceeding three per cent (3%). The two per cent (2%) interest reduction shall be authorized only upon payment in full on or before maturity date. The provision on this two per cent (2%) reduction in interest rate shall be incorporated in the loan application and/or promissory note between the bank and the borrower. The grant of rebates for prompt payments under the Masagana 99 programs shall be optional on the part of the lending banks. g. Sanctions . Whenever any person or entity violates any of the provisions of Subsec. 3303.1a, the person or persons responsible for such violation shall be subject to the penalty prescribed in the first paragraph of Section 34 of Republic Act No. 265, as amended, and/or the penalty prescribed in Section 10 of Act No. 2655, as amended, without prejudice to any action under the provisions of the second paragraph of Section 34 of Republic Act No. 265, as amended, and the imposition of administrative sanctions under Section 34-A of said Republic Act. SUBSECTION 3303.2 Service fees and other charges Except for the following paragraph which shall continue to be applicable (the ceiling on the rate of interest remains at twelve per cent (12%) per annum), the service fees and other charges on a loan or forbearance of any money, goods, or credits with a maturity of 730 days or less shall be included in the interest charged as provided under Sec. 3303.1a. Rural banks, upon release of each loan granted to an individual who is beneficiary of land reform under the supervised credit system, may collect, exclusive of interest on such loan, service fees and other charges not exceeding two per cent (2%) or one hundred fifty pesos (P150.00) per annum, whichever is lower. SUBSECTION 3303.3 Accrual of interest income . All banks are allowed to accrue interest earned on loans subject to the following guidelines: a. Only interest earned on current loans shall be accrued. No accrual of interest income is allowed if the loans or loan installments have matured or have become past due in accordance with the criteria for past due accounts or loan installments in arrears provided in Sec. 3304. Current loans as used herein, includes extended, renewed and restructured loans. (As amended by Section 1 of CBP Circular 1147 dated June 19, 1987) b. Interest earned on extended, renewed or restructured loans may be accrued provided there is no previously accrued but uncollected interest thereon. c. Accrued interest earned but not yet collected/received on loans or loan installments shall not be considered as profits and/or earnings eligible for dividend declaration and/or profit sharing purposes. d. Accounting procedures for uncollected interest shall be in accordance with Subsec. 3304.4. No interest income shall be accrued on past due accounts. Interest on past due accounts shall be taken up as income only when actual payments thereon are received. Rural banks shall report the end-of-month level of their past due accounts and installments in arrears for less than the number indicated in Sec. 3304a and for those using the accrual basis of accounting, the accrued interests thereon, subject to the next preceding paragraph. SUBSECTION 3303.4 Escalation clause : when allowable . Parties to an agreement pertaining to a loan or forbearance of money, goods or credit may stipulate that the rate of interest agreed upon may be increased in the event that the applicable maximum rate of interest is increased by law or by the Monetary Board: Provided , That such stipulation shall be valid only if there is also a stipulation in the agreement that the rate of interest agreed upon shall be reduced in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board: Provided, further , That the adjustment in the rate of interest agreed upon shall take effect on or after the effectivity of the increase or decrease in the maximum rate of interest. SUBSECTION 3303.5 Floating rate of interest . The following rules shall govern loans with floating rate of interest: a. The rate of interest on a floating rate loan during each interest period shall be stated as the current reference rate on the first day of an interest period plus a margin as may be agreed upon by the parties. b. The reference rate shall be determined and announced by the Central Bank every month and shall be based on the weighted average of the interest rates paid by the five (5) banks with the largest volume of business transacted during the immediately preceding thirty (30) days on time deposits with maturities of more than seven hundred thirty (730) days. c. Where the loan agreement provides a floating rate of interest system, the interest period, which shall be each period of time for which the rate of interest is fixed in this subsection, shall be three (3) or six (6) months, upon mutual agreement of the parties. SECTION 3304. Past Due Accounts . For purposes of this section, past due accounts shall, as a general rule, refer to all accounts in a bank's loan portfolio, all receivable components of trading accounts securities, and other receivables, as defined in the Manuals of Accounts for banks, which are not paid at maturity. The following shall be considered as past due: a. The total outstanding balance of a loan or receivable payable in installments, in accordance with the following schedules: Mode of Payment Installments in Arrears Monthly 10 or more Quarterly 4 or more Semestrally 3 or more Annually 2 or more Provided, however , That in the case of loans or receivables of rural banks payable in installments, only the loan installment or portion thereof shall be considered past due; (As amended by Sections 3 and 4 of CBP Circular 1147 dated June 19, 1987) b. Any due and unpaid loan installment or portion thereof, from the time the obligor defaults. for the purpose of determining delinquency in the payment of obligations as defined in Subsec. 3143.1e. c. All items in litigation as defined in the Manuals of Accounts for banks. All past due loans to farmer-borrowers under the Maisagana program shall be excluded in the computation of the total past due accounts of rural banks seeking financial assistance from the Central bank under its various special financing programs. SUBSECTION 3304.1 Redemption of foreclosed property . To provide borrowers with clear information on their payments of past due accounts and to insure uniformity in the treatment of partial payments on past due loans before foreclosure, and after foreclosure but before the expiration of the redemption period, all rural banks are required to furnish in writing the borrowers/former owners and/or their successors in interest the information which will reflect the mechanics, terms and conditions regarding the redemption of foreclosed properties, particularly the following: a. Partial payments on past due loans shall be applied first as payment of the interest and the balance, if any, as payment of the principal of the loan. b. When the amount tendered for the account of the borrower within the redemption period is less than the redemption value of the foreclosed asset, such amount may be accepted by rural banks as "deposit for the redemption of foreclosed properties" and shall be applied as payment for the foreclosed asset only when such deposit equals the redemption value. c. Acceptance by a rural bank of a deposit for the redemption of a foreclosed property during the redemption period does not suspend the running of the period of redemption. d. If the total redemption value is not fully paid within the redemption period, deposits made thereon shall be returned to the borrower. SUBSECTION 3304.2 Renewal of loans . Except as may be authorized by existing regulations on renewal, no loan shall be renewed or its maturity date extended unless the corresponding accrued interest receivable shall have been paid. SUBSECTION 3304.3 Write-off of loans . To implement the provision of Sec. 84 of R.A. No. 337, as amended, which provides: "Writing off of loans and advances with an outstanding amount of one hundred thousand pesos or more shall require prior approval of the Monetary Board", the Monetary Board adopted the following regulations to govern the writing-off of loans as bad debts: a. Definition of loans and advances . The term loans and advances shall include all types of credit accommodations granted to, and advances made by the bank for the account of the borrowers/debtors, including interest thereon recorded in the books. b. Frequency of write-off . Writing off of loans and advances by rural banks shall be made not oftener than twice a year by its board of directors. Note: Amendments to Subsec. 3304.3 as provided by the following: 1) CBP Circular 1169 dated January 13, 1988; 2) CBP Circular 1185 dated October 10, 1988 c. Procedural requirements . Notice/application for write-off of loans and advances shall be submitted, on the prescribed form, to the Department of Rural Banks and Savings and Loan Associations at least thirty (30) days prior to the intended date of write-off: Provided , That no such loans and advances with aggregate outstanding amount of P100,000.00 or more, as certified in said notice/application, shall be written off without the prior approval of (1) The Monetary Board, in cases of loans, advances and all types of credit accommodations granted to directors, officers, and stockholders of the rural bank directly or indirectly, as defined under Sec. 3329. (2) The Director of the Department of Rural Banks and Savings and Loan Associations, subject to confirmation by the Monetary Board, in the case of loans and advances other than those mentioned in Item (1) above. SUBSECTION 3304.4 Valuation accounts a. Allowance for uncollected interest on loans . A contra account to be designated "Allowance for Uncollected Interest on Loans" shall be set up if accrued interest receivable on loans or loan installments as set up in Subsec. 3303.3 are still uncollected after six (6) months from the date such loans or loan installments have matured or have become past due. The amount representing "Allowance for Uncollected Interest on Loans" may be chargeable against the excess of outstanding valuation reserves for loans and other risk assets as appearing in the bank's books, over those recommended by the Department of Rural Banks and Savings and Loan Associations. The balance thereof, if any, shall be chargeable against operations. For all purposes, the "Allowance for Uncollected Interest on Loans" shall be considered as valuation reserve/allowance against the accrued interest receivable account. b. Valuation reserves . Valuation reserves equivalent to fifty per cent (50%) and one hundred per cent (100%) of Masagana 99 considered as "doubtful" of collection and "uncollectible or worthless or loss", respectively, shall be set up and adjusted at the end of each year and/or prior to any declaration of dividends. Guidelines in categorizing loans as "doubtful" of collection or "loss" under the Masagana 99 program and other similar supervised credit programs are provided for in Subsec. 3345.4. In cases where the total amount of valuation reserves set up would impair the net worth of the rural bank such as to constrict its lending operations, the setting up of valuation reserves may be implemented on a staggered basis, not exceeding five (5) years, upon prior approval of the Central Bank. SUBSECTION 3304.5 Penalty on past due loans a. Coverage (1) Farmer-borrowers . Rural banks may impose a penalty of not more than two per cent (2%) per annum on past due loans of farmer-borrowers: Provided , That rural banks which are not in arrears in the payment of their matured bills payable under the Central Bank's rediscount facility may charge a penalty rate of five per cent (5%) per annum in lieu of the two per cent (2%) per annum penalty charge: Provided, further , That in both cases the farmer-borrowers' failure to pay their obligations on time is due to inexcusable neglect. For purposes of this subsection, the term inexcusable neglect shall mean the failure of the borrower to pay the loan on its due date for any reason except (1) natural calamities such as typhoons and floods, or (2) grave illness or death of the borrower or any immediate member of his family, or (3) any other similar emergency beyond the control of the borrower: Provided , That such calamities or emergencies are the direct cause of non-payment of the loan on its due date. (2) Other borrowers . For all other borrowers, rural banks can impose a penalty of three per cent (3%) per annum: Provided , also, That their failure to pay their loans is due to inexcusable neglect. (As amended by CBP Circular 1255 dated October 12, 1990) b. Terms and conditions . The terms and conditions under which the penalty may be imposed shall be included in the promissory note, format of which shall be as prescribed by the Department of Rural Banks and Savings and Loan Associations. SECTION 3305. Truth in Lending Act Disclosure . All banks are required to strictly adhere to the provisions of Republic Act No. 3765, otherwise known as the "Truth in Lending Act" and shall make the true and effective cost of borrowing an integral part of every loan contract. SUBSECTION 3305.1 Information to be disclosed Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth the following information: a. The cash price or delivered price of the property or service to be acquired; b. The amounts, if any, to be credited as down payment and/or trade in; c. The difference between the amounts set forth under clauses a and b; d. The charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; e. The total amount to be financed; f. The finance charges expressed in terms of pesos and centavos; and g. The percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. The contract covering the credit transaction, or any other instrument to be acknowledged and signed by the debtor, shall indicate the above seven (7) items of information. In addition, the contract or document shall specify additional charges, if any, which will be collected in case certain stipulations in the contract are not met by the debtor. SUBSECTION 3305.2 Definition of terms a. Creditor (who shall furnish the information) means any person engaged in the business of extending credit (including any person who, as a regular business practice, makes loans or sells or rents property or services on a time, credit, or installment basis, either as principal or as agent) who requires as an incident to the extension of credit, the payment of a finance charge. The term creditor shall include, but shall not be limited to, banks and banking institutions, insurance and bonding companies, savings and loan associations, credit unions, financing companies; installment houses, real estate dealers, lending investors, pawnshops and any other person or entity engaged in the business of extending credit, who requires as an incident to the extension of credit, the payment of a finance charge. b. Person means any individual, corporation, partnership, association, or other organized group or persons, or the legal successor or representative of the foregoing, and includes the Philippine Government or any agency thereof or any other government, or any of its political subdivisions or any agency of the foregoing. c. Cash price or delivered price in case of trade transactions, is the amount of money which would constitute full payment upon delivery of the property (except money) or service purchased at the creditor's place of business. In the case of financial transaction, cash price represents the amount of money received by the debtor upon consummation of the credit transaction, net of finance charges collected at the time the credit is extended, if any. d. Down payment represents the amount paid by the debtor at the time of the transaction as partial payment for the property or service purchased. e. Trade-in represents the value of an assets, agreed upon by the creditor and debtor, and given at the time of the transaction in partial payment for the property or service purchased. f. Non-finance charges correspond to the amounts advanced by the creditor for items normally associated with the ownership of the property or of the availment of the service purchased which are not incident to the extension of credit. For example, in the case of the purchase of an automobile on credit, the creditor may advance the insurance premium as well as the registration fee for the account of the debtor. g. Amount to be financed consists of the cash price plus non-finance charges less the amount of the down payment and value of the trade-in. h.. Finance charge represents the amount to be paid by the debtor incident to the extension of credit, such as interest or discounts, collection fees, credit investigation fees, attorney's fees, and other service charges. The total finance charge represents the difference between (1) the aggregate consideration (down payment plus installments) on the part of the debtor, and (2) the sum of the cash price and non-finance charges. i. Simple annual rate is the uniform percentage which represents the ratio, on an annual basis, between the finance charges and the amount to be financed. In the case of a single payment upon maturity, the simple annual rate in per cent is determined by the following method: (finance charge) (12) R = x 100 (Amount to be financed) (maturity period in months) In the case of the normal installment type of credit of at least one (1) year in duration, where installment payments of equal amount are made in regular time period spaced not more than one (1) year apart, the simple annual rate (R), in per cent, is computed by the following method: (number of payments (finance charge) in a year R = 2 x x 100% (amount to be (total number of payment financed plus one) In cases where the credit matures in less than one (1) year (e.g., installment payments are required every month for six (6) months), the same formula will apply except that the number of payments in a year should refer to the number of installment periods, as defined in the credit contract, if the credit matures in one (1) year. For example, the number of payments in a year would be twelve (12) for this purpose in cases where six (6) monthly installment payments are called for in the credit transactions. 1 In cases where credit terms provide for premium or penalty charges depending on, say, the timeliness of the debtor's payments, the annual rate to be disclosed in writing shall be the rate for regular payments, i.e., the premium and penalty need not be taken into account in the determination of the annual rate. Such premium or penalty charges shall, however, be indicated in the credit contract. SUBSECTION 3305.3 Scope of regulations a. Transactions covered . The foregoing regulations shall apply to all creditors engaged in the following types of credit transactions: (1) Any loan, mortgage, deed of trust, advance and discount; (2) Any conditional sales contract, any contract to sell, or sale or contract of sale of property or services, either for present or future delivery, under which part or all of the price is payable subsequent to the making of such sale or contract; (3) Any rental-purchase contract; (4) Any contract or arrangement for the hire, bailment, or leasing of property; (5) Any option, demand, lien, pledge, or other claim against, or for delivery of, property or money; (6) Any purchase, or other acquisition of or any credit upon the security of, any obligation or claim arising out of any of the foregoing; and (7) Any transaction or series of transactions having a similar purpose or effect. b. Transactions not covered . Considering that the specific purpose of the law is the full disclosure of the true cost of credit, the following categories of credit transactions are outside the scope of the above regulations: (1) Credit transactions which do not involve the payment of any finance charge by the debtor; and (2) Credit transactions in which the debtor is the one specifying a definite and fixed set of credit terms such as bank deposits, insurance contracts, sale of bonds, etc. SUBSECTION 3305.4 Availability for inspection of copies of contracts . Every creditor shall keep in his office or place of business copies of contracts covering all credit transactions entered into by him which involve the extension of credit to another and the payment of finance charges therefor. Such copies shall be available for inspection or examination by the Director of the Department of Rural Banks and Savings and Loan Associations or his duly authorized deputies. In case the seven (7) items of information mentioned in Subsec. 3305.1 are not disclosed in the contract covering the credit transaction, said items, to the extent applicable, shall be disclosed in another document in a form to be prescribed by the Monetary Board, to be signed by the debtor and appended to the main contract. The format of disclosure statement on loan/credit transaction prescribed by the Monetary Board is found in App. 22. Such disclosure statement on loan/credit transactions must be furnished each borrower. SUBSECTION 3305.5 Information sheets and other reports to be submitted to the Central Bank Every creditor shall file with the Department of Rural Banks and Savings and Loan Associations an information sheet and such other reports as the director of the said department may require, in the form or forms to be prescribed by the Monetary Board, regarding credit transactions entered into by such creditor. SUBSECTION 3305.6 Posters . Every creditor shall post in a conspicuous place, in his principal place of business, and branches, if any, an abstract of the provisions of Republic Act No. 3765 in the form (App. 23) prescribed by the Monetary Board which shall be reproduced in a format 60 cms. wide and 75 cms. long. SUBSECTION 3305.7 Offices authorized to enforce rules and regulations . All orders, policies, instructions, rules and regulations promulgated by the Monetary Board to implement Republic Act No. 3765 shall be enforced by the Department of Rural Banks and Savings and Loan Associations with respect to rural banks. The head of the Department of Rural Banks and Savings and Loan Associations shall have the authority to inspect or examine, personally or by deputy, all books, documents, papers or records or any creditor, necessary in his judgment to ascertain the facts relative to any credit transaction where the creditor requires as an incident to the extension of credit the payment of a finance charge. Furthermore, he may require every creditor to submit data or information regarding contracts within the purview of Republic Act No. 3765 which he may deem necessary in carrying out the purposes of said Act. SUBSECTION 3305.8 Penal provisions . The provisions of Section 6 of Republic Act No. 3765 shall apply to cases of non-compliance with or violation of the Act or any regulation issued thereunder. Non-compliance with the provisions on the disclosure statement and the posting of the abstract of R.A. 3765 shall subject the creditor concerned to such administrative sanctions as the Monetary Board shall impose. SECTIONS 3306-3310. (Reserved) . B. SECURED LOANS SECTION 3311. Loans Secured by Unencumbered Real or Personal Property . Rural banks may grant loans on the security of the following: a. Unencumbered real property, which may be: (1) Private lands with Torrens title; (2) Private lands, not registered under the Torrens system, where the owner can show five (5) years or more of peaceful continuous and uninterrupted possession in the concept of owner: Provided , That when such lands are subsequently titled, the encumbrance shall be annotated on the title; (3) Portions of friar land estates and other lands administered by the Bureau of Lands that are covered by sales contracts and the purchasers have paid at least five (5) years installment thereon, without the necessity of prior approval and consent by the Director of Lands; or portions of other estates under the administration of the Ministry of Agrarian Reform or other government agency, which are likewise governed by sales contracts and the purchasers have paid at least five (5) years installment thereon without the necessity of prior approval and consent by said department or corresponding government agency: Provided , That when the corresponding titles are issued the same shall be delivered to the registry of deeds of the province where such lands are situated for the annotation of the encumbrance; (4) Homesteads and free patent land covered by applications which have been approved but issuance of title to which is pending: Provided , That copies of notices for the presentation of the final proof of titles shall also be furnished the creditor-rural bank; and if the borrower-applicants fail to present the final proof within thirty (30) days from date of the notice, the creditor-rural bank may do so for them at their expense: Provided, further , That the applicant for homestead or free patent has already made improvements on the land, and the loan applied for is to be used for further development of the land or for other productive activities. Corresponding titles, when issued, shall be delivered to the register of deeds of the province where such lands are situated for the annotation of the encumbrance; and (5) Duly registered land transfer certificates issued by the Government, through the Ministry of Agrarian Reform, to tenant-farmers in an amount not less than sixty per cent (60%) of the value of the farm holdings as determined by Presidential Decree No. 27: Provided , That the loan shall be guaranteed by the Samahang Nayon (barrio association), in which the tenant-farmer is a full-fledged member: Provided, further , That the loans obtained shall be used in the improvement or development of the farm holdings of the tenant-farmer or the establishment of facilities that will enhance production of marketing of agricultural products of increase farm income therefrom. The appraisal and verification of the status of a land is the full responsibility of the rural bank and the loans granted on any land which shall be found later to be within a forest zone shall be for the sole account of the rural bank to the exclusion of the Central Bank counterpart. In case the security is land covered by Torrens title, the amount of loan shall not exceed seventy per cent (70%) of the fair market value of such land and improvements thereon, if any. However, if the security is land not covered by Torrens title, the amount of the loan shall not exceed fifty per cent (50%) of the fair market value of such land and improvements thereon, if any. If the security consists of land and building thereon, the building must be insured in an amount equal to the excess of the amount of the loan over the loan value of the land as mentioned above; Provided, however , That if the amount of the loan does not exceed one thousand pesos (P1,000.00), the building need not be insured. b. Unencumbered personal property which may consist of: (1) Bonds and securities issued by the Government, or by any of its agencies and instrumentalities which are fully guaranteed by the Government. Such bonds and securities may be accepted at their face value; (2) Stock and other securities issued by reputable commercial, industrial and other private companies, or entities engaged in non-speculative business, up to fifty per cent (50%) of their market value; (3) Expected harvest from the project to be financed or growing crops, up to forty per cent (40%) of their calculated market value of the crop for which the loan is sought, based on previous production records or, in the absence thereof, on production in the locality of similar plantations; (4) Quedans or warehouse receipts issued by bonded warehouses covering stock deposited in said warehouses up to eighty per cent (80%) of the calculated market value of the crop for which the loan is sought; and (5) Any other personal property, up to fifty per cent (50%) of the fair market value. If the property is newly purchased and the purchase price thereof appears in a bill of sale, then the above percentage shall be based on the price in said bill of sale. SECTION 3312. Loans Secured by Government Securities . A loan or renewal thereof or forbearance of money, goods of credits secured in whole or in part by government securities shall not earn a higher rate of interest or greater sum or value, including commissions, premiums, fines and penalties, than twelve per centum (12%) per annum. Government securities shall include those enumerate in Subsec. 3303.1b. SECTION 3313. Loans by Junior Mortgages on Real Estate . Rural banks may also grant loans on the security of junior mortgages on real estate: Provided , That for such loans to be considered as adequately secured under Section 78 of Republic Act No. 337, as amended, the sum total of the loan to be granted and the outstanding balance of the loan granted on the senior mortgage shall not, at any time, exceed the loan value of subject real estate security based on the appraisal of the real estate by the junior mortgagee. A certified latest statement of account showing the outstanding balance of the loan including interests and arrearages, from the senior mortgagee shall be presented to the bank. In case several loans are granted on the security of the same property, the total amount of the loans shall not, at any time, exceed the total loan value of the said property. SECTION 3314. Ceiling on Amount of Real Estate Loans Exempted from Publication Requirements . Real estate loans granted by rural banks of nor more than P20,000.00 shall be exempted from publication requirements in cases of foreclosure of mortgages and executions of judgments thereon. Note: Amendments to Section 3314 as provided by the following: 1) CBP Circular 1094 dated March 17, 1986; 2) CBP Circular 1213 dated October 20, 1989 SECTION 3315. Loans Secured by Time Deposits . The following rules shall govern the grant of loans secured by hold-outs on and/or assignment of certificates of time deposits issued by banks, i.e., the lending bank, or any bank other than the lending bank, as well as their branches or subsidiaries abroad: a. The original copy of the Certificate of Time Deposit subject to hold-out or assignment shall be surrendered to the lending bank, covered by a Deed of Assignment or hold-out agreement; b. The depository bank, other than the lending bank, shall be furnished a copy of the Deed of Assignment or hold-out agreement on the deposit used as collateral; c. If the term of the Certificate of Time Deposit subject to hold-out or assignment is shorter than the term of the loan, there shall be an agreement in writing that renewal of the time deposit upon maturity shall be made at least coterminous with the term of the loan; d. There shall be no pre-termination of the time deposit without the consent of the lending bank and unless an acceptable substitute collateral for the loan has been made; and e. Within twenty-four (24) hours from the release of the loan, a report thereon shall be submitted to the appropriate supervising and examining department of the Central Bank together with copies of collateral and other pertinent documents. ( Effective Sept . 6, 1985 ) (As amended by CBP Circular 1135 dated February 23, 1987) SECTIONS 3316-3318. (Reserved) . C. UNSECURED LOANS SECTION 3319. Loans against Personal Security . Rural banks may grant clean loans or loans against personal security in such amounts as may be necessary to meet the health education and subsistence needs of farmers, farm families and merchants as well as other inhabitants within their service areas. The terms secured and unsecured loans as used herein and in Title "B" of this Part shall be without prejudice to the definitions of the same under the Usury Law and its implementing regulations. SECTIONS 3320-3325. (Reserved) . D. LOANS AND OTHER CREDIT ACCOMMODATIONS TO DIRECTORS, OFFICERS, STOCKHOLDERS AND THEIR RELATED INTERESTS SECTION 3326. Coverage ; General Policy ; Definitions . The following regulations shall govern loans and other credit accommodations, both direct and indirect, by a bank to its directors, officers and stockholders (DOSRI). SUBSECTION 3326.1 General policy . Dealings of a bank with any of its directors, officers or stockholders and their related interests should be in the regular course of business and upon terms not less favorable to the bank than those offered to others. SUBSECTION 3326.2 Definitions . For purposes of the rules on DOSRI (Secs. 3326-3336), the following definitions shall apply: a. Directors shall refer to the bank directors duly holding their positions as such in accordance with the corporate by-laws and pertinent provisions of law; b. Officers shall include the President, Vice-Presidents and others mentioned as officers of the bank, or those whose duties as such are defused in the by-laws or are generally known to be the officers of the bank (or any of its branches and offices other than the head office) either through announcement, representation, publication or any kind of communication made by the bank: Provided , That a person holding the position of Chairman or Vice-Chairman of the Board or another position in the Board shall not be considered as an officer unless the duties of his position in the Board include functions of management such as those ordinarily performed by regular officers: Provided, further , That members of a group or committee, including sub-groups or sub-committees, whose duties include functions of management such as those ordinarily performed by regular officers, shall likewise be considered officers for the purpose of these rules. c. Stockholders shall refer to any stockholder of record in the books of the bank, acting personally, or through an attorney-in-fact, executor, administrator or guardian of a minor, incompetent and/or deceased stockholder or through a trustee designated by one or more stockholders pursuant to a voting trust agreement, whose stockholdings in the lending bank, individually and/or together with his spouse or relative within the first degree of consanguinity or affinity or relative by legal adoption; a partnership in which the stockholder or his spouse or any of his relatives mentioned above is a general partner, and a co-owner with the stockholder or the stockholder's spouse or relative mentioned above of a property, amount to two per cent (2%) or more of the total subscribed capital stock of the bank. d. Outstanding deposits shall refer to savings, time and demand deposits which are not subject to an assignment or hold-out agreement. e. Book value of the paid-in capital contribution shall mean the proportional amount of the bank's total capital accounts (net of such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank) as the corresponding paid-in capital contribution of each director, officer or stockholder concerned bears to the total paid-in capital of the bank: Provided , That, as a basis for determining the individual ceiling referred to in Sec. 3330 hereof, the corresponding book value of the shares of stock of such director, officer or stockholder which are the subject of pledge, assignment or any other encumbrance shall be deducted therefrom. f. Total loan portfolio shall refer to the sum of all accounts outstanding, gross of valuation reserves, as reflected in the bank's consolidated statement of condition, excluding loans financed by special/specific funds from the government and government financial institutions, such as Masagana 99 , to the extent of the total outstanding loans granted from said special/specific funds. g. Secured loan, borrowing, or credit accommodation shall refer to any loan, discount, credit or advance, or portion thereof, referred to in Sec. 3327 which is secured by real estate mortgage; chattel mortgage on tangible assets; standby letters of credit issued by foreign banks; assignment of, or hold-out on deposits maintained in the lending bank; or assignment or pledge of government securities or readily marketable bonds and other high-grade debt securities except those issued by the lending entity. The same shall also include sales contract receivable arising from sale of real property on credit wherein title to the property is retained by the bank. h. Unsecured loan, borrowing, or credit accommodation shall refer to any loan, discount, credit or advance, or portion thereof referred to in sec. 3327 which is not secured in accordance with paragraph g above. SECTION 3327. Transactions Covered . The terms "loan", "borrow", "money borrowed", and credit accommodations" as used herein have reference to transactions which involve the grant, renewal, extension or increase of any loan, discount, credit or advance in any form whatsoever, and shall include: a. Any advance by means of an incidental of temporary overdraft, cash item, vale, etc.; b. Outstanding availments under an established credit line; c. Any advance of unearned salary or other unearned compensation for periods in excess of thirty (30) days; d. Loans or other credit accommodations granted by another financial intermediary to such director, officer or stockholder from funds of the bank invested in the other institution's trust or other department when there is a clear relationship between the transactions; e. Any advance by means of drawings against uncollected deposits (DAUDs); f. The increase of an existing indebtedness, as well as additional availments under a credit line; g. The sale of assets such as shares of stock, on credit; and h. Any other transaction as a result of which a director, officer or stockholder becomes obligated or may become obligated to the lending bank, directly or indirectly, by any means whatsoever to pay money or its equivalent. SECTION 3328. Transactions not Covered . The terms "loan", "borrow", "money borrowed" or "credit accommodation" as used herein shall not refer to the following transactions: a. Advances against accrued compensation, or for the purpose of providing payment of authorized travel, legitimate expenses or other transactions for the account of the bank or for utilization of maternity and other leave credits; b. The increase in the amount of outstanding credit accommodation as a result of additional charges or advances made by the bank to protect its interest such as taxes, insurance, etc.; and c. Deposits of a rural bank with another bank, which has stockholdings in the depositing bank. SECTION 3329. Direct/Indirect Borrowings . For purposes of these rules on loans and other credit accommodations to directors, officers, stockholders and their related interests, a credit accommodation shall be considered a direct or indirect borrowing in accordance with the following criteria: a. Direct Borrowing . If the director, officer or stockholder of the lending bank is a party to any of the transactions enumerated in Sec. 3327, for himself or as the representative or agent of others, or if he acts as a guarantor, indorser or surety for loans from the bank, or if the loan or credit accommodation to another party is secured by a property interest or right of the director, officer or stockholder. b. Indirect Borrowing . If in any of the transactions in Sec. 3327 the borrower, guarantor, indorser, or surety is a: (1) Spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption of a director, officer or stockholder of the bank; (2) Partnership of which a director, officer, or stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, is a general partner; (3) Co-owner with the director, officer, stockholder or his spouse or relative within the first degree of consanguinity or affinity, or relative by legal adoption, of the property or interest or right mortgaged, pledged or assigned to secure the loans or credit accommodations, except when the mortgage, pledge or assignment covers only said co-owner's undivided interest; (4) Corporation, association, or firm of which a director or officer of the bank, or his spouse is also a director or officer of such corporation association or firm, except (i) where the securities of such corporation, association or firm are listed and traded in the big board or commercial and industrial board of domestic stock exchanges and less than fifty per cent (50%) of the voting stock thereof is owned by any one person or by persons related to each other within the third degree of consanguinity or affinity; or (ii) where the director, officer or stockholder of the lending bank sits as a representative of the bank in the board of directors of such corporation; Provided , That the bank representative shall not have any equity interest in the borrower corporation except for the minimum shares required by law, rules and regulations or by the by-laws of the corporation, to qualify a person as director of the corporation: Provided , finally, That the borrowing corporation under (i) or (ii) is not among those mentioned in b(5) and (6) of this section. (5) Corporation, association or firm of which any or a group of directors, officers, stockholders of the lending bank and/or their spouses or relatives within the first degree of consanguinity or affinity, or relative by legal adoption, hold/own more than twenty per cent (20%) of the subscribed capital of such corporation, or of the equity of such association or firm; (6) Corporation, association or firm wholly or majority-owned or controlled by any or group of related entities mentioned in b (2) (4) and (5) of this section. Other cases of direct/indirect borrowing shall be resolved on a case-to-case basis. It shall be the responsibility of the banking institution concerned to ascertain whether the borrower, guarantor, representative, indorser or surety is related to persons mentioned in (b) (1) above or connected with any of the directors, officers or stockholders of the bank in any of the capacities mentioned in (b) (2), (3), (4), (5) and (6) of this section. SECTION 3330. Individual Ceiling . The total outstanding direct credit accommodations to each of the bank's directors, officers or stockholders shall not exceed, at any time, an amount equivalent to his outstanding deposits and book value of his paid-in capital contribution in the lending bank: Provided ; That unsecured credit accommodations to each of the bank's director, officers or stockholders shall not exceed thirty per cent (30%) of his total credit accommodations. SECTION 3331. Aggregate Ceiling Ceiling on Unsecured Loans . Except with prior approval of the Monetary Board, the total outstanding borrowings of directors, officers or stockholders, whether direct or indirect, shall not exceed fifteen per cent (15%) of the total loan portfolio of the bank or one hundred per cent (100%) of combined capital accounts net of deferred income tax as defined under item 'i' of Subsection 3116.2, and such unbooked valuation reserves and other capital adjustments as may be required by the Central Bank, whichever is lower: Provided , That in no case shall the total unsecured direct and indirect borrowings of directors, officers and stockholders exceed thirty per cent (30%) of the aggregate ceiling or the outstanding direct/indirect loans thereto, whichever is lower. For the purpose of determining compliance with the ceiling on unsecured loans, banks shall be allowed to average the ceiling on unsecured loans and their outstanding unsecured loans every quarter. In evaluating requests for extension of loans in excess of the aggregate ceiling, the Central Bank shall consider the credit standing of the borrower, viability of the projects financed by such loans in relation to national objectives, collateral or security, and other pertinent considerations. SECTION 3332. Exclusions from Aggregate Ceiling . The following credit accommodations shall be excluded in determining compliance with the aggregate ceiling: a. Credit accommodations or portions thereof to the extent covered by a hold-out on deposits or secured by evidences of indebtedness of the Republic of the Philippines or of the Central Bank or by other evidences of indebtedness or obligations the servicing and repayment of which are fully guaranteed by the Republic of the Philippines. b. Credit accommodations to a corporate stockholder which meets all the following conditions: (1) The corporation is a non-financial institution (2) Its shares are listed and traded in the big board or commercial and industrial board of domestic stock exchanges (3) Its stockholdings in the lending bank do not exceed thirty per cent (30%) of the voting stock of the bank, and (4) No person or group of persons related within the first degree of consanguinity or affinity holds/owns more than twenty per cent (20%) of the subscribed capital of the corporation. SECTION 3333. Procedural Requirements . The following provisions shall apply if a director or officer is a party, directly or indirectly, to, or acts as a representative or agent of others in, any of the transactions under Sec. 3327. SUBSECTION 3333.1 Approval of the board when to obtain . Except with the prior written approval of the majority of the directors, excluding the director concerned, no loan or other credit accommodation shall be granted nor any of the transactions under Sec. 3327 entered into. SUBSECTION 3333.2 Approval of the board how manifested . The approval as required in Subsec. 3333.1 above shall be manifested in a resolution passed by the board of directors duly assembled during a regular or special meeting for that purpose and made of record. SUBSECTION 3333.3 Majority of the directors computation of . The computation of the majority of the directors, excluding the director concerned, shall be based on the total number of directors of the bank as provided in its articles of incorporation and by-laws. SUBSECTION 3333.4 Contents of the resolution . The resolution of the board of directors shall contain the following information: a. Name of the director or officer concerned and his relationship as regards the credit accommodation, such as principal, indorser, spouse of borrower b. Nature of the loan or other credit accommodation, purpose, amount, credit basis for such loan or credit accommodation, security and appraisal thereof, maturity, interest rate, schedule of repayment and other terms of the loan or credit accommodation c. Date of resolution d. Names of the directors who were present and who participated in the deliberations of the meeting. e. Names in print and signatures of the directors approving the resolution Provided , That the corporate secretary may sign, under a power-of-attorney, in behalf of a director who was present in the board meeting and who approved such resolution in instances where such signature is necessary to indicate that such resolution was approved by a majority of the director, and f. Such other information as may be required by the appropriate supervising and examining department of the Central Bank. SUBSECTION 3333.5 Transmittal of copy of board approval contents thereof . A copy of the written approval of the board of directors, as herein required, shall be submitted to the appropriate supervising and examining department of the Central Bank within twenty (20) banking days from the date of approval. The copy may be a duplicate of the original, or a reproduction copy showing clearly the signatures of the approving directors Provided , That if a reproduction copy is to be submitted, it shall contain on its face or reverse side a signed certification by the Secretary that it is a reproduction of the original written approval. SECTION 3334. Reportorial Requirements . Each bank shall maintain a record of loans covered by these rules in a manner and form that will facilitate verification of such transactions by Central Bank examiners. The appropriate supervising and examining department of the Central Bank may require the banks to furnish such data or information as may be necessary for purposes of implementing the provisions of this subtitle. SECTION 3335. Availment of Credit Facility with the Central Bank . Whenever the total direct accommodations of a bank to the parties mentioned in Sec. 3329 reach fifty per cent (50%) of the prescribed aggregate ceiling and the bank is applying for a loan or advance with the Central Bank, the Monetary Board may, upon the recommendation of the appropriate supervising and examining department, require as a condition for the extension of the credit facility the designation of a comptroller in the bank primarily for the purpose of bringing about the reduction of such accommodations. SECTION 3336. Sanctions . Violations of the provisions of Secs. 3326 to 3335 shall be subject to any or all of the following sanctions: a. Restriction or prohibition on the bank from declaring dividends until the outstanding loans and other credit accommodations have been reduced to within the herein prescribed ceilings; b. Disqualification of the directors voting for the approval of the loan or credit in excess of any of the ceilings prescribed in these rules from participating in the approval of loans or credits to officers, directors and stockholders of the bank: Provided, however , That the disqualification may be lifted by the Central Bank, as the circumstances may warrant; c. Application of (1) the borrowing director's or officer's share in the bank's profit sharing program; and (2) the share of the director voting for the approval of the loan or credit accommodation, against the excess of such loan or credit accommodation over any of the herein prescribed ceilings for such period of time as may be approved by the Monetary Board; d. For the duration of each violation, imposition of a fine of 1/10 of 1% of the excess over the ceilings per day but not to exceed P500 a day on the following: (1) The lending bank and director, officer or stockholder whose borrowing exceeds his individual ceiling; (2) Each of the directors voting for the approval of the loan or credit accommodation in excess of any of the ceilings prescribed in these rules; (3) The director, officer or stockholder who assigns or subjects his outstanding deposits to a hold-out agreement, or pledges his paid-in capital contribution in the lending bank, which deposits and capital contribution constitute the basis for determining his individual ceiling. The penalty for exceeding the individual ceiling, aggregate ceiling and ceiling on unsecured loans shall be computed on the average amount of loans in excess of said ceilings: Provided , That banks shall be permitted to offset daily loan balances which are in excess against those which are below said ceilings during the same week; e. Suspension or, after due hearing, removal from office of the director or officer (1) Borrowing from the bank in excess of his individual ceiling; or (2) Subjecting to an assignment or hold-out agreement outstanding deposits and/or pledging paid-in capital contributions earmarked as basis for his individual ceiling resulting in his exceeding his individual ceiling. Directors voting for the approval of the loan or other credit accommodation in excess of any of the ceilings prescribed in these rules shall also be subject to such suspension or removal. f. Other administrative and/or penal sanctions, including sanctions under Sections 34 and 34-A of Republic Act No. 265, as amended. SECTION 3337. Financial Assistance to Officers and Employees . Banks may provide financial assistance to their officers and employees, as part of their fringe benefit programs, to meet the housing, transportation, household and personal needs of their officers and employees. SUBSECTION 3337.1 Mechanics . The mechanics of such financial assistance shall be embodied in a financing plan, with the following minimum features: a. Participation shall be limited to full time permanent officers and employees of the bank. b. Financial assistance shall only be for the following purposes: (1) The acquisition of a residential house and lot, or the construction, renovation or repair of a residential house on a lot owned and to be occupied by the officer or employee; (2) The acquisition of vehicles, household equipment and appliances for the personal use of the officer or employee or his immediate family; or (3) To meet expenses for the medical, maternity, education or emergency needs of the officer or employee or his immediate family. c. Financial assistance for purposes mentioned under Items b(1) and b(2) above may be granted in the form of a loan, advance or credit accommodation, installment sale, lease with option to purchase or lease-purchase arrangement where the lessee is obliged to purchase the real estate equipment. d. The amount and maturity of financial assistance for each purpose shall be determined by the bank in consonance with the normal requirements thereof: Provided , That the maximum amount shall be stated as a percentage or multiple of the total monthly compensation of the officer or employee and shall be within the paying capacity of the borrowing officer or employee. Total monthly compensation shall include the basic salary and all fixed and regular monthly allowances of the officer or employee. Payments for sickness benefits and other special emoluments which are not fixed or regular in nature, or the commutation into cash of unused leave credits shall not be included in the computation of total monthly compensation. e. The amortization payment shall include amounts necessary to cover mortgage redemption insurance and fire insurance premiums, taxes, special assessments, and other related fees and charges. f. Availment of the financing plan to construct or acquire a residential house and lot shall be allowed only once during the officer's or employee's tenure with the bank, except where the right over the real estate previously acquired or constructed under the financing plan is absolutely transferred or assigned to another officer or employee of the bank or to a third party: Provided , That such third party shall have fully reimbursed the bank for the outstanding availment on the financing plan before the officer/employee is allowed to reavail himself of the same financing plan. An officer or employee (or his spouse) who already owns a residential house and lot shall not be qualified to avail himself of financial assistance for purposes of acquiring a residential house and/or lot. These prohibitions notwithstanding, financial assistance for the repair or renovation of a residential house may be allowed subject to such limitations as may be prescribed by the bank pursuant to item d above. g. Availment of the financing plan for the acquisition of a specific type of equipment or appliance shall be allowed not oftener than once every three (3) years: Provided , That reavailment shall be allowed only after previous obligations in connection with the acquisition of the same type of equipment or appliances have been fully liquidated. h. The bank shall adopt measures to protect itself from losses such as by incorporating in the plan or contract provisions requiring co-makers or consignors, chattel or real estate mortgages, fire insurance, mortgage redemption insurance, assignment of money value of leave credits, pension or retirement benefits, including a provision for the restructuring of the loan under the bank's regular lending operations in case of termination or separation of the officer or employee for whatever cause. SUBSECTION 3337.2 Other conditions/limitations a. The investment by a bank in real estate, equipment and other chattels under its fringe benefit program for officers and employees shall be included in determining the extent of the investment of the bank in real estate and equipment for purposes of Sec. 25 of R.A. No. 337, as amended. b. The investment by a bank in real estate, equipment and other chattels contemplated under these guidelines shall not be for the purpose of profit in the course of business for the bank. c. All loans or credit accommodations to bank officers and employees, except those granted under the fringe benefit program of the bank, shall be subject to the same terms and conditions imposed on the regular lending operations of the bank. Loans or credit accommodation granted to officers shall, in addition, be subject to the provisions of Sec. 83 of R.A. No. 337, as amended, and its implementing regulations but not to the individual ceilings where such loans or credit accommodations are obtained under the bank's fringe benefit program. The aggregate outstanding loans and credit accommodations granted under the bank's fringe benefit program inclusive of those granted to officers in the nature of lease with option to purchase, shall not exceed five percent (5%) of the bank's total loan portfolio. SUBSECTION 3337.3 Reportorial requirements . Financing plans and amendments thereto shall be submitted to the Central Bank for prior approval within thirty (30) calendar days from approval thereof by the bank's board of directors. The appropriate supervising and examining department of the Central Bank may require the banks concerned to submit a regular report monitoring the various transactions under the bank's financing plans for officers/employees. Modification of existing programs to conform with these rules must be submitted within the period stated. SUBSECTION 3337.4 Sanctions . Violations of the provisions of this section shall, whenever applicable, be subject to the penalties under Sec. 83 of R.A. 337, as amended, and Sec. 3610 hereof. SECTIONS 3338-3340. (Reserved) . E. SPECIFIC TYPES/CLASSES OF LOANS SECTION 3341. Agrarian Reform and Agricultural Credit . The following guidelines shall govern the grant of agrarian reform credit and agricultural credit by banking institutions under P.D. No. 717 dated May 29, 1975. SUBSECTION 3341.1 Definition of terms . For purposes of this section, the following definitions shall apply: a. Loanable funds shall refer to total funds generated after the effectivity of Presidential Decree No. 717, the composition of which shall be determined by the appropriate department of the Central Bank. b. Agrarian reform credit shall refer to production and other types of loans granted to beneficiaries of agrarian reform for the following purposes: acquisition of work animals, farm equipment and machinery, seeds, fertilizers, poultry, livestock, feeds and other similar items; acquisition of lands authorized under the Agrarian Reform Code of the Philippines; construction and/or acquisition of facilities for production, processing, storage and marketing; and efficient and effective merchandising of agricultural commodities stored and/or processed by the facilities aforecited in domestic and foreign commerce. c. Agricultural credit in general shall include all loans and/or advances granted to borrowers, whether beneficiaries of agrarian reform or not, to finance activities relating to agriculture, and for processing, marketing, storage, and distribution of products resulting from these activities. d. Agrarian reform beneficiaries shall include tillers, tenant-farmers, settlers, agricultural lessees, amortizing owners, owner-cultivators, farmers' cooperatives and compact farms, as determined by the Department of Agrarian Reform. The term shall likewise include agricultural enterprises registered under Presidential Decree No. 1159 as well as projects undertaken pursuant to the Corporate Farming Program under General Order No. 47: Provided , That the borrower submits the following documents to the lending bank: (1) A certification from the Board of Investments to the effect that the borrower is an agricultural enterprise duly registered under P.D. No. 1159; and (2) An endorsement of the Ministry of Agrarian Reform stating that land reform beneficiaries shall benefit from the agricultural enterprises' projects. Agrarian reform beneficiaries shall be determined on the basis of: (1) Documentary evidence, namely, certificate of land transfer or order of approval of application from the Department of Agrarian Reform (DAR) or agreement to sell/order of award from DAR or its predecessors such as LTA and NARRA (in the case of settlers); or (2) In the absence of documentary evidence under (1) above, a certification from the nearest DAR office that borrower is an agrarian reform beneficiary. SUBSECTION 3341.2 Who may borrow ; purposes a. Qualified borrowers under agrarian reform credit shall include all beneficiaries of agrarian reform credit mentioned under Presidential Decree No. 717 and Subsec. 3341.1 which credit shall be used for agricultural production or for other purposes mentioned herein. The eligibility coverage of agrarian reform (under supervised credit) is redefined so as to include compact/corporate farming scheme, with rates remaining unchanged. b. Qualified borrowers under agricultural credit in general shall include all corporations, entities, or private individuals engaged in agricultural production, processing, storage, marketing, or exportation of agricultural products; and importation, manufacture, or distribution of farm machineries and equipment, fertilizers, etc. used for agricultural production. c. Purposes . Agricultural loans shall be granted for the following purposes: (1) Farm expenses, like cost of labor, in connection with the preparation, planting and cultivation of the farm and the harvesting, transportation, storage and marketing of products; (2) Purchase of seeds, fertilizers, work animals, implements and equipment necessary for the operation of the farm, or for the hire of such work animals, implements, and equipment; (3) Purchase of animals, poultry, or fish for breeding purposes; (4) Minor repairs, construction or improvements in the farm or fishpond which are necessary and proper to maintain or increase productivity; and (5) Payment for current taxes and irrigation fees. During the period between production and marketing of farm products, limited amounts may be granted for food, clothing and shelter, and for basic elementary and vocational education of the members of a farm family. SUBSECTION 3341.3 Required allocation for agrarian reform and agricultural credit in general . Each bank shall set aside an amount equivalent to at least twenty-five per cent (25%) of its loanable funds for agricultural credit in general, of which an amount equivalent to at least ten per cent (10%) of the loanable funds shall be made available for agrarian reform credit. For purposes of this subsection, only loans extended by banks for agrarian reform credit, agricultural credit in general, and/or in appropriate cases, temporary investments in eligible government securities made by banks for agrarian reform credit, from May 31, 1975 to the date of the report as required under Subsec. 3341.6, shall be considered a compliance therewith. All loans granted under the Palay Marketing Credit Program shall be considered in compliance with P.D. 717 allocating twenty five percent (25%) of loanable funds of banking institutions for agricultural credit. Loans granted to Area Marketing Cooperatives (AMCs) shall fall under the ten per cent (10%) set aside from direct lending to agrarian reform beneficiaries. Marketing credits to the following qualified borrowers under the Grains Quedan Financing Program shall be considered as agrarian reform credits for purposes of determining compliance with the requirement under Section 3 of Presidential Decree No. 717, dated May 29, 1975, that ten percent (10%) of a bank's loanable funds shall be channelled to agrarian reform credits: a. Agrarian reform beneficiaries as defined by Presidential Decree No. 717; b. Registered agricultural enterprises duly endorsed by the nearest Office of the Ministry of Agrarian Reform in accordance with Presidential Decree No. 1159; c. General Order 47 corporations or agro-service corporations employed by a General Order 47 corporation which are certified by the Ministry of Agrarian Reform as engaged in grains production through linkage arrangements with agrarian reform beneficiaries; d. Area marketing cooperatives or Samahang Nayon duly registered with the Bureau of Cooperatives Development, Ministry of Agriculture; e. Registered agrarian reform beneficiaries' associations/other farm groups respectively endorsed as agrarian reform beneficiaries by the nearest Office of the Ministry of Agrarian Reform; Bureau of Cooperatives Development, Ministry of Agriculture; or the Farm Systems Development Corporation, National Irrigation Administration; f. NGA registered warehousemen/millers/wholesalers whose grains inventory, subject to a chattel mortgage, trust receipts or pledged quedan, are duly sworn to under oath by grains businessmen-borrowers concurred in by the president of the agrarian reform beneficiaries association in the area as having been produced by agrarian reform beneficiaries. g. The National Food Authority: Provided , That the palay procurement operations thereof are certified by the Ministry of Agrarian Reform as having been obtained through direct/indirect linkage arrangements with agrarian reform beneficiaries, subject to such ceilings as may be imposed by the Central Bank/Ministry of Finance on the loans/advances to the NFA by private commercial banks. SUBSECTION 3341.4 Computation of loanable funds Loanable funds shall be the net increase from May 29, 1975 to date of the report of the individual accounts which represent the following: The total bank funds consisting of deposits (demand, savings, time and NOW accounts) excluding foreign currency deposits under Circular No. 960; deposits of banks, net of due from other banks; bills payable (including borrowings from banks) net of interbank call loans with maturities not exceeding 15 days, proceeds from Central Bank rediscounting (except special time deposits), proceeds from special programs like the APEX, and special Central Bank credit accommodations in the form of emergency advances, overnight RPs and availment of overdraft facilities; total capital accounts; and added to the net increase are the total collections from the loan portfolio outstanding as of May 31, 1975 to date of the report less net increase of the following: bank premises, furniture and equipment (net book value); other property owned or acquired (representing properties acquired in satisfaction of debts); other assets; required reserves (reserves against deposit liabilities, deposit substitutes) but excluding reserves for marginal deposits; provisions for liquidity (15% of total deposits and demand liabilities); and loans to small and medium scale industries for export ( Effective April 23, 1985 ) SUBSECTION 3341.5 Allowable alternative investment . In the absence of qualified borrowers, the following shall apply: a. Agrarian reform credit the amount set aside for agrarian reform credit not actually loaned out may be invested temporarily in government securities expressly declared eligible for the purpose by the Central Bank, subject to the following conditions: (1) Such securities shall be held to maturity, without prejudice to the right of the holder bank to require the issuing government entity to monetize, encash or repurchase such securities whenever funds are needed by the bank for lending to the beneficiaries of agrarian reform; (2) Such securities shall not be hypothecated or encumbered in any way or earmarked for any other purpose; (3) Such securities shall be marked "For Agrarian Reform Credit" and shall be segregated from the bank's investment portfolio; and (4) Only the buying/lending bank may use, during the holding period, eligible government securities subject of a resale/repurchase agreement between private entities for purposes of compliance with this section, subject to the following: (a) The resale/repurchase should be for terms not less than thirty (30) days without pretermination during the first successive thirty (30) days, which condition shall be embodied in the resale/repurchase agreement; and (b) The buying/lending bank, with the consent of the selling/borrowing entity, shall register with the Central Bank its holdings of CBCIs under repurchase/resale agreement. b. Agricultural credit in general the amount set aside for agricultural credit in general not actually loaned out may be invested in commercial papers issued by entities engaged in agricultural production processing, storage, marketing, or exportation of agricultural products; and importation, manufacture, distribution of farm machineries and equipment, fertilizers, etc. used for agricultural production: Provided , That for purposes of compliance with this subsection, only the buying/lending bank may use commercial papers acquired in a resale/repurchase agreement during the holding period thereof subject to the conditions in Item (4) (a) of this subsection. c. For Agri-Agra Requirement Only the following government securities are eligible for purposes of registration of compliance with agri-agra requirement: (1) Discounted 5-year Treasury Notes 9%-Series 1 to 22 (MBR No. 150 dated January 22, 1982) (2) CBCIs outstanding issues, except CBCI Special Series (MBR No. 2516 dated November 28, 1975) (3) Discounted NDC Bonds Series AA to AC (MBR No. 422 dated February 26, 1982) (4) DBP Countryside Bills 1st and 6th Series (MBR No. 2381 dated October 31, 1974) ( Effective July 8, 1985 ) SUBSECTION 3341.6 Submission of reports . A monthly report on the following shall be submitted to the appropriate supervising and examining department of the Central Bank within twelve (12) banking days after end of each reference month: (1) Utilization of loanable funds set aside for agrarian reform credit and agricultural credit in general; and (2) Any change in the composition of government securities and commercial papers held as temporary investments for agrarian reform credit and agricultural credit in general, respectively. A certification under oath by the duly designated officer of the bank on the absence of qualified borrowers for agrarian reform credit or agricultural credit in general shall be submitted to the appropriate supervising and examining department of the Central Bank together with the, report as required in this subsection. SUBSECTION 3341.7 Syndicated type of agrarian reform credit/agricultural credit . Rural banks may grant a syndicated type of loan for agrarian reform credit/agricultural credit in general, either between or among themselves. The mechanics, including the recording of such syndicated type of loan transactions shall follow existing practices and regulations applicable both to the lead bank and other participating banks. Accordingly, the formal booking of loans shall only be for the amount of actual participation of each syndicate bank concerned. Memorandum entries, references or notations shall be made for the other participating bank(s). SUBSECTION 3341.8 Amount of loan, securities a. Maximum amount . The maximum amount of agricultural loan that may be granted to an eligible borrower shall be in accordance with the following rules: (1) Production of corn and palay . The amount of loan shall be based on (a) the value of the borrower's established production in the previous year or, if this is not available, on the estimated market value of the expected harvest from the project to be financed, and (b) on the market value of the estimated harvest from such project during the month immediately preceding harvest time; (2) Production of coconut, sugar, coffee, cacao, ramie, abaca, and other non-perishable crops . The amount of loan shall be based on the estimated market value of the expected harvest from the project to be financed based on the immediately preceding year production records or in the absence thereof, on production records of similar plantations in the locality. For the purpose of granting crop loans to sugarcane planters, rural banks shall require the annual submission of parcellary plans of individual farms planted to sugarcane. (3) Production of perishable crops . The amount of loan shall be based on the production of the previous year, or, if this is not available, on the estimated market value of expected harvest from the project to be financed: Provided , That in case of loans for fruit production like mangoes, citrus, and others, in the absence of previous production records, a loan shall not be granted until sufficient fruits shall have attained such size as to provide a safe basis for reasonable calculation; (4) Livestock, poultry and fish production The amount of loan shall be based on the appraised value of the stock existing at the time the loan is granted; and (5) Storage, transportation and marketing of farm products . The amount of loan shall be to the extent actually necessary for the purpose. The loans referred to in the preceding paragraphs may be secured by chattel mortgage on the stored products and/or pledge or assignment of quedans issued for such products without prejudice to the right of a rural bank to demand additional securities. b. Collateral/Security The collateral/security for loans shall be governed by the following rules: (1) All financing institutions shall hereafter accept as collateral for loans any duly registered Land Transfer Certificate issued by the Government, through the Department * of Agrarian Reform, to tenant farmers in an amount not less than sixty per cent (60%) of the value of the farmholding as determined under Presidential Decree No. 27: Provided , That (a) such loans shall be guaranteed by the guarantee fund established by the samahang nayon (barrio association) in which a tenant-farmer is a full-fledged member and (b) the loans obtained shall be used in the improvement or development of the farmholding of the tenant-farmer or the establishment of facilities that will enhance production or marketing of agricultural products or increase farm income therefrom. (2) Loans granted under the agrarian reform credit/agricultural credit in general shall be secured by any or a combination of: (a) Real estate property owned by the borrower or his co-maker, not necessarily the same real estate property used by the borrower for his agricultural or farm project; (b) Poultry; (c) Stored crops in bonded warehouse; (d) Assets acquired with the proceeds of the loan such as farm machinery; (e) One co-maker acceptable to the bank: Provided : That in case a borrower is a member of a cooperative, the cooperative may act as a co-maker; Provided, further , That in case the borrower is a farmers' cooperative, no co-maker shall be required; and/or (f) Other collateral acceptable to the bank, such as, but not limited to, standing crops, livestock or work animal. (g) For agricultural credit in general, loans shall be secured by the usual collateral required by banks. SUBSECTION 3341.9 Terms of loans ; renewal a. Agricultural loans shall be granted for a period not exceeding three hundred sixty (360) days. b. Such loans may be renewed only in highly meritorious cases, Provided : (1) It will not prejudice the interest of the bank; (2) It will improve the borrower's financial position and enable him to pay within the period of renewal; (3) At least twenty per cent (20%) of the loan, including interest is paid; and (4) The securities of the loan are not diminished or impaired in any manner whatever. c. A new promissory note must be executed in the prescribed manner and form. In no case shall more than two (2) renewals be granted. SUBSECTION 3341.10 Interest and other charges Maximum lending rates that may be charged by rural banks for papers rediscounted with the Central Bank shall be in accordance with the provisions of Sec. 3303 and 3271.2. * of one (1) year, subject to the following conditions: a) The non-payment of the rediscounting obligations was due to drought and the effects thereof; b) Financial assistance to the rural bank has not been suspended at the time of the application by the Monetary Board/Governor due to serious irregularities; c) The combined capital accounts of the rural bank shall not be less than 10% of its total risk assets: d) There is no internal dissension in the rural bank; e) The rediscounting arrearages did not arise from mismanagement or serious irregularities in the rural bank's operations. Provided , That in meritorious case, a second or third restructuring may be allowed for a maximum period of three (3) years: Provided, Further , That in other cases, farmer-borrower's delinquent accounts may also be restructured under the same conditions if at least thirty (30) percent of the principal and accrued interest due is paid on each of the first and second restructuring. 2) In order to avail itself of this special restructuring scheme, a rural bank must file its application with the Central Bank not later than August 31, 1983, supported by the following: a) Duly accomplished Rediscount Schedule (DLC Form No. 4), containing a listing of the rural bank's borrowers whose loans had been restructured; b) Resolution of the Board of Directors authorizing the rural bank to apply for restructuring of its loans and authorizing the President or Manager to sign/endorse all documents for and in behalf of the rural bank: c) Latest financial statements; d) Report on required and available reserves for the past four (4) weeks; e) Promissory notes (DLC Form No. 11) in favor of the Central Bank: f) Certification signed by the rural bank President/Manager that the non-payment of the loans of the borrowers was due to drought, accompanied by a certification from the Provincial Program Officer (PPO) that the area serviced by the rural bank had been affected by drought. 3) The restructured promissory notes shall be endorsed in favor of the Central Bank and deposited with, and duly acknowledged by, the rural bank's authorized depository bank; 4) The rediscounting obligations to be restructured shall be assessed the same interest rate originally imposed on such loans; 5) The prior verification of the restructuring application of a rural bank shall not be applicable under this scheme; 6) Past due accounts restructured under this scheme shall be exempted from the 5% liquidated damages in accordance with Section 7 of Memorandum Circular to All Rural Banks dated April 1, 1975, as amended, provided that the rural bank concerned shall not assess any penalty on the corresponding past due accounts of its borrowers. 7) Rural Banks which are in the process of restructuring the past due accounts of their borrowers may be allowed to continue to rediscount their eligible papers, provided, that they shall complete the restructuring of such obligations and submit to the Central Bank the covering restructuring applications not later than August 31, 1983; and 8) Any false statement or information given by the President/Manager or any authorized officer of a rural bank in compliance with these guidelines shall make said bank liable to the liquidated damages provided for under existing regulations and to the corresponding administrative sanctions under Sections 34 and 34-A of the Central Bank Act, without prejudice to the institution of other appropriate legal action against the persons responsible thereof; and 9) CB:IBRD borrowers may restructure their accounts in accordance with existing Central Bank guidelines issued under its Circular-Letter No. 79 61 dated October 19, 1979. C. STD from SARF Fund : 1) The SES Department III shall release immediately from the Special Agricultural Rehabilitation Funds (SARF) STDs to rural banks which are not presently qualified to avail of rediscounting facilities of the Central Bank to finance the replanting/replenishing requirements of farmer-borrowers adversely affected by the drought subject to guidelines on SARF herewith attached. 2) Loans granted under the program shall be for a period of not exceeding 180 days at an interest rate of 10% per annum plus a service charge of 2% per annum. The service charge of 20% shall be deducted from every loan release. 3) The SARF STDs shall finance 100% of the project cost and the recipient rural bank, as agent, shall earn a commission of 3% per annum on the amount collected for the fund in addition to the service charge of 2% per annum; at the same time it shall bear part of the credit risk equivalent to 15% of SARF Loan extended to each farmer. 4) Loans generated from SARF STDs are not rediscountable. D. STDs from other Government-Owned Funds : 1) The SES Department III shall likewise release immediately from other government owned funds STDs to rural banks enjoying normal access to rediscounting facilities of the Central Bank also to finance the credit requirements of farmers in drought-stricken areas. 2) The STD to be released shall be 50%/100% of the project 1cost, as the case may be, payable from the rediscounting proceeds in accordance with existing guidelines ( Effective May 31, 1983 ). SUBSECTION 3341.13 Accounting Records . In order to improve the quality of required reports and for facility of reference, Rural Banks are enjoined to maintain a separate subsidiary ledger for loans granted under PD 717 (Loans to Agrarian Reform Beneficiaries) ( Effective May 9, 1985 ) SECTION 3342. Commercial, Industrial, Term Loans, Loans to Cooperatives . The following rules shall govern the grant by rural banks of commercial, industrial, term loans and loans to cooperatives. SUBSECTION 3342.1 Commercial loans a. Purposes . Commercial loans may be granted for the purpose of conducting or carrying on, developing, or improving commercial operations as well as purchasing commodities for resale which are considered necessities or semi-necessities by consumers or end-users, and of general acceptability and quick turnover. b. Amount of loan ; securities . In the case of purchase of commodities for resale, the amount of a commercial loan shall be based on the market price, of such commodities which may be secured by chattel mortgage on the merchandise to be purchased, without prejudice to the right of the rural bank to require additional securities. c. Terms of loans ; renewal . Commercial loans shall be granted for a maximum period of one hundred eighty (180) days, renewable for another period not exceeding ninety (90) days subject to the provisions of Subsec. 3341.9(b). SUBSECTION 3342.2 Industrial loans a. Purposes . Industrial loans may be granted for the following purposes: (1) Expenses for labor in connection with the manufacture of goods which are in demand and readily saleable, or have quick turn-over, considered necessities or semi-necessities, essentials or semi-essentials; (2) Purchase of raw materials for the manufacture and processing of the goods mentioned in Item (1) above; and (3) Marketing of the good manufactured or processed mentioned in Item (1) above. b. Amount of loan ; securities . The amount of industrial loans shall be based on the market value of the products financed. The loan may be secured by chattel mortgage on the goods to be manufactured, processed or marketed without prejudice to the right of the rural bank to require other securities. c. Terms of loans renewal . Industrial loans may be granted for a period of not more than three hundred sixty (360) days, renewable for another period not exceeding one hundred eighty (180) days, subject to the provisions of Subsec. 3341.9(b). SUBSECTION 3342.3 Term loans a. Purposes . Rural banks may grant medium and long-term loans for the following purposes: (1) Purchase of farm land, improved or unimproved, to be devoted to agricultural production; (2) Improvement of agricultural, commercial, industrial or residential real estate for the borrower's own use and not for speculation: (3) Acquisition of agricultural or industrial machinery tools and other equipment needed in the farm or necessary to set up an essential or semi-essential rural industry, or for improvement or expansion of an industry already in operation, (4) Purchase of equipment and materials for livestock and poultry raising, fish culture and coastal fishing; and (5) Production and harvesting of agricultural crops which have production cycles of more than one (1) year. b. Classification . For purposes of classification, a medium term loan is one with maturity period of more than one (1) year but not exceeding five (5) years, while a long-term loan is one with a maturity period of more than five (5) years. c. Amount of loan ; securities . The amount of loans which may be granted for the purpose mentioned in Item "a" above shall be to the extent necessary to finance the expenditures and shall be secured by a mortgage on the land, machinery, equipment or real estate purchased without prejudice to the right of the rural bank to require other acceptable collaterals. The maximum amount of loan to a single borrower shall not exceed fifteen per cent (15%) of its unimpaired capital and surplus. d. Maturity periods ; amortization . Maximum maturity periods for medium and long term loans shall be as follows: (1) Long term loans for the purchase of farm land, improved or unimproved twenty (20) years; (2) Long term loans for the improvement of agricultural, commercial, industrial, or residential real estate ten (10) years; (3) Medium term loans for agricultural or industrial machinery, tools, and other equipment needed in the farm or necessary to put up an essential or semi-essential rural industry or to improve or expand one already in existence five (5) years; (4) Medium term loans for the purchase or acquisition of work animals for use in the farm owned and/or operated by the borrower three (3) years; and (5) Medium term loans for agricultural crops with production cycles exceeding one (1) year eighteen (18) months. The foregoing limitations may not apply when loans contemplated under this section are insured under the Home Financing Act or any other similar law. SUBSECTION 3342.4 Loans to cooperatives a. Kinds of loans to cooperatives ; purposes The following loans may be granted to cooperatives: (1) Agricultural loans for meeting the credit needs of members of farmers cooperatives in accordance with the purposes specified in Subsec. 3341.2c; (2) Commercial loans for the purchase of commodities for resale to members of the cooperative. This loan may be granted to all types of cooperatives; and (3) Industrial loans to meet the credit needs of the members of cooperatives of artisans, jobbers, and manufacturers according to purposes specified in Subsec. 3342.2a. b. Requisites for grant of loans . The following are the requisites for eligibility to borrow: (1) The cooperative must be duly registered or re-registered under P.D. 175 and Letter of Implementation No. 23; and (2) The cooperative must meet all the requirements on collaterals prescribed under existing regulations. c. What are considered cooperatives . For purposes hereof, the following shall be considered cooperatives: (1) Kilusang bayan (Cooperatives as defined in P.D. 175 and LOI No. 23); and (2) All samahang nayon (barrio associations) and all other registered pre-cooperative organizations which enjoy the status of provisional cooperatives, as certified to by the Bureau of Cooperatives. d. Terms and conditions of loans . Loans to cooperatives shall be subject to the same terms and conditions imposed on other borrowers, depending on the kind of loan, whether agricultural, commercial, or industrial, specified in the preceding sections. SECTION 3343. (Reserved) . SECTION 3344. Temporary Overdrawings Against Current Accounts . Temporary overdrawings against current accounts shall not be allowed unless caused by normal bank charges and other fees incidental to handling such accounts, which in no case shall exceed Two Hundred Pesos (P200.00). SECTION 3345. Supervised Credit . Supervised credit is a system of lending which combines adequate and timely credit with farm and home management guidance under a trained technician. Under the system, the farmer-borrower agrees, in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production and abide by the approved farm plan and budget jointly prepared by him and a duly accredited supervised credit technician. SUBSECTION 3345.1 Steps in supervised credit system The steps involved in supervised credit are the following: a. Analysis of the project to be financed to determine the resources of the farm project, the necessary changes which must be made to make the farmer-borrower more productive and efficient, and the additional facilities and/or financing required to improve his operations; b. Preparation of a farm plan and budget which shall include a modern farm schedule which sets down in specific terms the day-to-day farming activities of the farmer-borrower under modern cultural practices; c. Periodic inspection and follow-up of the project by the technician of the rural bank and/or of the government technician assigned to the bank to see to it that the farmer is operating strictly in accordance with the farm plan and budget and to provide the necessary technical assistance; d. Evaluation of the farm project at the end of the crop season or when such project has been completed to identify any problem that the farmer-borrower may have encountered during his operations and to see to it that such problem is avoided in the next project. SUBSECTION 3345.2 Requirement for supervised credit technician . In order that a rural bank may participate in the supervised credit program, it must hire as a member of its regular staff a supervised credit technician trained and duly accredited by the Central Bank who shall be responsible for providing supervised credit services to farmer-borrowers. However, the services of production or farm management technicians of government agencies may be temporarily utilized by the rural bank in case trained private technicians are not available. SUBSECTION 3345.3 Applicability of supervised credit . Rural banks shall grant loans under the supervised credit system in their ordinary or special lending operations regardless of the source of funds, whether from the bank's own funds, from special time deposits, rediscounting, etc.: Provided , That the loan papers are supported by duly accomplished farm plan and budget prepared under the supervision of a qualified production or farm technician. SUBSECTION 3345.4 Valuation reserves for doubtful and loss loan accounts under the Masagana 99 and other similar supervised credit loans a. Valuation reserves equivalent to fifty per cent (50%) of loan accounts considered as "doubtful" of collection shall be set up subject to adjustment at the end of each year and/or prior to any declaration of dividends. Loan accounts which on the basis of existing circumstances render their collection or liquidation in full highly improbable shall be classified as "doubtful". These types of loans may include, among others, any of the following: (1) Loans under litigation (excluding portion covered by Land Bank guarantee); (2) Loans which are past due for six (6) months and efforts to collect even the interest due have failed; (3) Restructured loans which have matured and have not been renewed, and efforts to collect even the interest due have failed; (4) Past due loans secured by collaterals which have declined in value without the borrower offering sufficient additional collateral for the loans, coupled with the weakened financial condition of the borrower; (5) Past due loans secured by mortgage on real estate, the title to which is subject to an adverse claim rendering settlement of the loans through foreclosure doubtful; and (6) Other loans which are current but have become doubtful of collection due to crop failure/unfavorable results of operations of the project financed. (b) Valuation reserves equivalent to one hundred per cent (100%) of loan accounts considered "uncollectible or worthless or loss" shall be set up and adjusted at the end of each year and/or prior to any declaration of dividends. These types of loans may include, among others, any of the following: (1) Loans which are past due, the interest of which are unpaid for a period of six (6) months and not in process of collection; (2) Loans previously categorized for the past six (6) months as "doubtful" of collection and without any payment of interest and/or reduction of principal; or (3) Loans wherein the borrower and/or his co-makers(s) are insolvent, and if secured, the collaterals thereof are considered worthless. c. Valuation reserves shall be set up for restructured Masagana 99 and other supervised credits at a graduated rate for the duration of the restructured term, as follows: (1) Fifteen per cent (15%) of the loan balance at the time of the first quarter of its restructured term; (2) Twenty-five per cent (25%) of the loan balance on the second quarter of its restructured term; (3) Thirty-five per cent (35%) of the loan balance on the third quarter of its restructured term; and (4) Fifty per cent (50%) of the loan balance at the end of its restructured term. SECTIONS 3346-3350. (Reserved) . F. SPECIAL FINANCING PROGRAMS SECTION 3351. Special Financing Programs . Special financing programs of the government for agricultural production, except those covered by agreements with foreign countries and/or international financial institutions, shall be undertaken under a special financing scheme in accordance with the provision of this section. The fund established for the special financing program shall be under the administration of the Central Bank and shall be channeled through rural banks in the form of special time deposits to provide them with seed funds for initial loan releases to finance specific projects under the program and to enable these banks to generate more funds through rediscounting with the Central Bank. The lending operations of rural banks under the special financing programs shall be governed by the respective project agreement and implementing rules and regulations for such programs, by the provisions hereof and other provisions of the implementing rules and regulations, and by such rules and regulations as may be issued by the Central Bank. The Central Bank international Bank for Reconstruction and Development (CB-IBRD) rural credit projects under supervised credit to provide financing for machinery and equipment for small farmers, including facilities for irrigation, storage, refrigeration and processing, shall be governed by the project agreement entered into between the Central Bank and the International Bank for Reconstruction and Development and the implementing rules and regulations. The rules and regulations issued by the Central Bank shall be suppletory to such implementing rules and regulations. In line with the policy and objectives of the government and Republic Act No. 720, as amended, rural banks may (1) adopt integrated agricultural financing under supervised credit to maximize the income of small farmers through multiple cropping, fish, livestock, and poultry production under a credit line system of lending, and (b) participate in cottage and small scale industries financing under supervised credit for working capital, purchase of land, installations, and machineries and equipment, construction of building for new industries or for the expansion of existing ones. The program is intended to encourage entrepreneurship, increase productions and productivity and create employment opportunities. SUBSECTION 3351.1 Requirement for participation in special financing programs . In order that a rural bank may participate in the special financing program, it must meet the following conditions: a. The rural bank must be operating in accordance with laws and regulations, instructions and directives of the Monetary Board; b. It is being managed wisely and prudently; c. There is no internal dissension in the rural bank which may jeopardize government investment and financial assistance to said bank; and d. It is eligible to rediscount with the Central Bank: Provided , That for purposes of the twenty-five per cent (25%) rule on past due loan ratio the Virginia and burley tobacco financing programs shall be implemented separately from the other special financing programs. Accordingly, rural bank whose overall past due loan ratios exceed twenty-five per cent (25%) may still be qualified to participate under the Virginia and burley tobacco financing programs: Provided , That their past due Virginia/burley tobacco loans outstanding do not exceed twenty-five per cent (25%) of the total tobacco loans granted under said two (2) special programs. Rural banks with unpaid matured special time deposits and rediscounting obligations with the Central Bank may still be allowed to participate in the Virginia and burley tobacco financing programs. Furthermore, a rural bank with past due or matured obligations with the Central Bank which are overdue for more than one (1) month but not exceeding two (2) months, except obligations covered by a duly approved plan of payment whose terms and conditions are faithfully complied with, may be allowed to participate in the Masagana 99 and other food production programs under the supervised credit scheme: Provided , That the total rediscounting obligations of a rural bank with the Central Bank shall not exceed five hundred per cent (500%) of its net worth plus fifty per cent (50%) of its monthly averaged saving and time deposit liabilities during the four (4) months' period immediately preceding its date of loan application. SUBSECTION 3351.2 Special time deposits ; requirements for availment/utilization . The funds for the special financing program shall be deposited with the participating rural bank in the special time deposits to be utilized for extending agricultural production and commodity loans to eligible borrowers. Such special time deposits shall be placed in rural banks for a period of three (3) years or as may be determined by the Monetary Board, subject to recall at any time in case the rural bank violates any of the terms and conditions in the grant of said deposits or any provision of law or rules, regulations, and instructions promulgated by the Monetary Board. Rural banks shall pay interest on special time deposits at the rate prescribed by the Monetary Board. Every rural bank shall at all times keep special time deposits under separate deposits account. SUBSECTION 3351.3 Rediscounting . Papers covering loans granted out of the special time deposits under the special financing program shall be rediscountable with the Central Bank, subject to the rules and regulations issued by the Monetary Board governing the rediscounting of rural bank papers. SUBSECTION 3351.4 Penalty on past due special time deposits . A penalty of five per cent (5%) per annum shall be imposed on all outstanding past due special time deposits of rural banks unremitted to the Central Bank. In the event of natural calamities, however, the Central Bank may suspend the imposition of the five per cent (5%) penalty on past due special time deposits: Provided : That: a. The special time deposits affected were used by the rural bank to finance loans guaranteed or those in the process of restructuring; and b. The rural bank files a notice in writing with the Department of Rural Banks and Savings and Loan Associations within ten (10) days after the occurrence of the calamity and the extent of damages on crops financed, etc. The exemption from the penalty shall be limited to the amount of loans restructured by the rural bank as recommended by the Central Bank's agricultural credit supervisor and approved by the Department of Rural Banks and Savings and Loan Associations. SUBSECTION 3351.5 Checks in payment of special time deposits or rediscounting obligations . Checks representing remittances of rural banks for the payment of (1) Special Time Deposits (STDs) or (2) rediscounting obligations with the Department of Loans and Credit, Central Bank, shall be clearly marked as follows: a. For special time deposits The phrase "FOR PAYMENT OF STD No. __________ dated _______" shall be typewritten at the left-hand corner of the check; and b. For rediscounting obligations with DLC The phrase "FOR PAYMENT OF REDISCOUNTING OBLIGATIONS, DLC" shall also be typewritten as stated above. All remittances to pay STDs shall be addressed directly to the Director, Department of Rural Banks and Savings and Loan Associations, while those made to pay rediscounting obligations shall be addressed to the Director, Department of Loans and Credit, Central Bank of the Philippines, Manila. SUBSECTION 3351.6 Kinds of loans under special financing program . The following loans may be granted under the special financing program: a. Short term loans with maturities not exceeding one (1) year for: (1) Rice production; (2) White corn and feed grains production; (3) Livestock fattening; (4) Poultry (broilers and layers); (5) Vegetable production; (6) Fisheries (inputs for fishponds); (7) Native and Virginia tobacco production; (8) Cotton production; and (9) Other products as may be determined by the Central Bank. b. Commodity loans with maturities of not more than one hundred eighty (180) days; c. Medium term loans with maturities not exceeding three (3) years for the purchase of work and dairy animals, hand tractors (power tillers), livestock for breeding, farm implements, and other similar equipment; and d. Such other loans as may be authorized by the Monetary Board. SUBSECTION 3351.7 Security . Loans granted under the special financing program shall be secured by any or a combination of the following: a. Real estate; b. Chattel mortgage on standing crops, existing poultry or livestock or on the object financed; c. Stored crops in bonded warehouses; d. Two co-makers acceptable to the bank: Provided , That in case a farmer is a member of a group or selda/damayan , the cooperative or selda may act as co-maker and: Provided , further , That in case of multi-purpose cooperatives, no co-maker shall be required. SUBSECTION 3351.8 Requirements for production loans a. Agreement . Loans for production under the special financing program shall be granted under the supervised credit system as provided in SECTION 3345. b. Loan proceeds ; special savings deposits . The proceeds of the loan granted out of the special time deposits shall be placed by the rural bank in a special savings deposit in the name of the farmer-borrower. Releases from said deposit shall be made from time to time in accordance with the schedule in the farm plan and budget. c. Amount of loan . The amount or size of the loan shall depend on the actual needs and viability of the project to be financed and the capacity of the borrower to repay the loan. d. Loan priority . Priority in the grant of loans shall be given to (a) cooperatives, (b) farmers with leasehold contracts, (c) farmers who are members of a cooperative, samahang nayon , selda/damayan , and who are beneficiaries of agrarian reform: Provided , however , That the farmer-borrower shall be tilling not more than six (6) hectares of farmland. e. Interest rate ; service fees and other charges . Production and commodity loans shall be charged an interest rate not exceeding twelve per cent (12%) per annum, excluding service fees and other charges. Service fees and other charges which rural banks may collect on loans granted under special financing programs shall be in accordance with the provisions of the applicable rules and regulations governing the program. SUBSECTION 3351.9 Conversion of production loan into a commodity loan . A farmer may apply for a commodity loan or convert his production loan into a commodity loan with the written consent of the marketing agent. A rural bank may extend a commodity loan to a farmer in an amount equivalent to not more than the current market value of the produce deposited in a bonded warehouse, secured by warehouse receipts: Provided , however , That in securing a commodity loan, the farmer must first liquidate his production loan, if any. A commodity loan shall fall due upon the sale of the commodity but shall in no case exceed one hundred and eighty (180) days. SUBSECTION 3351.10 Marketing tie-up . A three (3) party marketing agreement appropriate for the products financed shall be executed by: a. The borrower who shall undertake to deliver immediately to the marketing agent an agreed quantity of his produce which value is at least equivalent to the amount of the outstanding loan and the interest thereon; b. The marketing agent who shall undertake to purchase the borrower's produce at a specified minimum price and to pay the borrower through the rural bank within a specified number of days from actual delivery of the produce; and c. The rural bank which shall undertake to provide the borrower's credit requirement and to accept payment thereof from the marketing agent and apply the same to the borrower's account and release the excess to him or deposit the same in his savings account with the rural bank. SUBSECTION 3351.11 Agricultural Guarantee Fund . Rural banks may avail themselves of the guarantee coverage of eligible loans under the Agricultural Guarantee Fund, created under Republic Act No. 6390, as amended, and administered by the Land Bank, in accordance with the rules and regulations governing such fund. SECTION 3352. Small Fishermen's Special Credit Fund . Rural banks may avail themselves of the Fund which shall be used to provide credit to small fishermen in accordance with the following rules and regulations: SUBSECTION 3352.1 General policy . The National Food and Agriculture Council representing the Government of the Philippines deems it essential and necessary to give encouragement to the country's fishing industry. Toward this end, it has decided to establish "Small Fishermen's Special Credit Fund" called the "Fund", which will provide a readily available credit for the development of the nation's fishing industry. The fund shall be used to provide credit to small fishermen and/or seldas of small fishermen belonging to a fishermen's association who otherwise do not have access to credit through the usual or conventional credit institutions. All loans under this program shall be provided with supervised credit services from the Central Bank and Philippine Fisheries Commission technicians. The technical assistance to be extended shall include the preparation of feasibility study, preparation of fishing and home plan and periodic visits to the fishermen under supervision during the lifetime of the loan. a. Definition of terms . A small fisherman is one who operates a fishing outfit that uses fishing vessels of not more than three (3) tons gross. Examples of fishing outfits operated by small fishermen include gill net, baby trawl, fish corral, hook and line, fish traps, beach seine, round haul seine, presh net, and lift net, etc. b. Rural banks that may participate . The operation of the Fund shall be limited to designated qualified rural banks. The following are the criteria: (1) that the rural bank has complied with the rules and regulations of the Central Bank; (2) that the rural bank is authorized to accept savings and time deposes; and (3) that the rural bank operates within a fishing area. c. Eligibility . Fishermen actually engaged in fish capture using fishing vessels not exceeding three (3) tons gross are qualified to borrow from the Fund through the nearest implementing rural bank: Provided , They are bonafide members of a fishermen's cooperative or a fishermen's association ( samahang nayon ) wherein the members are formed into seldas or damayans of five (5) to eight (8) people. SUBSECTION 3352.2 General procedure a. All applications under the program shall be in prescribed form and shall be filed by the applicant-borrower but in no case to exceed Rural Banks and Savings and Loan Associations, Central Bank of the Philippines, hereinafter called the Bank. b. The application shall be processed by the Bank and evaluated in accordance with the covering agreement agreed upon between the National Food and Agriculture Council and the Central Bank of the Philippines. c. When the application is approved, the Bank shall execute the corresponding agreement with the applicant-bank in the prescribed form and in case of special time deposits, release the Fund in accordance with the procedure below. SUBSECTION 3352.3 Special time deposit a. Being a medium-term loan not exceeding three (3) years, each application shall be evaluated individually by the bank applicant before the application is transmitted to the Central Bank for final action. b. The Bank shall review the evaluated list of applicant-fishermen in the light of its knowledge of the credit requirement in the area and shall advise applicant-bank of its action within a week. c. The Bank shall forthwith make special time deposit based on approved request and each deposit shall be covered by a time deposit certificate. d. The special time deposit shall be co-terminus with the loan granted out of said deposits: Provided , however , That as installments or payments are received from the borrowers, said installments or payments shall be remitted to the Central Bank and returned to the Fund. e. The applicant-bank should release the loan within one (1) month from receipt of deposit after which it shall submit to the Bank the list of borrowers extended the loans. f. The applicant-bank should credit the time deposit with interest at the rate of six per cent (6%) per annum. g. Loans extended by the applicant-bank to farmer borrowers shall be charged an effective rate of interest not exceeding twelve per cent (12%) per annum. SUBSECTION 3352.4 Guarantee of loans a. Being a very highly risky loan arrangement, the guarantee should cover eighty per cent (80%) of the losses from the loan extended and outstanding at any given time by the Fund. b. In the event of default in the payment of guaranteed loans, the applicant-bank should take all necessary measures to recover as much of the loans as possible before applying for payment of losses sustained under the guaranteed loan. The Bank should satisfy itself that all possible measures have been taken to minimize loss from guaranteed loans. SUBSECTION 3352.5 Loans by rural bank to end-users a. Purpose of loans . Loans shall be made available to rural banks or a consortium of rural banks with the prior written approval of the Bank for relending to end-user applicants for the following specific purposes: (1) acquisition of fishing boat; (2) acquisition of inboard motor and accessories; (3) nets and other fishing paraphernalia. b. Loan limit . The amount of loan applied for should be based on the actual needs of the applicant-borrower but in no case to exceed P7,000. In the case of seldas , the equivalent of P7,000 per member of selda is to be followed to finance bigger vessels and better fishing gears. c. Security . The loan shall be secured by real estate if available. In its absence, the fishing outfit plus two (2) co-makers acceptable to the applicant-bank shall be required. d. Maturity . Loans shall be granted with maturities not exceeding three (3) years. e. Interest rate . Loans to end-user shall be charged an effective rate of interest of twelve per cent (12%) per annum on the principal amount outstanding from time to time; such interest, however, shall not be collected in advance. f. Repayments . The loan shall be repaid in equal monthly installments which shall be due every end of the month. The borrower-end-user however, is required to deposit not less than thirty per cent (30%) of the proceeds of his catch every fishing day. g. Marketing . The marketing of the fish caught by members of the cooperative shall be coursed thru their respective cooperative marketing association. The cooperative will in turn market the fish to the GMTFM. SECTION 3353. Coconut Financing Program . Coconut financing program shall be administered through a supervised credit scheme whereby a credit line is to be provided to the coconut farmer/worker families to finance economically-feasible projects to increase their income by maximizing the use of available farm resources through year-round productive activities. Participating rural banks shall be covered by the following rules and regulations governing the operations of the Integrated Agricultural Financing Program-Coconut. SUBSECTION 3353.1 Objectives a. General . To diversify the sources of income and improve the quality of life of small coconut farmer/worker families living under the coconut trees through multiple cropping, diversified farming and related agricultural undertakings by providing the necessary credit, technology and other technical assistance under a supervised credit scheme. b. Specific (1) To help the Administration's food self-sufficiency program by planting between coconut trees; (2) To maximize land-use of coconut farms; (3) To effectively transfer farm technology and increase employment of coconut farmers; (4) To encourage use of formal credit facilities, and promote savings; and (5) Corollarily, to introduce improved cultural practices in coconut farming and thus enhance coconut productivity. SUBSECTION 3353.2 Basic strategy . The program will initially involve thirty (30) pilot municipalities whose major agricultural crop is coconut. Loans shall be granted to small coconut farmers/worker families living under the coconut trees in these pilot municipalities by selected rural banks for the following purposes: a. Planting/raising under coconut trees any or a combination of the following: (1) Crops Priority I crops, which schemes on supervised credit are already operational, such as: (a) corn (b) mongo (c) Feedgrain sorghum, soybean and yellow corn (d) peanuts (e) vegetables (f) onion (g) garlic (h) others (2) Animal production (a) cattle/carabao (b) goat (c) swine (d) poultry (e) fish and fishery products (f) others b. Acquisition of any or a combination of the following: (1) farm machineries (2) tools and equipment (3) work animals (4) irrigation pumps (5) others SUBSECTION 3353.3 General policies a. COCOFED provides the Central Bank of the Philippines, Department of Rural Banks and Savings and Loan Associations (CB-DRBSLA) with a seed fund of initially P10 Million which will be released to and used as the initial capital of selected rural banks for loan to farmers engaged in multiple cropping and/or diversified farming and another P10 Million for the acquisition of work animals, farm machinery and equipment, etc. b. CB-DRBSLA releases funds to participating rural banks in the form of STDs based on the short and medium-term credit requirements of the farmers to be serviced. c. The Department of Loans and Credit of the Central Bank of the Philippines (CB-DLC) rediscounts one hundred per cent (100%) of all short-term eligible papers under this program at a preferential rate given to loans granted under the supervised credit. d. All STDs granted under this program shall be kept in a separate account by the rural banks and shall not be utilized for purposes other than those stated herein. e. CB-DRBSLA shall assign a credit supervisor to coordinate with the personnel of the rural banks, COCOFED town chapters, and the PCA for an effective implementation of the program; NFAC and primarily PCA shall provide the necessary number of production technicians (PT) with at least one (1) PT assigned to each participating rural bank. All production technicians assigned to the project shall undergo a training program to be undertaken by CB-DRBSLA on crop production technology, supervised credit and marketing. These production technicians shall receive allowances at the prescribed rates. f. The RBs shall be allowed to re-structure the loans granted under the program in case of force majeure or fortuitous events upon certification by the production technicians, duly attested by the appropriate middle-level supervisor and subject to verification by the CB credit supervisor assigned in the area. g. Coconut farmer/worker families shall be encouraged to save and deposit with the RBs in line with the "Savings Mobilization Program" of the government. h. Participants under this program shall be limited to selected RBs. SUBSECTION 3353.4 Lending operations a. Loan priorities (1) Only coconut farmer/worker families who own/cultivate not more than fine (5) hectares, duly recommended by the PCA/NFAC/RB production technicians and who are or shall be engaged in multiple cropping/diversified farming, shall be eligible for financing under this program. This limitation shall apply to loans for the acquisition of work animals, farm machinery and equipment, etc: Provided , That the project is viable. (2) Loans for production purposes shall be granted under supervised credit wherein the coconut farmer/worker families must agree in writing that they will apply the package of technology and abide with the farm plan and budget prepared by them under the guidance of the PCA/RB production technician. b. Security of the loans (1) Loans extended for multiple cropping or diversified farming shall be secured by a chattel mortgage of the projects being financed and jointly executed by either one person acceptable to the rural bank as co-maker or the members of the selda , samahang nayon and/or damayan as co-borrowers. (2) Loans extended for the acquisition of work animals, farm machinery and equipment, etc. shall be secured as follows: (a) fifty per cent (50%) by a chattel mortgage on the project being financed; and (b) fifty per cent (50%) by a real estate mortgage. c. Loan application, annual farm plan and budget (1) The coconut farmer/worker families with the assistance of the PCA/NFAC/RB production technicians, shall prepare the loan application and its accompanying farm plan and budget of the project to be financed, which shall be submitted to the RB for approval. (2) To facilitate loan approval and to promote group action, the PCA/NFAC/RB production technicians shall organize the coconut farmer/worker families into farming units and/or selda/damayan . The members will co-sign for one another in the promissory note and loan application. Group loans shall be allowed for the acquisition of work animals, farm machinery and equipment, etc. where the members will also jointly offer the necessary securities. (3) The COCOFED town chapter president shall certify that the applicant is a bonafide coconut farmer/worker family living under the coconut trees. In the case of loans for the acquisition of work animals, farm machinery and equipment, etc., the COCOFED town chapter president shall certify that the applicant(s) is/are registered COCOFUND receipt holder(s). d. Loan budget and releases (1) The loan budget will depend on the credit requirements of the project to be financed. Crop production loans shall be to the same extent as those authorized under existing supervised credit programs. For loans extended for the acquisition of work animals, farm machinery and equipment, etc., the following scheme shall be observed: (a) The coconut farmer/borrower shall be required to deposit ten per cent (10%) of the loan budget; and (b) The Fund shall finance ninety per cent (90%) of the approved loan budget. (2) Loan releases will be synchronized with the credit needs of the projects based on the farm plan and budget. (3) Loan proceeds shall be released in lump-sum and automatically credited to the Special Savings Deposit (SSD) in the name of the coconut farmer/worker. The SSD shall earn an interest of twelve per cent (12%) per annum. e. SSD and savings deposit withdrawals All cash withdrawals from the SSD must be countersigned by the PCA/NFAC/RB production technicians as an indication that the money is needed by the project and is in accordance with the farm plan and budget. f. Purchases of inputs/farm implements (1) The borrower shall purchase the needed agricultural inputs from dealers of his choice through the use of chits under the same procedures required under the Masagana 99 scheme. The RB shall stamp its seal thereon. (2) The CB-IBRD implementing rules and regulations shall be applied to loans for the acquisition of work animals, farm machinery and equipment, etc. g. Interest, maturity and repayment (1) Loans granted under the program shall have an interest rate not exceeding twelve per cent (12%) per annum or one per cent (1%) per month, which shall not be deducted in advance but shall be collected upon repayment of the loan. (2) Maturity of the loans will depend on the projects to be financed but in no case shall it exceed a period of one (1) year or twelve (12) months for production loans, and not more than five (5) years in the case of loans for the acquisition of farm implements. (3) Crop production loans shall be repaid on or before the maturity date, out of the income realized from the projects financed and/or other sources. SUBSECTION 3353.5 Implementing agencies and their responsibilities a. Philippine Coconut Producers Federation (COCOFED) shall : (1) Deposit IAFP-Coconut with CB-DRBSLA to be utilized for STDs with selected RBs; (2) Coordinate with town chapters involved in the program; and (3) Conduct an information campaign on the program b. Central Bank of the Philippines (CB) (1) Department of Rural Banks and Savings and Loan Associations (DRBSLA) shall: (a) Administer the IAFP-Coconut Fund intended for selected RBs to participate in the program; (b) Provide supervisory personnel to coordinate in program implementation; (c) Simplify loaning operations for smooth and accelerated implementation of the supervised credit program; (d) Encourage selected RBs to participate actively in the implementation of the program; (e) Assist in the information campaign on the program; and (f) Conduct comprehensive training on the IAFP-Coconut crop production technology, supervised credit and marketing. (2) Department of Loans and Credit (DLC) shall: Rediscount all short-term eligible papers under the program at a preferential rate of rediscounting given to loans granted under the IAFP-Coconut supervised credit scheme. c. Philippine Coconut Authority (PCA) shall : (1) Provide at least one (1) production technician for every selected bank; (2) Assist in the information campaign of the program; (3) Coordinate and monitor the activities of the PCA production technicians; and (4) Assist the rural banks in the collection of loans. d. National Food & Agriculture Council (NFAC) shall : (1) Provide at least one (1) production technician for every selected rural bank; (2) Assist in the information campaign on the program; (3) Conduct comprehensive training on the technical aspects of the program; (4) Coordinate and monitor the activities of NFAC production technicians; and (5) Assist rural banks in the collection of loans. e. Rural Banks shall : (1) Grant production loans under this program to farmers to be financed; (2) Abide with the reporting procedures; (3) Undertake the principal responsibilities in the collection of loans with the assistance of the PCA/RB production technicians; and (4) Submit progress and summary reports to CB-DRBSLA. SUBSECTION 3353.6 Personnel of implementing agencies and their responsibilities a. CB-DRBSLA credit supervisors (1) Encourage selected RBs to participate actively in the implementation of the program; (2) Coordinate and facilitate the activities of selected RBs for effective program implementation; and (3) Verify, evaluate and recommend the application for STD of participating RBs; (4) Expedite the release of STD and supervise the utilization of the same; (5) Advise selected RBs on supervised credit program implementation; (6) Supervise the preparation of progress and summary reports and review the same before submission to CB-DRBSLA; (7) Test-check pricing, delivery and application of inputs and farm implements, including the utilization of the cash portion of the loan by borrowers; (8) Verify loans covered by restructuring applications of selected RBs; and (9) Submit recommendations and proposals to improve and accelerate program implementation. b. PCA/NFAC/RB production technicians (1) Assist the coconut farmer/worker, families in the preparation of the loan application, annual farm plan and budget and other loan documents; (2) Render to borrowers technical supervision from production to marketing; (3) Teach the borrowers simple farm record-keeping and conduct a periodic check-up of the same; (4) Keep accurate records of the supervised farming projects under their supervision; (5) Submit progress and summary reports to the rural banks, copy furnished to middle-level supervisors; (6) Assist the selected RBs in the collection of loans extended under the program; (7) Consult CB-Credit supervisor and RB manager on problems concerning the program; and (8) Must have a continuing dialogue with the coconut farmer/worker families to gain their full support and cooperation in the implementation of the program. SUBSECTION 3353.7 Reporting system a. RBs participating under the program will prepare a monthly progress report to be submitted to CB-DRBSLA, Manila, not later than the 10th day of the following month. b. CB-DRBSLA consolidates monthly progress reports of the RBs participating under the program and submit a summary report to IAFP-Coconut secretariat. c. PCA/NFAC/RB production technicians prepare a monthly progress report of the supervised farming projects under his supervision and submit the same to the rural bank, copy furnished the PCA/PCDO or the NFAC/PPO. The cut-off date will be the last working day of the month. d. Rural banks prepare a monthly summary report of the supervised farming projects and submit the same to the CB-DRBSLA, copy furnished IAFP-Coconut secretariat. SUBSECTION 3353.8 Program evaluation . Periodic evaluation of the program shall be conducted by IAFP-Coconut Secretariat. SUBSECTION 3353.9 Special restructuring scheme for past due coconut loans . The following guidelines shall govern the restructuring of matured coconut loans (supervised and non-supervised) of farmers situated in the provinces indicated in App. 24 and the restructuring of the corresponding rediscounting obligations of rural banks with the Central Bank: a. A rural bank may be allowed to restructure its mature/maturing rediscounting obligations related to coconut loans for a term of not more than one (1) year, subject to the following conditions: (1) The non-payment of the rediscounting obligations was due to natural calamities and other adversities in the coconut industry such as the decline in the price of cobra in the world market; (2) Financial assistance to the rural bank has not been suspended at the time of the application; (3) There is no internal dissension in the rural bank; (4) The combined capital accounts of the rural bank shall not be less than ten per cent (10%) of its total risk assets; (5) The rediscounting arrearages in coconut loans did not arise from mismanagement or serious irregularities in the rural bank's operations. b. In order to avail of this restructuring scheme, a rural bank shall file its application (DLC Form No. 3) to the Department of Loans and Credit, supported by the following: (1) Duly accomplished Rediscount Schedule (DLC Form No. 4), containing a listing of the rural bank's borrowers whose coconut production loans had been restructured; (2) Resolution of the board of directors authorizing the rural bank to apply for restructuring of its coconut loans and authorizing the president or manager to sign/endorse all documents for and in behalf of the rural bank; (3) Latest financial statements; (4) Report on required and available reserves for the past four (4) weeks; (5) Promissory notes (DLC Form No. 11) in favor of the Central Bank; (6) Certification signed by rural bank president or his duly authorized representative that the non-payment of the loans by the borrowers was due to natural calamities or other adversities such as decline in the price of copra in the world market. c. The restructured promissory notes shall be endorsed in favor of Central Bank and deposited with, and duly acknowledged by, the rural bank's authorized depository bank; d. Any false statement or information given by the president/manager or any authorized officer of a rural bank in compliance with these guidelines shall render said bank liable to the liquidated damages provided for under existing regulations and to the corresponding administrative sanctions under Sec. 34 and 34-A of the Central Bank Act, without prejudice to the institution of other appropriate legal action against the persons responsible therefor, if warranted. e. Rural banks concerned may be allowed access to the rediscount window during the life of the restructured loans, subject to the existing rules and regulations on rediscounting. SECTION 3354. IGLF Program . Availment by qualified rural banks of special time deposits under the IGLF Program shall be governed by the following criteria and rules: SUBSECTION 3354.1 General criteria a. The rural bank, based on the general and special examinations of the Department of Rural Banks and Savings and Loan Associations during the last two (2) years immediately preceding the date of application for a special time deposit under the Industrial Guarantee and Loan Fund Program, has been operating in accordance with existing laws, rules and regulations as well as the requirements of the Monetary Board and such other relevant regulations that the Central Bank may issue from time; b. The rural bank has no past due and/or restructured loans, inclusive of IGLF and CB-IBRD accounts; no plans of payments; and whose total past due ratio does not exceed twenty-five per cent (25%) of its total outstanding loans; c. The paid-in capital of the rural bank, exclusive of government counterpart capital (preferred shares), is not less than P300,000; d. The rural bank's credit rating should be at least Class "D" at the time of filing of the application: Provided , That it has not committed any serious infraction of the laws, rules and regulations governing rural banks, especially those on rediscounting; e. Financing under the Industrial Guarantee and Loan Fund Program in the form of special time deposits shall not exceed 150,000.00 per application; and f. The proceeds of the special time deposits shall be made available by the rural banks to eligible borrower-firms in their respective area(s) of operation for the establishment, expansion and/or refinancing of small (scale) sized export-oriented industries as well as cottage industries, production of essential food items, including import substitutes where no imported materials are used in their components. SUBSECTION 3354.2 Additional rules and regulations a. Eligible projects . Projects eligible for IGLF financing shall include: (1) Projects of manufacturing industries enumerated in App. 7; and (2) Tourist inns outside Metro Manila Area with the required indorsement/certificate from the Department of Tourism: Provided , That the total assets of the prospective IGLF grantee shall not exceed P1 million as of the date of application. b. Purpose of financing . The IGLF facility which should not exceed P500,000 may be utilized for any or a combination of the following purposes: (1) Working capital requirements; (2) Fixed assets costs, such as the acquisition of factory site, which shall be strictly on a case-by-case basis, building construction and improvements, purchase of machinery, equipment or spare parts and installation costs. c. Papers required (1) The application of an accredited bank for initial release (50% of amount approved) against an approved project shall be filed in duplicate with the Industrial Loans Division (IGLF Unit), Department of Loans and Credit, Central Bank, together with the following supporting papers: (a) A certification that both the borrower-firm and the project being financed meet the eligibility requirements of IGLF and that the approved loan has been processed/evaluated in accordance with IGLF rules and regulations; (b) Original and two (2) copies of deed of undertaking (assurance of peso payment) duly accomplished and signed by an authorized officer of the financial institution; (c) Original and three (3) copies of guarantee agreement, duly accomplished and signed by an authorized officer of the financing institution with its seal affixed thereto as indicated in the agreement; (d) Borrower-firm's request for release of the approved IGLF facility duly endorsed by the applicant financing institution; (e) Whenever applicable, an insurance policy on the life of the proponent (single proprietor) in an amount equal to sixty per cent (60%) of the approved loan, duly endorsed/assigned in favor of the CBP-IGLF. This is required where the applicant is a single proprietorship and the approved loan is P100,000.00 or more. This old policy is amended so as to make the said insurance requirement optional rather than mandatory on the part of the borrower. (f) Certification on non-arrearages with the DPB, PNB, GSIS and SSS on behalf of the following: For single proprietorship the proprietor Partnership the partnership and all partners Corporation the corporation, officers and directors The certification may be issued by the agencies or may be in the form of a sworn statement executed by the aforementioned parties; and (g) Certificate of time deposit corresponding to the amount released signed by authorized officer(s) of the financial institution. Separate certificates shall be submitted for the working capital and fixed asset portion of the approved loan. (2) The subsequent application of the accredited financial institution for the final release (balance of 50%) against an approved project shall be supported by the following: (a) A duplicate of the borrower-firm's promissory note covering the initial release; (b) A copy of the corresponding credit advice/memo or check stub evidencing release to the borrower firm of the initial funding from IGLF; and (c) Certificate of time deposit covering the final release of the fifty per cent (50%) balance signed by authorized officer(s) of the financial institution. (3) Under the sponsorship scheme for rural banks; Eligible rural banks shall continue to file applications for IGLF STDs in the prescribed forms, with the National Economic and Development Authority (NEDA), in quadruplicate. Other supporting papers shall be submitted as indicated in the notice of approval of the application for IGLF facility. Applications may no longer be submitted through a consortium of rural banks. The minimum STD loan that a rural bank may extend to a single borrower shall be P20,000. d. Criteria for project evaluation . The criteria in the evaluation of projects shall be as follows: (1) Project feasibility It must be economically, technically and financially feasible. (2) Foreign exchange earnings/savings It should contribute to the reduction of trade imbalance through the manufacture of export-products and the utilization of indigenous raw materials. (3) Regional dispersal Priority shall be given to industries located outside Metro Manila. Only expansion and new export-oriented projects within the Metro Manila Area will qualify. (4) Employment generation Priority shall be given to projects which are labor-intensive. (5) Equitable distribution of income To spread the benefits of IGLF financing to as broad a base as possible, the prospective IGLF grantee shall not be a shareholder of another IGLF beneficiary firm. Where the project is a spin-off or subsidiary of another firm(s), the combined assets should not exceed P1 million. (6) Compliance with existing requirements of other government agencies, e.g., pollution control. The prospective borrower shall have complied with all the requirements in connection with the project to be financed. e. Debt-equity requirement . The maximum amount of financing that may be extended shall not exceed eighty per cent (80%) of the total long-term debt (inclusive of the amount applied for) and equity of the applicant-firm such that the resulting debt-equity ratio would be 80:20. f. Maturity period . The special time deposits/deposit substitutes shall have maturities not exceeding three (3) years for working capital and ten (10) years for fixed assets. For new projects, STD/DS loans for working capital and fixed assets shall have a grace period of one (1) year and two (2) years, respectively, in payment of principal amortization inclusive of the approved term. g. Interest rate/Loan Ceiling Effective November 1, 1984, the new interest rates/policy change governing the operations of the Industrial Guarantee and Loan Fund (IGLF) shall be as follows: A . Cottage and Small Interest Rates Industries 1. From IGLF to accredited 16% p.a. institutions 2. From Accredited Institutions 23% p.a. inclusive of a to End-Users service charge of 1.5% p.a. B . Medium Industries 1. From IGLF to Accredited 18% p.a. Institutions 2. From Accredited Institutions 23% p.a. inclusive of a to End-Users service charge of 10.0% p.a. The maximum loan ceiling for cottage/small industries is fixed at P2.0 million. (Effective Oct . 19, 1984 ) prLL h. Guarantee coverage (1) All IGLF special time deposits availed of shall be covered by an automatic sixty per cent (60%) guarantee for which a guarantee fee of two per cent (2%) per annum shall be assessed, in addition to interest. The guarantee fee shall be equal to two per cent (2%) of sixty per cent (60%) of the outstanding balance, per annum, payment of which shall follow the schedule of payments on principal and interest. The financial institutions may pass on to its borrowers the two per cent (2%) guarantee fee. (2) Straight guarantee of industrial loans for projects eligible under the IGLF program may be allowed up to a maximum of eighty per cent (80%) subject to approval by the IGLF Review Committee. The guarantee fee shall be equal to two per cent (2%) of the approved guarantee coverage. i. Amortization payments . Eligible rural banks shall submit a schedule of equal amortization payments (principal and interest) computed on a quarterly basis. j. Releases on approved IGLF facility . All amounts released to eligible rural banks shall immediately be released to the project proponent and no part thereof shall be retained in the form of deposits. Special Time Deposits approved in favor of eligible rural banks (under the sponsorship scheme) shall be effected upon the request of the financial institutions and submission of all the required documents as indicated in the letter of advice. Failure to submit these documents within one hundred twenty (120) days from receipt of such advice shall be sufficient cause for reversion of the approved amount to the uncommitted resources of the IGLF. k. Service charges . The maximum charges, including commissions, premiums and service fees other than interests and guarantee fees, regulation fees, mortgage redemption insurance, documentary and science taxes and similar expenses that financial institutions may collect on loans granted under the Program shall be as follows: (1) Charges on the loan principal which shall be collected only once and only upon the full releases of the loan shall not exceed the following rates: Over P250,000 1-% P250,000 and below 1% (2) On the second year and every year thereafter, and for as long as the loan or any portion thereof remains unpaid, a service fee on the outstanding balance may likewise be collected in accordance with the following schedules: Over P250,000 P200.00 Over P100,000 to P250,000 P100.00 P100,000 and below P50.00 l. Default in amortization payments . A financial institution is considered in default upon failure to pay the amortization on its IGLF special time deposits as they fall due. In case of default, its demand deposit account with the Central Bank and/or its duly designated depository bank shall be debited for the equivalent amount in default, plus the corresponding interests and guarantee fees due thereon; Provided , That such debit shall not result in overdrawings; otherwise, the financial institution binds itself to remit directly to the Central Bank the total amount due. Failure to remit the amortization(s) due within a specified period may temporarily disqualify the financial institution from availing itself of the privilege of access to the rediscounting facilities of the Central Bank subject to approval of the Monetary Board and/or participating in the IGLF Program. m. Violations by the financial institution/IGLF grantee . Any violation or infraction of these regulations, including loan diversion and misrepresentation in the application, will serve as sufficient basis for the recall of the special time deposit within thirty (30) days from receipt of notice and/or to the imposition of administrative sanctions as provided for under existing laws, rules and regulations insofar as these are applicable. n. Supplementary rules . The Central Bank may, from time to time, issue additional rules and regulations to supplement, complement or amend rules and regulations as may be initiated by the National Economic and Development Authority. o. The following policy changes have been adopted by the IGLF Review Committee for IGLF Financing for rice/corn mill projects: (1) Loans granted for working capital shall be for a maximum period of six (6) months only; and (2) These loans may be secured by a Deed of Pledge on negotiable grains quedans issued by NFA-franchised rice/corn mills/warehouses with eighty (80%) guarantee coverage of the Quedan Guarantee Fund Board. ( Effective Feb . 18, 1985 ) (3) The following guidelines shall govern working capital loans to NFA-franchised rice/corn mill projects under the IGLF-Quedan Financing Scheme as a supplement to the IGLF Policy Manual. 1. Guarantee required by participating financial institutions (PFI's) for working capital loans of NFA franchised rice/corn mills shall be arranged with the Quedan Guarantee Fund Board (QGFB). 2. Applications of rice/corn mills whose loans are to be covered by QGFB guarantees shall be supported by the following: a. Audited and/or duly certified financial-statements for the last three (3) years. b. Xerox copy of applicable business papers, e.g. Bureau of Domestic Trade Registration, Articles of Incorporation and By-Laws and SEC registration. c. Income Tax Returns for the past three (3) years. d. Data/figures needed by the accredited bank in the preparation of the project appraisal report. e. Certificate of Special Franchise (CSF) or Certificate of Pending Franchise (CPF) from the National Food Authority. f. Borrower's request for release of the loan. g. Other requirements of the accredited financial institution. 3. Requests of IGLF accredited financial institutions for funding of these loans shall be filed with the CB-IGLF, together with the required supporting papers, as follows: a. A simplified Project Appraisal Report (PAR) for loans below P2.0 million, without projections. b. An expanded PAR for loans of P2.0 million and above, including a 6-month projection. c. If already available, List of Quedans, xerox copies of the affidavit of ownership, stock inspection report and certificate of special franchise. d. Other supporting papers/documents specified in the IGLF Policy Manual to support the application for release, if applicable. 4. An accredited financial institution applying for release of an approved IGLF working capital loan covered by QGFB Guarantee shall first comply with the QGFB requirements including the payment of the corresponding 2% guarantee fee. ( Effective Aug . 19, 1985 ) SECTION 3355. Livestock and Poultry Financing . The following guidelines shall be observed for financing livestock and poultry production. SUBSECTION 3355.1 General policies a. Rationale . This short-term livestock and poultry financing has been conceived to provide more effectual organization of government agencies and the private sector. It will be implemented on an integrated effort of the Central Bank through the rural banking system and the coordinated efforts of the NFAC, FTI, BAI, BAEX and other government and private agencies. This program will capitalize on the recommended package of technology supervised credit scheme, integrated financing-marketing scheme and closer coordination of government and the private food processors. The Department of Rural Banks and Savings and Loan Associations of the Central Bank of the Philippines shall be responsible for the planning, coordination and effective implementation of the national program. The marketing shall be integrated with financing such that the FTI will give priority of procurement, at floor price level, the produce of the farmer producers. Through this, the farmers will be encouraged to avail of production/commodity loans and assure them of repayment for these loans. An audit team composed of the resident bank examiner and the agricultural credit supervisor shall conduct a regular examination on fund releases and disbursement and evaluation surveys on animal procurement and disposal as well as the efficiency of the finance-marketing schemes. b. Objectives . In consonance with the national policies towards food self-sufficiency, this financing scheme envisions to contribute its share in the realization of such objectives through a wider dispersal of credit to the countryside. (1) To intensify the production of poultry and livestock to meet the effective demand on such products. (2) To meet the demand of animal protein requirements. (3) To provide the farmer-borrowers more concrete incentives in animal production through viable financing and marketing programs. c. Features . This short-term credit financing is distinct with added features on improvement from the previous financing guidelines set forth by the department. New concepts as well as new projects have been included to make the total program responsive to the needs of the countryside in contribution to the attainment of the national goals. (1) The recent reorganization which effected the residency concepts of the department's bank examiners and agricultural credit supervisors would promote an effective and efficient utilization of manpower in the administration and supervision of this financing scheme. LLpr Having profited from previous credit program implementations, the tenets of supervised credit shall be the basic strategy to effect the desired results in the implementation of this new production financing. (2) Supervised credit scheme . Supervised farm credit is a system of lending that includes the provision of technical services to farm borrowers to insure that the borrower adopts, with the help of the loan granted to him, recommended practices designed to increase his productivity and income. Under this lending system, the borrower's specific credit requirements must be identified. For the purpose of the implementation of this program designed for participating rural banks to cater to its clientele of small farmers, the critical steps involved are the following: (a) The first step is a careful analysis of the project which is the object of financing to determine the resources of the farm project, changes that have to be introduced to make the farm more productive, and additional facilities and/or financing that the farmer may require to enable him to attain his objectives of improving his operations. If he is presently engaged in rice, he may, with the help of the technician, find it necessary to engage in an integrated farming operation to include the raising of poultry and livestock. (b) Preparation of the farm plan . This includes a modern farming schedule which sets down in very specific terms the day-to-day farming activities of the farmer using new technologies and improved cultural practices. (c) The grant of a loan to the farmer . After determining the credit worthiness of both the project and the borrower, only can such a loan be granted. The loan, however, is not released in lump sum but in installments as specific needs of the farm project would require from time to time. (d) Periodic inspection or follow-up of the project . An agriculturally trained technician assisting the farmer should oversee whether he is operating strictly according to the plan and/or obtain technical assistance for the farm whenever the technician believes such assistance is necessary. (e) Evaluation of its farm projects at the end of the project/crop season . To determine whether the operation of the farm have improved as a result of the financial and technical assistance extended to the farmer under supervised credit and to identify and analyze any problem that the farmer-borrowers had encountered during the project year/crop season and to find out the result of what he had done to overcome said problems so that he could do better next time. d. Eligibility requirements (1) Rural banks (a) Must be operating in accordance with the laws and regulations, instructions and directives of the Monetary Board; (b) Must have no internal dissension which may jeopardize the government investments and financial assistance to the bank; (c) Must be eligible to rediscount with the Central Bank; (d) Must have been authorized by the Central Bank to accept and service savings and time deposits; (e) Must have sound liquidity and investment position; (f) Must have competent management to handle the program; (g) All banks, regardless of performance in previous livestock programs, should obtain the accreditation from the DRBSLA before they can be allowed to implement and/or continue their financing under the program. Likewise, expansion of their livestock lending operations shall from time to time be subject to evaluation and recommendation of the CB agricultural credit supervisor (for details, please refer to appendices). (h) Banks participating for the first time under this program should implement the project on a pilot basis until such time that the resident CB-ACS recommends the expansion on a bigger scale. (i) The bank must have its own qualified livestock technician to supervise the projects. Preference shall be given to agriculture graduates, major in animal husbandry or graduates of veterinary medicine. However, other agriculture graduates (college or secondary) who have adequate training or experience on livestock management and disease control may also qualify. Furthermore, in exceptional cases, and upon recommendation of the CB-ACS, said bank may be allowed to participate in the program without employing its own technician: Provided , That: (i) Its financial position does not warrant the hiring of a technician; (ii) the volume of transaction is so limited to justify the employment of one; (iii) a qualified government technician is assigned to the bank to assist in the program implementation. (j) The bank shall be required to hire/enlist additional technicians in proportion to the number of farmer-cooperators and volume of loans being handled as determined and upon recommendation of the CB-ACS. (k) The bank must purchase the necessary veterinary equipment and instruments for the use of its technician/s. (2) Borrowers (a) A prospective borrower must have ample experience and adequate competence to operate the project with a minimum of external supervision and technical assistance. (b) He must be willing to abide by the technical recommendations of the RB/livestock technician, to keep records and to follow a repayment schedule. (c) He must have the necessary water and housing facilities and/or willing to shoulder the labor and cost of putting up such necessary facilities for the projects. (d) He must be a resident of the locality, where land transportation is easily accessible and where peace and order is not a problem. (e) He must be of good moral character and/or bonafide member of a samahang nayon /duly accredited cooperative association or compact farm. (f) He must not have any existing loans in arrears from other banking institutions. (g) He must have other sources of income in addition to the projects to be financed. (h) He must have an adequate area for forage production. (3) Projects (a) It should be the policy of this financing scheme that animals to be purchased should come from disease-free stocks and acquired from established and reputable breeders. (b) in like manner, a ready market for finished products/animals should be the primary concern before the project is to be considered for financial assistance. Whenever necessary and practicable, a marketing contract be entered into among the producer, the buyer and the rural bank. e. Lending policies (1) Purpose of the loan . The loan proceeds shall be used to finance the purchase of poultry and livestock stocks, concentrate feeds, veterinary supplies/services, breeding fee and other incidental expenses and contingencies related to the procurement cost. (2) Loan basis . The loan amount shall be based on the actual costs of the essential items enumerated above. The maximum number of head or size of the projects per end-user borrower shall principally depend on individual qualifications, i.e., paying capacity, collateral, character, available farm labor, adequacy of forage supply, training and experience and availability of housing and water facilities. In case, however, the financing exceeds P10,000 per end-user/borrower, the rural bank may require such forms of securities as may be appropriated to cover the excess amount. (3) Loan releases . The loan shall be covered by only one promissory note to be released in lump sum in the name of the borrower and subsequently deposited under the special savings deposit account. Thereafter, loan releases in the form of withdrawals shall be made as indicated in the prepared farm plan and budget. All loans under this scheme shall be released in kind and under no circumstances shall the borrower be allowed to withdraw cash out of his approved loan. (4) Loan term . Loans shall have a maturity not exceeding one (1) year for all project categories. (5) Repayment plan . Loans shall be paid out of the proceeds of the project financed or from other sources of income. Liquidation of the loan shall immediately follow after the sale of the animals. (6) Interest rate . Loans shall bear an interest of twelve per cent (12%) per annum not discounted in advance. Furthermore, the bank may charge a service fee of not exceeding three per cent (3%) based on the outstanding balance. cdll (7) Security requirements . Loans granted under this financing shall be secured by any or a combination of the following: (a) Chattel mortgage on the animal to be financed including existing animals in addition to two (2) co-makers acceptable to the bank management. (b) Joint liability or guarantee coverage may also be accepted by the bank provided requirements attendant thereto are properly met. (c) The bank may also require the presentation of real estate collateral in cases where the number of animals to be financed exceed the optimum number. Subject collateral shall be free from all liens and encumbrances. f. Procedure in obtaining poultry/livestock production loan (1) Interested farmers should visit the nearest rural bank which has been duly authorized to participate in the special financing programs of the Central Bank. (2) Rural Bank management conducts preliminary inquiry and apprise farmers as to: (a) Specific purpose of the loan and the prerequisites needed. (b) Loan terms and mode of payment. (c) Security requirements. (d) Other related matters pertinent to the loan application. (3) If farmer's application appears meritorious, then (a) Inspection and appraisal of the security/s is made. (b) Other information relative to the application is gathered. (4) After the security requirements have been evaluated and the borrower is eligible for the loan, then the RB farm technician prepares: (a) Final appraisal of the credit worthiness of borrower-applicant. (b) Farm and credit plan with the borrower. (c) Repayment schedule. (5) The RB manager takes note of the plans prepared for the applicant by the RB technician and accordingly acts on the application for approval/disapproval. (6) Upon approval of the loan application, end-user borrower shall be required to execute only one promissory note on the approved amount: Provided , That only the amount actually required by the project at the time the borrower signs the note shall be released. All releases must be in the form of purchase orders except on meritorious cases where releases in the form of cash is unavoidable. (7) The unused portion of the loan shall be deposited in a special savings deposit account in the borrower's name and withdrawals against such special savings deposit account shall be allowed only in amounts specified in the approved farm plan and budget and must be certified by the RB technician. (8) Withdrawals from the special savings deposit shall be paid by the rural bank either in favor of the borrower-depositor and/or direct to the dealer of the goods purchased upon presentation of purchase orders duly signed by the borrower and authenticated by the RB technician together with a copy of the official receipt. (9) Procurement of financed animals shall at all times be undertaken in the presence of the farmer-borrower, RB technician and/or government technician and if necessary, the resident CB-agricultural credit supervisor to insure a thorough ocular examination of the quality of the animals to be purchased. (10) During the life of the loan, regular weekly visitation shall be conducted by the RB technician to render technical assistance so required under a supervised credit program. (11) In all cases, marketing or sale of any financed farm animal/s shall always be reported by the borrower to the rural bank management and liquidation of corresponding loan should immediately follow after the sale of said animal/s. However, in the event that the borrower wishes to market or sell earlier than the estimated marketing age, prior authority from the bank management shall be secured. If allowed, the borrower should immediately liquidate his loan out of the proceeds of his sales. g. Priority areas . Priority areas shall be confined to provinces with existing livestock auction markets and those projected by the Bureau of Animal Industry to be best suited to the production of such animals. Other considerations that may qualify as priority areas are the following conditions: (1) Easily accessible by conventional means of transportation; (2) Ready market outlets for finished products; (3) Presence of reputable sources of stocks; (4) Readily available supply of biologicals and well-formulated rations; (5) The area must be certified by the Bureau of Animal Industry as disease-free area. h. Strategy of implementation (1) Administrator . The Department of Rural Banks and Savings & Loan Associations shall assume the full responsibility for the administration of the short-term livestock and poultry financing, the implementation of which shall be delegated to the different chiefs of divisions who shall direct the program activities in accordance with the existing policies and procedures. Formulation of subsequent policies and standard operating procedures as well as the revision of these guidelines shall be undertaken by the staff of the different divisions on the basis of monitored and evaluated project development after its initial phase of implementation. (2) Cooperating agencies . All government agencies and private offices connected with the expansion and production and poultry, large cattle and other livestock shall be enjoined to participate and/or coordinate in bringing about success to the program. Most notable among government agencies are the NFAC, BAI, BAEX and the FTI. (a) Bureau of Animal Industry (i) This agency provides close coordination with other agencies in the promotion of the production campaign among poultry and livestock raisers. (ii) Provides additional technical assistance and supervision of the projects. (iii) Conducts regular immunization program, check-up for disease outbreaks or epidemic and provide prevention and control measures. (b) Bureau of Agricultural Extension . The chief function of this agency is to promote the program and extend information on the improved and practical aspects of plants and animal production. (c) Food Terminal Incorporated provides the necessary marketing tie-up for a ready market of the produce, of the farmer-borrowers to boost their incentive for an expanded production. (d) National Food and Agriculture Council coordinates and implements the program thru the existing field organization by providing the needed technicians coming from the Bureau of Agricultural Extension and the Bureau of Plant Industry. 3355.2 Specific programs a. Backyard cattle/carabao breeding/fattening financing program (1) Project requirements (a) Stocks that are eligible for financing shall be limited to exceptional native stocks, purebreds, crosses and grades of either Murrah Buffalos and oriental breeds of cattle. (b) Age of stocks to be purchased for every project category are as follows: (aa) Pre-fattening 8 months to 1 1/2 old (bb) Fattening 1 1/2 to years old (cc) Pre-breeding ready to breed or 2-5 years old (c) The animals should pass ocular examinations to be conducted by BAI Veterinarian/technicians, a duly authorized bank representative and the borrower during procurement time. (d) Purchase cost of the animals including incidental expenses should be reasonable and falling within the current and fair market prices. (e) Loans for pre-breeding shall be allowed only in places where purebred bull and/or artificial insemination services are available. (f) Borrowers wishing to raise only pre-breeding animals would have to shoulder at least fifty per cent (50%) of the acquisition cost of stocks. (g) Purchases of stocks should come from reputable sources. (h) Bulk buying of stocks shall be encouraged whenever practicable and economical in the presence of BAI technician, RB representative and the borrowers or their representatives. LLpr (i) Proximity to livestock and auction market to avail of fair market prices. (j) Number of animals allowed per project category for both cattle and carabao. Minimum Maximum (i) Pre-fattening 1 10 (ii) Fattening 1 10 (iii) Pre-breeding 4 8 Borrowers for pre-breeding projects shall be required to have a ratio of one (1) breeder to three (3) fatteners. (2) Marketing tie-ups . Sale of stocks should be done whenever practicable thru auction markets or samahang nayon marketing associations/cooperatives and/or among qualified borrowers. (3) Priority areas . Priority areas shall be confined to provinces with existing livestock auction markets and qualified rural banks as follows: (a) First priority Batangas Cagayan Pangasinan Bulacan Isabela Laguna Nueva Ecija Cavite Bohol Rizal (b) Second priority Tarlac Iloilo Pampanga Negros Occidental Rizal Misamis Oriental Quezon Negros Oriental Camarines Sur Davao Albay b. Financing backyard goat raising (1) Project requirements (a) The farmer must be able to provide an area of at least 1.200 sq. m. (unimproved) or 200 sq. m. (improved) of pasture as sources of roughages; (b) The facilities like goat sheds and labor must be provided as equity of the borrower. The floor space recommended is 1 x 1.5 sq. meters per head; (c) It is envisioned that the problem on the shortage of stock would come out, however, only good quality goats of any breed or grades will be the object of financing. Upon purchase, the animals shall be identified by putting ear tags; (d) The animals should pass at least an examination for parasitism and preferably to be conducted by BAI; (e) The purchase cost of the animals, including incidental expenses should be reasonable and falling within the current and fair market prices. In no instance, however, should this financing exceed twenty (20) heads but not less than the minimum of five (5) heads; (f) The stocks to be purchased shall be within the following age requirements: does (1 year old) and kids (3-5 months old). A good ratio is 2:3 of does and kids, which arrangement would be just enough for a one (1) year maturity. (g) All the animals should not be sold without the prior consent of the rural bank, nor should they be transferred from one place to another in order to facilitate supervision and control of the project. (2) Priority areas . The latest data on goat population as reported by the Bureau of Census and Statistics has shown 1.25-m goats in 1973. It is hoped that this financing program could bring about significant contribution in increasing the total goat population in the country. The Bureau of Animal Industry has come up with its target areas for the dispersal, development and expansion of goat production in the Philippines. These priority areas encompass the three big islands of the country with the corresponding provinces as shown in the table below: Priority areas for goat production Luzon Visayas Mindanao Batangas Masbate Zamboanga Cavite Bohol Tawi-Tawi Rizal Cebu Basilan Laguna Panay Island Sulo Mt. Province Davao Ilocos Provinces This BAI projection could serve as a guide for developing pilot areas in this financing program. For this purpose, the following provinces are considered pilot areas: Batangas, Laguna, Ilocos Provinces, Bohol, Cebu, Panay Islands, and the Davao Provinces. c. Financing backyard hog fattening and weanling production (1) Project requirements (a) In case of weanling production, the stock cost (either farm-born or acquired) shall also be an equity of the borrower in the project. (b) At least three (3) gilts/sows (for weanling production) must be existing at the time of application for loan, and for hog fattening project, the stock should preferably be farm-born animals; (c) The hogs to be raised under this financing should be crossbreed, grades or pure-breeds; (d) The existing pig pen should be spacious to provide enough movement for the animals, or should have a minimum concrete floor area of ten (10) sq. feet per head with wooden or concrete wallings; (e) The hog pen must halve a good drainage system with sufficient and continuous water supply; (f) Green feeds must always be available throughout the production period of animals. The green feeds may either be farm-grown or from other sources; and (g) For weanling production the following are required in addition to the above items: (i) Farrowing pens/stall crate. (ii) Separate pens for weaned animals. (2) Other policies (a) Purpose of the loan (i) Weanling production Loan will be for the purpose of financing the cost of feeds, feed additives, veterinary drugs and breeding fees and piglets; (ii) Hog fattening The loan shall be for a hog fattening project only. It will cover the cost of stocks and expenses for feeds, feed additives, veterinary drugs and other essential items. (iii) If the borrower has existing stocks for fattening (Farm-born or acquired) and is willing to purchase additional stocks out of his own fund, the subject of financing will cover only the purchase of feeds, additives, and veterinary drugs for such animals. (b) Loan basis (i) Weanling production The loan amount shall be based on the actual credit-production requirement applicable in the area. A minimum of three (3) and a maximum of ten (10) gilts/sows per farmer-borrower will be financed under this program. (ii) Hog fattening The amount of the loan that may be granted to each borrower will be based on the actual production requirements based on the price in the area with a minimum of five (5) heads and a maximum of twenty (20) heads for full financing and thirty (30) heads for partial financing provided that stocks are the equity of the borrowers. (c) Term of loan (i) Weanling production Maturity of the loan shall not be more than two hundred eighty (280) days. (ii) Hog fattening The term of the loan will not exceed two hundred ten (210) days. (d) Repayment (i) Weanling production The proceeds from the sale of the weanlings and/or other sources of income should be applied as payment of the production loan. (ii) Hog fattening Income from the sale of fattened animals shall be applied as payment to the loan. The manner of payment may also be in accordance with the marketing agreement if a marketing arrangement exists. (3) Priority areas . The fourteen (14) priority provinces set by Bureau of Animal Industry (BAI) are as follows: Luzon Visayas Mindanao Pangasinan Cebu Zamboanga Pampanga Bohol del Sur Bulacan Leyte Bukidnon Nueva Ecija Iloilo Tarlac Masbate Batangas Camarines Sur Other provinces not within the priority areas set by BAI may avail of the financing program provided that the following are met: (a) Availability of adequate and quality feed supply or sources of the same. aisadc (b) Nearness to markets (consuming areas and processing plants). (c) Marketing agreement. (4) Additional requirements on STD application (a) Certification from the rural bank management on the adequacy and continuous supply of feed supported by a list of reputable feeds and veterinary products supplier/dealers in the area. (b) Certification from rural bank management that marketing is not a problem in the area. (c) Certification from the provincial veterinarian or his duly authorized representative that the area has no case of highly communicable diseases for the last six months prior to the application. (d) A certification from the stock supplier (weanlings for hog fattening project) that the stocks are vaccinated against hog cholera. In case of farm-born animals, a certification signed by all hog raisers should be attached to the application, attesting that the subject stocks were vaccinated against hog cholera. d. Financing backyard egg production (1) Project requirements (a) The project should be for the production of eggs with a required minimum stock population of 100 and a maximum of 1,000 birds. (b) Loans shall be for the purpose of financing the purchase of high quality ready-to-lay pullets of 3 -5 months, good quality feeds, feed additives, medicines, biologicals and other essential items of production. * (c) Loan basis (i) Starting from ready-to-lay pullets Loan amount shall be based on the cost of ready-to-lay pullets (minimum of 100 and maximum of 1,000) and actual cost of other essential items needed by the project for a period of not more than three months. (ii) In cases where the borrower has already available quality stocks, the loan amount shall be based on the actual cost of production of the minimum/maximum required number of birds in each project. (d) Loan releases. Loans shall be released on the basis of the project budget as incorporated in the credit plan corresponding to the exact cost and time the estimated inputs are needed. (e) Loan term. Starting from ready-to-lay-pullets maturity not exceeding 360 days. (f) Repayment plan. Repayment shall be made at the term of the loan or may be scheduled in equal monthly installments to fall due to every end of the month so arranged to start from the second month of lay. Whenever practical, the borrower end-user should be encouraged to deposit with the rural bank not less than forty per cent (40%) of the proceeds of his daily egg sales. (2) Priority areas . For this program, areas which can satisfy the following conditions shall be considered priority areas: (a) Easily accessible by conventional means of transportation. (b) Ready market outlets for finished products. (c) Presence of reputable sources of stocks. (d) Readily available supply of biologicals and well formulated rations. (e) The area must be certified by the Bureau of Animal Industry as disease-free area. e. Financing backyard broiler production (1) Project requirements (a) The borrower must have no less than one (1) year experience as a poultry raiser and/or must have attended or undergone training in poultry husbandry and as such, requires only a minimum of external supervision and technical assistance; (b) Must raise at least three (3) batches of broilers in 210 days in an "all-in-all-out" fashion. (c) The site of the project must have good drainage and a separate covered pit for proper disposal of waste; (d) There should be existing water and lighting facilities; (e) The stocks to be acquired must come from established and reputable breeders and/or hatcheries; and (f) When existing stock will be the subject of financing for feeds and essential items, it must likewise be disease-free and at least vaccinated against avian pest. (2) Marketing tie-ups and supply of broiler chicks . The borrower, in coordination with the rural bank should have marketing tie-up with established marketing outlets for marketable broilers. Likewise, he must enter into an agreement with reputable hatcheries or suppliers of broilers chicks to assure him of regular and ready supply of stock. A tripartite arrangement with broiler production input supplier and broiler outlet on one hand, and the rural bank on the other hand, must be made. (3) Purpose of the loan (a) Purchase of high-quality stocks; (b) Purchase of good quality feeds and other essential production inputs such as feed additives, veterinary, supplies and drugs; (c) If the applicant has existing stock, then the purpose of the loan will only be for the purchase of feeds and other veterinary supplies and drugs needed to support a part or all of the specified stock but not to exceed the maximum number of birds that could be financed under this short term broiler financing program. (4) Loan bases . The amount of loan shall be based on the total actual cost of the essential items (chicks, veterinary drugs and supplies and feed additives) needed by the project but in no case shall exceed the estimated value of production of the project to be financed. The minimum amount of loan shall be based on the actual cost of the essential items needed to produce not less than 500 birds, but in no case shall be more than the actual cost of essential inputs needed to rise a maximum of 2,000 birds. If the stock is already existing, then the total amount of loan shall not exceed the actual cost of all other items (feeds, veterinary drugs, supplies, and feed additives excluding the cost of chicks) needed to grow the number of birds on hand for a minimum of 500 to a maximum of 2,000 heads. (5) Loan releases . A loan under this financing program shall be released on the basis of the prepared farm plan and budget for the project. The loan will be fully released and placed in a special savings deposit in favor of the borrower or end-user. The said loan amount represents the total cost of rearing one (1) batch of broilers in an "all-in-all-out" basis. Succeeding batches shall be financed out of the proceeds of sales of previous batch. (6) Loan term . A loan shall have a maturity not exceeding 210 days or a period equivalent to raising of at least three batches of broilers. (7) Loan repayment . Loan repayments shall be made in three installments. The first partial payment of at least twenty per cent (20%) of the loans granted for the first batch shall be made upon the sales of same batch of broiler within 70 days from the date of last payment. The third and last installments shall be paid on or before the maturity date. (8) Priority area . The priority areas recommended by the Bureau of Animal Industry are the following: (a) Provinces surrounding Metro Manila: Batangas Rizal Cavite Laguna Bulacan * (b) Other Provinces in Luzon: Pampanga * Nueva Ecija * Pangasinan * Bataan * (c) Key Cities: Luzon Lucena City Legaspi City Naga City Iriga City Visayas Cebu City Tacloban City Iloilo City Bacolod City Mindanao Davao City Cagayan de Iligan City Oro City * Highlands areas not frequently flooded in said provinces should be selected. f. Financing of small scale duck raisers Duck pullet production Duck egg production (1) Project requirements (a) The borrower must have ample experience (at least two years) and competence to operate the project with a minimum of external supervision and technical assistance; aisadc (b) The project must be located in areas of good drainage and free from strong winds; (c) Must be near the source of adequate feed supply; (d) Stocks should be selected and must come from reliable sources; (e) Projects must be situated within the service area/territory of the rural bank for purposes of more effective supervision and/or follow-up; (f) Must be able to generate an average monthly net income which is sufficient enough to cover the monthly loan amortization; and (g) A ready market for the produce (pullets and eggs) should be considered before financing duck-pullet and duck-egg production projects. If possible, a marketing agreement should be entered into among the farmer-borrower, rural bank and the buyer. (2) Other policies (a) Purpose of the loan (i) Duck pullet production . The loan shall be for the purpose of financing the purchase of 1-3 day-old sexed females plus males (1:10 ratio) and feed allocation. (ii) Duck-egg production . The loan shall be for the purpose of financing the purchase of not more than 6-month old ready-to-lay selected duck pullets plus drakes (1:10 ratio) and feeds for not more than 90 days. (b) Loan basis (i) Duck pullet production . The loan shall be based on the cost of 1-3 day-old sexed female ducklings (minimum of 200 and maximum of 500) and the actual cost of feed (e.g. home mixed feeds, fresh-water snails, clams, shrimps, ayungin, mata-mata, palay and cassava) needed by the project. (ii) Duck-egg production . The amount of loan shall be based on the cost of not more than 6-month old ready-to-lay duck pullets (minimum of 100 and maximum of 250) including the required number of drakes and the actual cost of feed for not more than 90 days. (iii) In cases where the borrower has already existing quality stocks, the amount of the loan shall be based on the actual cost of feed (e.g. fresh-water snails, clams, shrimps, ayungin, palay, mata-mata and cassava) and other essential items of production ** needed for a period of not more than 90 days. (c) Release of loans . The proceeds of the loan is released in lump sum and is automatically credited in a special savings deposit (SSD) in the name of the farmer-borrower. Withdrawal from said deposit is on a staggered basis in accordance with the approved farm plan and budget. (d) Loan term . A duck-pullet production loan shall have a maturity of not exceeding 180 days while a duck-egg production loan shall have a maturity of not exceeding 360 days. (e) Repayment (i) Duck-pullet production . Loan shall be paid out of the sales of duck-pullets. In such instance wherein the borrower for duck-pullet production would like to retain his stocks for egg production he shall pay his outstanding loan using his earnings from other sources or out of the proceeds of sale of fifty per cent (50%) to sixty per cent (60%) of his pullet stock. Upon liquidation of his obligation, he may be granted a loan for feed and other essential inputs of production needed for a period of not more than 90 days to enable him to continue in egg production operation. (ii) Duck-egg production . Repayment shall be made at the term of the loan or may be scheduled in equal monthly amortization to fall due at every end of the month and to start after the second month of lay. The borrower, however, shall be encouraged to deposit with the rural bank not less than fifty per cent (50%) of the proceeds of his daily egg sales thru the marketing agent. (f) Seasons for lending . A duck-pullet production loan shall be granted to borrowers during the months of February to March while a duck-egg production loan shall be granted during the months of August to October. This is to take advantage of the availability of good quality snails during the months of August to May of the following year, coinciding with the peak of egg production. (3) Priority areas . Priority areas on this special financing program are the bay towns in the provinces of Rizal, Laguna and Batangas where the fresh water snails, clams, shrimps and small fishes are available. Financing inland duck projects may be extended on a case to case basis only. g. Ipil-ipil forage financing (1) Eligibility requirements (a) Rural bank (i) Rural bank should be operating in accordance with laws and regulations, instructions, and directives of the Monetary Board; (ii) There is no internal dissension in the rural bank which may jeopardize government investment and financial assistance to said bank; (iii) It is eligible to rediscount with the Central Bank; (iv) It is authorized to accept and service time and savings deposits; (v) Must have sound competent management to handle the program; (vi) Must have sound liquidity and investment position; (vii) Must have qualified production technician, either government agriculturist on full detail with the rural bank or RB-hired technician to supervise the project. (b) Farmer-borrower (i) Must be owning, leasing or cultivating at least 0.5 hectare of land planted/to be planted to ipil-ipil. (ii) Must be willing to shoulder the cost of drying and other capital expenditures. (iii) Must be willing to follow planned innovation, improved management practices and repayment schedule. (iv) Must have other sources of income in addition to the project to be financed. (v) Must be rearing at least 7 bucks or 3 steers to be able to qualify for a minimum of hectare financing. (vi) Must use only the recommended varieties of giant ipil-ipil. (vii) Must be credit-worthy. (viii) Must have a shed for storage and drying of ipil-ipil leaves. (c) The Project (i) Proximity to big feed millers and feedlot farms. (ii) Accessible to conventional land transportation facilities. (iii) Cattle and goat farming in the area is established. (iv) The project area should be compact and the volume of production is big enough to attract feed millers. (2) Lending policies (a) Purpose of loan . Loans shall be for financing the purchase of seeds, fertilizers and labor for ipil-ipil production as forage/leaf meal. (b) Loan basis (maximum and minimum) . The amount of loan shall depend upon the collateral offered, the paying capacity and other factors basing on the borrower's worthiness but in no case shall it exceed one half of the total cost that will be incurred for establishment and annual recurrent cost for the first year. A minimum of one-half () hectare and a maximum of five (5) hectares as duly recommended by the RB Technician is eligible for financing. (c) Loan budget and release . The loan budget will depend on the credit requirements of the project to be financed. Loan releases will be synchronized with the credit needs of the project based on the farm plan and budget. (d) Interest rate, maturity and repayment . Loans granted shall have an interest rate of not exceeding twelve per cent (12%) per annum or one per cent (1%) per month which shall not be deducted in advance but shall be collected upon repayment of the loan. Maturity of the loan shall be for a period not exceeding 360 days. Loans shall be repaid on or before the maturity period, out of the income derived from the project financed and/or income from other sources. (e) Security requirements . Loans granted shall be secured by any or a combination of the following: (i) Mortgage of movable and immovable property. (ii) Chattel mortgage on existing animals raised by the borrower. (iii) Co-maker acceptable and known to the rural bank. (iv) Joint liability groups as damayan or selda or cooperative of any farmers association. (3) Priority area . Priority is given to places where there are established goat, beef, and carabeef production projects and where there is ready market for leaf meal. SECTION 3356. Masagana 99 Rice Production Program . The following implementing guidelines shall govern the M-99 Rice Production Program. SUBSECTION 3356.1 Strategy of implementation a. Use of package of technology . Masagana 99 makes use of a package of technology which has been proven productive and effective in the country. The package includes the use of high-yielding varieties; timely application of the proper amount of fertilizers; judicious use of insecticides, herbicides and rodenticides and proper water management practices. Supplementary programs like double cropping and direct seeding, which are innovative strategies to further increase the production are likewise implemented. b. Supervised credit . Non-collateral production loans under a supervised credit scheme are extended to needy farmers who have to organize themselves into a joint liability group known as selda . Farmers who can put up the necessary collateral need not become members of a selda to qualify for a Masagana 99 loan, however, proper technical supervision should be provided them by production technicians. In addition, criteria that shall determine the farmers who are qualified to obtain production loans under the Masagana 99 program have been set-up. SUBSECTION 3356.2 Borrowing policies and procedures a. Borrowing policies (1) Qualified borrowers (a) Bonafide farmers who have participated in previous Masagana 99 phases and have no outstanding loans from any financial institution and do not belong to a selda with a delinquent member. In cases where the farmer has no delinquent loan but belongs to a selda with a delinquent member, he may be entitled to participate in the program provided he follows the guidelines with respect to the restructuring of the selda. (b) Bonafide farmers who have not participated in previous Masagana 99 phases but whose ricefields are fully irrigated, as attested to by the production technician. (c) Bonafide farmers who have not participated in any previous phase of Masagana 99 and whose ricefields are purely rainfed ("Sahod Ulan" or irrigated purely by rainfall), may be allowed to participate only after a very close analysis of the farm plan and budget indicates the ability of the farmer to pay his loan. In this case, the production technician and the manager of the financing institution concerned would be answerable for any improper assumption or deficiencies in the preparation of the farm plan and budget of the farmer, which would result in the farmer's inability to pay his loan. Bonafide farmers cultivating rainfed ricefields in previous Masagana 99 phases who do not have any outstanding Masagana 99 loan or belong to seldas with delinquent member(s), are also eligible. (2) Disqualified borrowers Farmers whose farms are in upland areas are not eligible to participate in this rice production program. (3) Loan per hectare . The maximum loaning rate is P3,000.00 per hectare. The PT shall use his wise judgment in determining the actual credit requirement of the farmer, but in no case shall it exceed P3,000.00 per hectare, as follows: Input Portion Seeds P200.00 Fertilizer 1,675.00 Chemicals/Rodenticides 960.00 Sub-Total P2,835.00 Barrio Savings Fund (BSF) 90.00 Crop Insurance 75.00 Total P3,000.00 ========= Deduction for BSF from farmer-borrowers under the Special Financing Program is now optional. It may be made only on a voluntary basis and when authorized in writing by the Samahang Nayon member. ( Effective Jan . 11, 1985 ) (4) All production technicians are advised to safeguard and see to it that the loan proceeds are utilized by the farmer according to the approved farm plan and budget. The above aggregate amount of P3,000.00 is loan ceiling only and final approval is still the bank manager's prerogative. ( Effective Dec . 26, 1984 ) (5) Loan term . The term of all loans granted under this program and other food production programs (agricultural loans) shall be co-terminus with the production period of the crops to be financed with an allowance of two (2) months for marketing. In effect, the loan term for rice production loans shall in no case exceed six (6) months. (6) Loan collection . To strengthen collection of loans, production technicians are granted the following incentive allowances: (a) For the duration of the loan, fifty centavos (P0.50) per month for every farmer supervised. However, full payment of the loan prior to maturity date shall also entitle the production technician to the balance of the total amount corresponding to the loan period which is three pesos (P3.00) for Masagana 99 and two pesos and fifty centavos (P2.50) for Masaganang Maisan . (b) Six pesos (P6.00) upon full payment of the Masagana 99 loan on or before maturity date; six pesos and fifty centavos (P6.50) upon full payment of the Masaganang Maisan loan on or before maturity date. (c) There shall be a one peso (P1.00) deduction from the six pesos (P6.00) for every month the loan is past due. (d) In no case, however, shall the production technician receive less than three pesos (P3.00) on the fourth month that the loan is past due or thereafter when the loan is fully repaid. This also covers restructured loans. b. Borrowing procedures (1) Organization of the selda . Before a farmer can be extended a loan under the Masagana program, they have to organize themselves into seldas consisting of five (5) to seven (7) members with one of them to be elected as selda leader, based on one or a combination of the following criteria: (a) Affinity of farmers . Farmers must know each other intimately either as friends, neighbors in the barrio, or better still, closely related to each other. (b) Contiguity of farms . Farms must be adjacent or near each other in the same barrio. (c) Size of farm . The landholding of farmers constituting the selda shall more or less have the same size. (d) Yield . Productivity of the farms of selda members should be more or less the same. (e) Cropping seasons . Selda members must at least have the same number of crops per year based on available irrigation facilities or cropping patterns in case the second crop is not rice. prcd (f) Willingness to undertake the joint liability concept . Prospective borrowers must be aware of the duties and responsibilities of members of the selda , particularly, their joint obligation to pay the unpaid loan of the delinquent members of their selda. (2) Restructuring of the selda . Farmers who previously belonged to a different selda can regroup themselves, and form another selda based on the above-listed criteria provided, however, that all members have paid their loans. In the event that there is one or more delinquent member, they can only be allowed to join a new Selda after signing a promissory note undertaking to pay, on an amortization basis, the unpaid balance of delinquent members of their original selda under a plan of payment to be drawn between the previous co- Selda members and the financing institution concerned. In the event that the bank will succeed in effecting collections from their delinquent co- selda members, the paying members of the selda shall be reimbursed accordingly. However, no loan shall be extended them under their new selda unless the first installment of the amortization covering the unpaid loan of their delinquent co- selda members has been made. Old seldas that meet the above criteria can be maintained with the same membership. They likewise, will be granted new loans on condition that they have paid their loan obligations. However, in case of default of any * (b) From the collection centers, the farm produce shall be delivered to NGA operated/designated warehouses for drying and/or storage. NGA shall immediately issue a purchase receipt to said farmer-borrower for the palay/corn delivered in payment of the loan and shall forthwith authorize PNB or the lender rural bank to credit the account of the farmer borrower with the corresponding peso value of said produce. (c) Upon presentation to the bank by the farmer-borrower of the warehouse purchase receipt which also indicates the cash value of the palay deposited, the bank credits to the borrower's account the cash value of the palay and pays the farmer any amount in excess of the loan. LexLib SUBSECTION 3356.3 Technicians as collection agents . At the option of the financing institution, bonded production technicians may be allowed to collect cash payments directly from farmers. All collections made by the production technician for the day should be turned over before closing hour of the same day to the banks concerned for proper application to the accounts of their respective farmer-payees. All payments should be covered by official receipts issued by the banks in the names of the paying farmers. SUBSECTION 3356.4 Guarantee procedures a. Losses . The Land Bank shall guarantee any loss that may be incurred by a participating lending institution as a result of non-payment due to force majeure of loans granted to farmer cooperators under this program. The provisions and procedures are prescribed in the implementing guidelines set forth by the Land Bank of the Philippines. b. Payments of arrearages . To restore the good credit standing of banks with the Central Bank of the Philippines (CB) and to regain their capability to render financial services to the rural communities and thus enable them to continue their participation in the supervised credit program, the Philippine National Bank (PNB) and rural banks may avail themselves of guarantee payment on their past due Masagana 99 loans from a special revolving trust fund constituted from national budgetary releases and administered by the Philippine Crop Insurance Corporation (PCIC), as provided under Letter of Instructions No. 1242. (1) Coverage . Guarantee payments shall cover eighty-five per cent (85%) of farmer's past due Masagana 99 loans with PNB and rural banks which area: (a) past due for three (3) years or more as of date of effectivity of the LOI; and (b) not previously subject of claims payments and/or advances under the Agricultural Guarantee Fund. ( Effective Feb . 2, 1983 ). However, past due Masagana 99 loans already written off in the books of accounts of rural banks and other banking institutions shall be excluded from the coverage of guarantee payments. (2) Qualification requirements . The Philippine National Bank and all rural banks with eligible M-99 arrearages covered by Item (1) may qualify for guarantee payments, except those banks which are under receivership or those which have committed serious irregularities. (3) Application for guarantee payment . The PNB and rural banks concerned shall file an application with the PCIC, thru the Central Bank, in the prescribed form with the following documents: (a) Resolution of the board of directors authorizing the bank to avail itself of guarantee payments under this Measure; (b) A list of eligible loans for guarantee payments as defined in Item (2) certified under oath by the president or other duly authorized officers of the lending institution, and favorably endorsed by the Central Bank; (c) A deed of undertaking to submit with in a reasonable time the farmers' restructured loans subject of the claim for guarantee payment; (d) Such other documents as may be required by the PCIC and Central Bank. (4) Schedule of releases . The PCIC shall release to PNB and to the rural banks (thru the Central Bank) such amounts not exceeding eighty five per cent (85%) of loans subject of claims for guarantee payment according to the following schedule: Year 1 25 per cent of eligible loans Year 2 30 per cent of eligible loans Year 3 30 per cent of eligible loans (5) Restructuring of loans (a) The principal amount and accrued interest of eligible M-99 loans of farmers, exclusive of penalties and other charges shall be consolidated and restructured over a period of five (5) years. Thereafter, no interest and penalty charges shall be imposed on the restructured loans. (b) Where, for one reason or another, restructuring of loans is not possible, the bank shall submit a list of these accounts together with the reasons or justifications for non-restructuring, certified and attested to by authorized barangay officials. (6) Restructuring of rediscounting obligations . The principal amount and accrued interest of M-99 Bills Payable of rural banks covered by Subsec. 3356.4b, exclusive of liquidated damages, shall be consolidated and restructured over a period of three years. Thereafter, no interest and/or penalties and other charges shall be imposed on such restructured Bills Payable. (7) Application of collections . All collections on loans already covered by guarantee payments shall be proportionately shared as follows: (a) Eighty five per cent (85%) of collections made by banks under Subsec. 3356.4b shall be remitted to PCIC, as Administrator of the Trust Fund, within thirty (30) days after collection. (b) Fifteen per cent (15%) of all such collections, plus accrued interest, shall be retained by the bank. (8) Accounting (a) Loans covered by Subsec. 3356.4b shall be segregated from other loan accounts of the bank concerned and shall be lodged under "Restructured Loans (LOI No. 1242)" account, which account shall be excluded from the computation of past due ratio and risk assets ratio. (b) Guarantee payments received from the PCIC shall be credited to a "Special Guarantee" account in the bank's books. Remittances to PCIC of collections on farmers' loans which are the subject of Subsec. 3356.4b shall be charged against this "Special Guarantee" account. (c) In the case of rural banks with M-99 rediscounting obligations with the Central Bank, releases of guarantee payments thru the Central Bank shall be charged against past due "Bills Payable" account and credited to "Special Guarantee" account in the bank's books. (d) The cut-off date for accrual of interest charges on past due loans for purposes of restructuring shall be the date of payment/approval of the claim for guarantee payment which shall also be the basis in computing interest on payments to the Central Bank. ( Effective Feb . 7, 1984 ) SUBSECTION 3356.5 Input distribution scheme . In order to maintain the proper distribution of fertilizers, chemicals and seeds to Masagana 99 farmers, the following distribution scheme should be observed: a. Use of chits (1) Seed chit . Chit A corresponds to the chit used in withdrawing the seed requirement of the farmer. (2) Fertilizer chits . There will be three (3) kinds of fertilizer chits. Chit B shall be used in withdrawing the fertilizer allocation for basal application. Chit B 1 shall be used in withdrawing fertilizer allocation of first top dressing and Chit B 2 , for the second top dressing. Effective Phase VIII, self-financed Masagana 99 farmers shall no longer be issued fertilizer coupons, there being a uniform price of fertilizer for food and export crops. (3) Chemical chit . Chit C corresponds to the chit used in withdrawing chemicals of which there are three (3) kinds, namely: C 1 for insecticides, C 2 for herbicides and C 3 for rodenticides. b. Routing of chits . The chits shall be accomplished and issued out with the farm plan and budget by the technician to the farmer before the loan is approved by the bank. The bank shall stamp its seal on the chits upon the approval of the loan and issue to the farmer the bank's and dealer's portions of the chits which shall be presented to the dealer for input withdrawal. The dealer shall then submit the bank's copy of the chit to the bank concerned and keep his copy for audit purposes. c. Issuance of chits . The PT issues four (4) chits corresponding to the input requirements discussed in the preceding paragraphs together with the farm plan and budget before the bank approves the loan. The PT should have fully filled out chit with the following information: (1) name of farmer; (2) effective date of chit; (3) type of infestation to be prevented/controlled; (4) area on which input shall be applied; (5) amount of input needed; (6) PTs signature. The PT keeps the stub portion of the chit for reference. The effectivity of the groups of insecticides/herbicides against the kinds of infestations in the field shall be explained to the farmer-borrowers by the production technician. A list of approved recommended chemicals (insecticides and herbicides) together with their corresponding codes shall be provided to farmer-borrowers for their reference and guidance. Likewise, a list of accredited dealers/outlets and the lines carried shall be posted in lending banks and accredited outlet's store. The farmer selects from the coded list of inputs the appropriate chemical and writes down the code numbers on the chit. d. Validation of chit . The farmer-borrower must first validate his input chits before it could be of use. Chits are validated through the following steps: (1) Farmer takes accomplished chit to the lending bank; (2) Bank verifies the schedule of input releases and the corresponding amount to be withdrawn against the SSD; (3) Farmer accomplishes withdrawal slip from the SSD; (4) Bank stamps its seal on the chits and returns both bank's and dealer's copy to farmer. A validated chit is good only for fifteen (15) days. Hence, the farmer-borrower must withdraw his inputs from his chosen dealer within the indicated term. If, however, the farmer fails to get his inputs within the specified span of time, he can revalidate his expired chit(s) subject to the approval of the technician and the bank concerned. e. Withdrawal of input (1) Farmer brings validated chit(s) to the accredited dealer of his choice within the locality. (2) Dealer verifies the effectivity date of the chit(s) and checks the code number and/or brand name of chemicals. Changes in the effectivity periods of the chit can only be made by the technician depending upon the necessity of the input use. Dealers should not, in any way, substitute the input(s) preferred by the farmer as indicated in the chit. Changes in input shall be done by the farmers after which he initials the changes. In no case shall the PT or another person except the farmer himself alter the code on the chit. (3) Chit(s) submitted before or after its effectivity dates shall not be honored. (4) Dealer issues the input(s) with an invoice receipt indicating clearly the code number and the exact name, quantity and price of the withdrawn input(s). (5) Using the chit stubs as reference, the PT visits the farmer and verifies actual input withdrawn. The PT also oversees the utilization of these inputs. f. Liquidation of serviced chit (1) The dealer summarizes weekly the chits served during the week. The summary together with the bank's portion of chits, invoice, and/or delivery receipt are submitted to the lending bank for payment. (2) Authorized seed distributor consolidates the serviced chits and official receipts served during the week and submits to the lending bank for liquidation. (3) Bank pays accredited dealer and the authorized seed distributor for the inputs/seeds withdrawn by the farmer. (4) The chits, invoice and/or delivery receipt are retained and filed by the lending bank for audit verification purposes. SUBSECTION 3356.6 Accounts undergoing court action . Uncollected Masagana 99 accounts undergoing court action shall be included in the computation of total past due obligations of rural banks to the Central Bank as well as in the computation of past due ratios in the total loan portfolio of rural banks. SUBSECTION 3356.7 Direct seeding scheme or " sabog-tanim ." As part of the Masagana 99 rice production program, the National Food and Agriculture Council (NFAC) is implementing a rice planting program for rainfed areas using the direct seeding method which eliminates the necessity of seed bed preparation and seedling transplanting. The Central Bank, as member of the NFAC, is cooperating in this effort by providing part of the financing through the Philippine National Bank and the rural banking system. a. The scheme . Essentially, this scheme involves land preparation starting as early as November, December or January while the soil is still moist and planting thru direct broadcast of seeds in lieu of transplanting the seedlings immediately after the first rains in May or June. This project would cover rainfed areas involving around 50,000 hectares in eleven selected provinces (Ilocos Norte, Ilocos Sur, La Union, Pangasinan, Tarlac, Nueva Ecija, Pampanga, Bulacan, Camarines Norte, Camarines Sur, and Iloilo). Harvests are expected to coincide with the lean months of July, August and September. As usual, the scheme will follow the recommended package of technology in rice production consisting of high yielding seed varieties, fertilizer, pesticides, herbicides and credit to be made available to selected farmer-cooperators who would be closely supervised by the production technicians of the government and lending institutions who are in turn supervised by the Central Bank technicians. Specific areas and technicians will be designated by NFAC's provincial program officers. b. Financing . The amount required to finance the first phase of the scheme shall be released to farmer-borrowers at P200 per hectare from November or December up to the early part of February for the preparation of the land. The promissory notes for this initial release will have a maturity period of nine to ten months. Special Time Deposits (STDs) may be granted to rural banks for this purpose with a maturity of three (3) months to be repaid out of the rediscounting of the aforementioned promissory notes. The amount to be utilized exclusively for direct rice seeding and the corollary needs during the months of May and June shall be released to cooperators at P700 per hectare in the form of loans whose maturity will be co-terminus with the initial release for land preparation. Special time deposits may also be granted to rural banks which again would be repaid out of rediscounting of the loans generated from said STDs: Provided , the STDs for land preparation are already repaid. c. Loan limit . All banks participating in the financing of direct seeding scheme for rainfed areas or sabog-tanim program shall release the required loans to farmers in an amount not exceeding one thousand six hundred pesos (P1,600.00) per hectare, as in the case of the Masagana 99 rice production program. SECTION 3357. Masaganang Maisan and Maisagana Programs . Lending under these programs shall be in accordance with the following guidelines. SUBSECTION 3357.1 Masaganang Maisan a. Objectives (1) To satisfy the increasing demand for white corn for human consumption; (2) To produce sufficient yellow corn, sorghum and soybeans to satisfy the feed requirements of the poultry and livestock industries; (3) To produce enough corn for export in the form of corn starch and other by-products; and (4) To study and establish joint-ventures, multi-lateral feedgrains project with foreign investors. b. Implementing procedures (1) The lending procedures are essentially the same as in Masagana 99 Rice Production Program (Section 3356), such as the accomplishment of the simplified loan papers and the use of purchase order or chits for the input portion (fertilizer, pesticides, and herbicides), except for the maximum loaning rate which is P900.00 per hectare. (2) Rural banks in Bukidnon and Misamis Oriental qualified to participate under the Masaganang Maisan Financing Program have been authorized to finance borrowers engaged in feedgrains production an additional loan of P350.00 per hectare for liming purposes to correct soil deficiencies peculiar in these areas. The loan shall be repayable within a period not exceeding three (3) years. In selecting farmers to be financed under this scheme, the criteria would be the following: (a) Farmers who are already engaged in Masaganang Maisan financing program and have good repayment capacity; (b) Farmers who are farming in contiguous areas; and (c) Borrowers are not marginal farmers. c. Guarantee coverage . The Land Bank shall provide guarantee fund for the credit requirement of the program to cover any loss that may be incurred by participating rural banks due to non-collection of loans granted under this program up to eighty five per cent (85%) of the loan, subject to the rules and regulations that may be prescribed. Only loans not exceeding Five Thousand Pesos (P5,000) at any one time per borrower tilling not more than six (6) hectares of land are eligible for guarantee coverage. SUBSECTION 3357.2 Maisagana program a. Qualification requirements for rural banks . The following are the minimum requirements to be complied with by rural banks desiring to participate in the program: (1) The ratio of past due loans to total loan portfolio, excluding past due CB: IBRD loans, shall not exceed fifty per cent (50%); (2) Unpaid matured obligation with the Central Bank, in the form of rediscounting and special time deposits, excluding CB: IBRD loans, shall not exceed P1 million: Provided , That the past due CB: IBRD loans with the Central Bank are covered by approved plans of payment which are faithfully complied with; The plan of payment of past due CB: IBRD loans shall be in accordance with the following: Amount Past Due Repayment Period From P100,000 to P200,000 not exceeding 1 year Over P200,000 to P300,000 not exceeding 1- years Over P300,000 to P500,000 not exceeding 2 years Over P500,000 to P1,000,000 not exceeding 3 years Over P1,000,000 to P2,000,000 not exceeding 4 years Over P2,000,000 not exceeding 5 years (3) The rural bank's risk asset ratio shall not be less than ten per cent (10%) after taking into account the provision of Subsec 3116.2 which gradually phases out the privilege given to rural banks to classify as non-risk assets supervised credit loans to the extent that they are covered by guaranty or crop insurance; (4) There are no irregularities/serious exceptions in the operations of the rural bank; (5) All past due loans of farmer-borrowers under the Maisagana program shall be excluded in the computation of the total past due accounts of rural banks seeking financial assistance from the Central Bank under its various special financing programs. b. Definition/Meaning of terms (1) MA Ministry of Agriculture (2) NFAC National Food and Agriculture Council (3) DRBSLA Department of Rural Banks and Savings and Loan Associations, Central Bank (4) DLC Department of Loans and Credit, Central Bank (5) PAC Provincial Action Committee (6) FPB Farm Plan and Budget (7) STD Special Time Deposit (8) SSD Special Savings Deposit (9) BSF Barrio Savings Fund (10) pH Relative acidity or alkalinity of the soil (11) POT Package of Technology c. Eligible borrowers . A masterlist of qualified farmer-borrowers under the program will be prepared by the Maisagana Provincial Agricultural Officer of the MA to be submitted to the bank, based on the following: (1) Holder of a leasehold contract, a landowner-cultivator and/or beneficiary of agrarian reform. (2) Member of a Samahang Nayon or an accredited farmer's organization or cooperative. (3) A farmer who has attained past production yields of at least 1.5 metric tons per hectare if he applies for loans under the IPB Var. 1 and white corn packages of technology, or at least two (2) metric tons per hectare for loans under the hybrid package. (4) A farmer whose actual area cultivated to corn is not less than one (1) hectare. (5) A farmer who has undertaken a farmer's training class in the appropriate package of technology. (6) A farmer who has an outstanding past due loan under previous corn program, provided he has already repaid at least seventy per cent (70%) thereof. The granting of loans to these farmers who have paid at least seventy per cent (70%) of their previous loans will, however, be subject to the discretion of the bank. d. Lending procedure (1) The farmer gets a certification: (a) from the barangay leader/captain attesting that he is a bona-fide farmer in the area; and (b) from the president of a farmer's organization where he is a member. A farmer with an NFAC farmer-cooperator's ID need not get a certification. (2) The farmer with the assigned production technician of MA prepares his FPB based on the appropriate package of technology. FBP prepared by a rural bank technician should be duly certified by the Municipal Agricultural Officer in the area. (3) The farmer accomplishes the promissory note and trust receipt with the assistance of the production technician. (4) The farmer fills up the necessary, loan papers and attaches his FPB and ID/Certification and submits them to the bank for processing. Upon approval he is given a copy of his FBP. (5) On approval of the loan, the loan proceeds which is released in one lump sum should be automatically credited in a SSD account in the borrower's name which shall earn an interest rate equal to that of the loan. e. Loan packages . Maisagana loans are granted for crop production. They are specifically intended for the purchase of seeds, fertilizer and other inputs, plus a cash outlay for land preparation. Other production costs are borne by the farmer-borrower. The loan packages per crop are: 5-ton POT 3-ton POT Hybrid IPB VAR 1 DMR 2 Loan Components Yellow corn Yellow corn White (1) Cash portion Land preparation P300 P300 (2) Input portion Seeds 340 120 P60 Fertilizer 940 705 700 Farm chemicals 660 283 210 (3) BSF 60 42 30 TOTAL P2,300 P1,450 P1,000 ===== ===== ===== Only high-yielding corn varieties as indicated in all different POT will be financed under the program For Bukidnon and some areas in Misamis Oriental, an additional P300 per hectare may be granted for soil liming purposes when necessary. No production loan should be extended in these areas without the required certification of the MA soil technologist that pH corrective measures have been instituted. f. Loan interest/maturity (Period of loans) . Loan bears an interest rate of fifteen per cent (15%) per annum including service fee and other charges. Loans may be granted for a period not exceeding 150 days. g. " Seed " STD funding and procedures (1) The MA production technicians assist farmer-borrowers in the preparation of their farm plans and budgets. These are submitted to the RB together with other required documents. (2) The RB prepares an STD application based on the credit requirements of farmer-applicants covered by the program areas previously determined by the PAC and NFAC which will be the basis for granting STDs by the DRBSLA. (3) The Bank submits the STD application to DRBSLA which shall be supported by document requirements similar/analogous to that of the M99 STD applications. (4) DRBSLA furnishes DLC two (2) copies of the approved STD application, together with the bank's assigned target area, which shall be the basis of the amount of rediscounting of the particular bank. The DLC in turn furnishes its regional office concerned with a copy of the said application which shall be the basis for subsequent rediscounting of the bank. (5) The STD application should carry a certification from the provincial agricultural officer on the hectarage to be financed and the total loan funds required. (6) DRBSLA fills up the STD certificate and releases the STD to the bank by credit advice or telegraphic transfer to the participating bank's depository bank. h. Rediscounting and SSD limitation . DLC rediscounts at one hundred per cent (100%) all eligible paper of the participating banks at a preferential rate of three per cent (3%) per annum. (1) The bank rediscounts the promissory notes with DLC and submits thereto the rediscounting schedule and other pertinent papers. (2) Upon approval of the bank's application, DLC automatically credits fifty per cent (50%) of the rediscounting proceeds to the bank's STD account with DRBSLA and the remaining fifty per cent (50%) to the bank's depository bank. (3) Only rural banks utilizing STD to initially fund their short term supervised loans including Maisagana are authorized to set up SSD account. They are authorized to credit SSD accounts of their borrowers up to one hundred per cent (100%) of their loans even if the same are only funded up to fifty per cent (50%) from STD. These SSDs must be fully funded after such loans have been totally rediscounted with DLC. Rural banks participating under the Maisagana program, like in other short supervised credit lending, which do not utilize STD to initially fund their supervised loans are not allowed to set up SSD accounts. i. Project supervision . Adequate manpower or production technicians will be detailed/deployed with the participating banks. These technicians will conduct the necessary project supervision to ensure increased production and loan repayment. Each bank has a maximum level of Maisagana loans for each season. This ceiling aims to keep the number of borrowers within the predetermined ratio of fifty (50) farmers per one production technician. The bank can, however, exceed its loan target subject to the approval of the PAC and NFAC. Banks must coordinate and agree with the Maisagana program officer on release and cut-off dates even if approval of these loans was given before these cut-off dates. j. All rural banks participating and/or had participated in the said program are required to submit the cumulative report on M-99 Rice Production Program using the original Form, CBP-7-19-06A-2. Such report shall be submitted on a monthly basis in addition to the Progress Report on Short-Term Loans (CBP-7-19-36). The original copy of said report shall be submitted by the rural bank to the Agricultural Credit Supervisor (ACS) assigned in the area on or before the 5th day after the end of the reference month, who shall forward the same to the Department of Rural Banks and Savings and Loan Associations, Manila, within two (2) days upon receipt thereof and the duplicate copy to the Provincial Program Officer. The existing penalty for delayed monthly reporting shall be imposed on any rural bank which fails to submit its report within the prescribed period. SECTION 3358. Gulayan sa Kalusugan . The program, as an integral part of the Government's intensified food production campaigns, emphasizes the growing of selected vegetable crops that are nutritious and profitable. The guidelines thereon are provided for in App. 14. SECTION 3359. Financing Program for Fisheries Production and Development . These guidelines shall govern the operations of short-term financing for fisheries production and development under the Central Bank-NFAC supervised credit program. 3359.1 Rationale . The short-term financing scheme for fisheries production and development under the NFAC-Central Bank program is envisioned to uplift the socio-economic status of the Filipino fishermen. Various Programs were already formulated but some failed due to lack of study on the financial side of it. The program aims to maximize the utilization of all available fishery resources and to augment the protein requirement of our people. This will also implement results of improved fish culture and fish capture practices with effectiveness through proper financial support. The scheme will bridge the gap of fish production between the producers and the consumers through the extension of liberal credit facilities. This will likewise introduce a marketing tie-up between the producers and the buyers. The program, upon identifying various projects, will enhance increased fish production per unit area and per fishing outfit. SUBSECTION 3359.2 Objectives a. General . To integrate various projects on fisheries production and development through the introduction of the short-term financing program. b. Specific (1) To uplift the socio-economic status of the people. (2) To identify fishery resources and tap their potentialities. (3) To increase fish production per unit area and per fishing outfit. LLjur (4) To introduce and encourage our people in the proper use of credit facilities of rural banks and teach them the right attitude towards repayment of loans. (5) To develop civic-minded citizens among the fishermen through orientation and training on the proper use of our fishery resources. SUBSECTION 3359.3 Projections a. Fishpond . In 1975, there were 176,032 hectares of existing fishponds in the country with an estimated output of 106,461 metric tons or equivalent to eight per cent (8%) of the country's total fish production. Ten per cent (10%) of the total hectarage is targeted for the NFAC-CB short term financing at a maximum cost of P3,000.00 per hectare. The funding requirement will be P52.8 M and a probable increase in fish production by 10,474 metric tons. b. Fishpen . For fishpen project the total area developed as of 1975 is 5,850 hectares. Of the said area 1,880 1 hectares are targeted for financing which is about thirty-two percent (32%) of the total area. This will generate a total production of 9,870 m.t. based on the 5,250 kgs. expected produce per hectare of fishpen. Financing need is P13,442,000 for the total project at P7,150.00 per hectare. c. Bangus fry . The onset of improved farm techniques necessitates a continuous supply and demand of bangus fry. For fry requirement the need is 704 million pieces for fishponds at the rate of 4,000 fry/ha. and 3.9 million pieces for fishpens at the rate of 40,000 fry/ha. or a total of 707,900,000 fry. Based on this and on the assumption that a gatherer can catch approximately 40,500 fry per season, this would ensure a total of 17,500 gatherers and would therefore require an amount of P8,750,000 based at a maximum amount of P500.00 per gatherer. d. Oyster and mussel . For financing shellfish projects the total funding requirement is P5,312,000. The total target area is 700 hectares, with oyster sharing 500 hectares and green mussels ( tahong ) 200 hectares. For oyster alone the amount of P4,000,000 will be needed at P8,000.00/ha. while mussel needs the amount of P1,312,000 at P6,500 00/ha. This will generate a total approximate yield of 2,000 2 m.t. of oysters and an approximate 1,380 3 m.t. total yield for green mussels. e. Fishing boats . Financing for mechanization of non-motorized bancas totalling around 300,000 is shifted to the medium-term credit program for small fishermen or the Isdaan ng Bayan . At least twenty percent (20%) or 14,964 of the 74,819 total number of motorized fishing bancas of less than three (3) gross tons will be given priority for short-term financing. At P2,000.00/craft, the need is computed to be P29,928,000 which would benefit around 123,000 small fishermen. SUBSECTION 3359.4 Total funding requirement . Based on the projection, the total funding requirement involved in the short-term financing program for fisheries production and development is P110,232,000. SUBSECTION 3359.5 Lending procedures a. Loan priorities . Under the supervised credit financing scheme, the fisherman-borrower agrees in writing that he will apply proven fish farm/fishing practices necessary to improve fish production and abide by the approved fisheries plan and budget jointly prepared by him and a duly accredited fisheries extension worker. It is a system of lending which combines adequate and timely credit to fisheries project and home management guidance under a trained technician. (1) Eligible projects Loan Limit Maximum Area Tonnage (a) Brackishwater fishpond (i) Bangus culture P3,000.00/ha. 5 hectares (ii) Combination of bangus and sugpo culture P4,500.00/ha. 4 hectares (b) Shellfish Culture (i) Oyster P2,000.00 per 2,500 sq.m. 1 hectare (ii) Tahong P1,640.00 per 2,500 sq.m. 1 hectare (c) Fishpen (i) Bangus P7,000.00/ha. 2 hectares (ii) Tilapia P3,300.00 per 1,000 sq.m. 3,000 sq.m. (d) Small fishermen P2,000/ borrower 3 Gross tons (e) Fry collection P500.00/ borrower No area involved (2) Eligible borrowers (a) Experienced fishpond operator managing not more than five (5) hectares of fully developed fishpond. (b) Fishpen operator managing not more than two (2) hectares in case of bangus culture and not more than 3,000 sq.m. in case of tilapia culture. (c) Experienced oyster/ tahong grower operating not less than hectare but not more than one (1) hectare farm (d) fishermen engaged in fish capture using fishing boat of not more than three (3) gross tons. b. Fishermen actually engaged in bangus fry collection (1) Security of the loans . Loans extended under the program shall be secured by chattel mortgage of stocked fish and other fishery products, fishing boat and paraphernalia and/or project financed and/or any person acceptable to the rural bank as co-borrower. (2) Loans granted by the rural bank from the STD shall be automatically guaranteed by the funds up to the extent of eighty five per cent (85%) of the losses due to force majeure or fortuitous events such as typhoons, floods and other causes beyond the capacity of the borrower to control and upon certification of the BFAR fisheries technicians, subject to the verification of the CB-credit supervisors assigned in the area. (3) Guarantee coverage All fisheries loans granted by the rural banks to fishermen/fishpond/fishpen/tahong and oyster farmers and operators shall be eligible for guarantee coverage to be provided by the Land Bank of the Philippines: Provided , That the application to avail of the guarantee shall follow the Land Bank's ruling and policy on the matter. c. The policy of the Central Bank on guarantees shall be followed strictly. The lender rural bank is the one guaranteed against losses. d. In case of force majeure or fortuitous events beyond the control of the fisheries borrowers, the participating rural bank after being informed of the losses shall reschedule payment of the loans of the affected borrowers under the fisheries supervised program. A new loan shall be granted immediately, on case to case basis, so as to enable the borrowers to produce and pay the new and restructured loan. e. Fishery plan and budget (1) The applicant-borrower with the assistance of the fisheries extension worker will prepare fishery plan and budget of the project to be financed. (2) The supervised credit fisheries extension worker will submit the list of prospective borrowers indicating the project to be financed, area, amount of loan and date needed. (3) The supervised credit fisheries extension worker will submit the accomplished fishery plan and budget to the rural bank management for approval. The plan and budget should include a marketing tie-up with a reputable fish broker in the locality acceptable to the rural bank. f. Loan application (1) Fisherman/fishery operator, a selda/damayan member shall apply for a loan. (2) The fisherman/fishery operator with the assistance of the fisheries extension worker shall prepare all the necessary loan documents for submission to the rural bank for appropriate action. (3) To encourage group action for increased fish production, fisheries extension workers will organize the fishermen/fisheries operators into selda/damayan units. The members will co-sign for one another in the application and promissory note. g. Loan budget and releases (1) Loan budget will depend on the credit requirements of the project to be financed under the short-term loan for fisheries financing program. (2) Loan releases will be synchronized with the credit needs of the project based on the fishery plan and budget. h. SSD withdrawals . All withdrawals from the SSD will have to be countersigned by fisheries extension worker assigned in the area to make sure that the amount withdrawn will be spent on the project being financed and in accordance with the prepared fishery plan and budget. i. Purchase orders (PO) and coupons (1) The rural bank will issue a booklet of POs or chits to the fisheries extension workers. (2) The Fisheries Provincial Program Officer (PPO) or Fertilizer Industry Authority (FIA) coordinator shall issue fertilizer coupons to fisheries extension workers. (3) The PO or chits will be good for only fifteen (15) days; hence, the borrower-end user must draw the inputs from the dealer within the indicated period. Subject to the recommendation of the fisheries extension worker and approval of the rural bank management, the PO or chit may be revalidated. The fisheries extension worker shall surrender the stubs of unused PO to the rural bank and unused fertilizer coupons to the FIA Coordinator. (4) The fisherman-borrower shall bring the PO to the rural bank for the signature of the bank manager after which the bank shall stamp the PO with the rural bank seal. (5) The fisherman-borrower shall present the PO to the dealer in the area, withdraw inputs and sign sales invoice and delivery receipts. LLphil j. Special time deposit (1) Each loan application shall be evaluated individually by the bank applicant before the application is transmitted to the Central Bank for final action. (2) The bank shall review the evaluated list of applicants in the light of each knowledge of the credit requirements in the area and shall advise applicant-bank of its action within a week. (3) The bank shall forthwith make special time deposit based on approved requests and its deposits shall be covered by a time deposit certificate. (4) The special time deposit shall be co-terminus with the loan granted out of said deposits: Provided , however , That as installments or payments are received from the borrowers said installments or payments shall be remitted to the Central Bank and returned to the fund. (5) The applicant-bank should release the loan within one (1) month from receipt of deposit after which it shall submit to the bank the list of borrowers extended the loans. (6) The applicant-bank should credit the time deposit with interest at the rate of six per cent (6%) per annum. (7) Loans extended by the applicant-bank to farmer-borrowers shall be charged an effective interest not exceeding twelve per cent (12%) per annum. k. Guarantee of Loans (1) All loans granted by the rural banks to the applicants for fisheries projects under the short-term special financing for fisheries production and development shall be eligible for guarantee coverage and chargeable against the fund: Provided , That the application to avail of the guarantee shall follow Central Bank's ruling and policy on the matter. (2) In the event of default in the payment of guaranteed loans, applicant-bank should take all the necessary measures to recover as much as the loan as possible before applying for payment of losses sustained under the guaranteed loan. The bank should satisfy itself that all possible measures have been taken to minimize loss from guaranteed loans. l. Maturity . Loans should be granted for a term not exceeding one (1) year. m. Repayment (1) Loans for small fishermen shall be repaid in equal monthly installments. (2) Loans for fishpond, fish pen, fry collection and shellfish culture shall be paid on or before the maturity date out of the income realized. SUBSECTION 3359.6 Marketing aspects . The marketing of the fish caught and/or harvest by members of the cooperative shall be coursed thru their respective cooperative marketing association. Fishermen not belonging to a cooperative shall be required to execute a marketing tie-up with reputable brokers accredited by the lending rural bank to insure sound collection of loans. SUBSECTION 3359.7 Coordinating agencies and their responsibilities a. NFAC shall: (1) Deposit funds with the Central Bank of the Philippines as seed fund to be utilized for short-term Special Financing for Fisheries Production and Development (SFFPD) program thru participating rural banks. (2) Approve plans and programs prepared by CB: DRBSLA. (3) Provide extension workers to coordinate in program implementation. b. Central Bank of the Philippines (CBP), Department of Rural Banks and Savings and Loan Associations (DRBSLA) shall: (1) Administer the SFFPD intended for qualified rural banks to participate under the program. (2) Provide supervisory personnel to coordinate in program implementation. (3) Simplify loaning operations for smooth and accelerated implementation of the Supervised Fisheries Credit Programs (SFFPD). (4) Encourage rural banks to participate actively in the implementation of the SFFPD. (5) Assist in the information drive in the implementation of the program. (6) Furnish the NFAC with quarterly consolidated rural bank report and other financial status report. c. Rural Bankers Association of the Philippines (RBAP) shall coordinate and encourage active participation of rural banks in the proper and effective implementation of the short-term special financing for fisheries. d. Rural banks shall: (1) Grant loans to qualified borrowers under the program; (2) Undertake the principal responsibilities in the collection of loans with the assistance of Fisheries Extension Workers (FEW) as provided for in this guideline. e. Department of Natural Resources (DNR) shall provide overall guidelines in the preparation of plans and programs to develop the fishing industry. f. Bureau of Fisheries and Aquatic Resources (BFAR) shall: (1) Provide extension workers to render assistance to qualified borrowers who will avail of the program for fisheries production and development. (2) Lead in the information drive for the campaign of the program to qualified borrowers. (3) Develop and improve the general practices in fishing by applying modern techniques in fish capture. (4) Improve the cultural practices of the different cultivable species of fish. (5) Coordinate with the CB: DRBSLA for the proper implementation of the program. (6) Coordinate with the DLGCD in organizing selda/samahang nayon for fishermen, fishpond and fishpen operators. g. Department of Local Government and Community Development, Bureau of Cooperatives (DLGCD, BC) shall: (1) Furnish all participating rural banks list of fishermen/fishpond and fishpen operators/oyster and tahong farmers and bangus fry collectors who are bonafide members of samahang nayon . (2) Facilitate the formation/organization of selda/damayan in the samahang nayon . (3) Facilitate formation and approval of samahang nayon . (4) Assist in the information campaign for Special Financing for Fisheries Production and Development (SFFPD) program. (5) Coordinate in the program implementation. (6) Provide personnel at the provincial and municipal level to coordinate in the program implementation and to constitute in the committee of government adjusters in the province. (7) Assist in the collection of loans from the members of samahang nayon . SUBSECTION 3359.8 Personnel of implementing agencies and their responsibilities a. CB: DRBSLA credit supervisors shall: (1) Encourage the rural banks to participate actively in the implementation of the supervised fisheries financing program. (2) Coordinate and facilitate the activities of rural banks and fisheries extension workers for effective program implementation. (3) Verify, evaluate and recommend the application for STDs of participating rural banks. (4) Expedite the release of STDs and supervise the utilization of the same. (5) Advise rural banks and fisheries supervised credit technicians on supervised fisheries program implementation. (6) Promote and encourage the formation of fishing units, selda or damayan . (7) Supervise the preparation of programs and summary reports and review the same before submission to CB: DRBSLA. (8) Test check pricing, delivery and application inputs including the utilization of the cash portion of the loan by the fisheries borrower. (9) Submit recommendation and proposals to improve and accelerate program implementation. b. Fisheries supervised credit technician shall: (1) Assist the fisheries borrowers in the preparation of the fishery plan and budget and other loan documents. (2) Render technical assistance and supervision to fisheries borrowers financed under the program from production stage until marketing stage. (3) Make sure that the supervised fisheries projects of borrowers are conducted in a business-like manner. (4) Assist the rural banks in the collection of loans extended under the program. (5) Keep accurate records of the supervised fisheries projects under their respective supervision. (6) Submit programs and summary reports to the provincial program officer and furnish the CB-credit supervisor and the rural bank a copy of the same. (7) Consult the PPO, the CB-credit supervisor, the rural bank manager on problems concerning the program. (8) Encourage other people who are active in the fishing industry to participate in the program. SUBSECTION 3359.9 Reporting system a. The fisheries supervised credit technician shall submit regularly to the PPO a report on the activities of the fisheries projects financed under the program and shall furnish the CB-credit supervisors and the rural bank a copy of the same. b. The FSCT shall consolidate daily activities of the project and submit a monthly report to the PPO copy furnished the CB-credit supervisor and the rural bank. c. The rural bank shall submit a monthly report using the prescribed form to the CB-DRBSLA every 10th day after end of reference month copy furnish the PPO. d. The RB shall again submit a quarterly report to the CB-DRBSLA every 10th day after end of reference quarter and shall furnish the PPO a duplicate copy. SECTION 3360. ( Reserved ). SECTION 3361. Bakahang Barangay . The following policies and guidelines cover the bakahang barangay (cow-calf) program and the implementation of the bakahang barangay project under the CB-DALL Fund. SUBSECTION 3361.1 Bakahang barangay (cow-calf) program a. Objectives (1) General (a) To increase the cattle breeder base; (b) To improve the genetic make-up of the local stock through artificial insemination and/or natural breeding; and (c) To increase the dressed weight and dressing percentage of slaughtered cattle by finishing them before slaughter. (2) Specific (a) To generate opportunities for year-round employment and additional income for small farmers. (b) To encourage the participation and support of the barangay in cattle breeding; (c) To increase the supply of feeder stock for fattening and dairy animals for milk production; (d) To conserve and increase the cattle breeder base; and (e) To improve the animal protein supply and raise the levels of nutrition in the rural areas. b. Credit and financing (1) Eligibility requirements (a) Rural banks (i) Must be operating in accordance with the laws and regulations, instructions and directives issued by the Central Bank of the Philippines; (ii) Must have no internal dissension which may jeopardize the government investments and financing assistance; (iii) Must be eligible to rediscount with the Central Bank; (iv) Must have been authorized by the Central Bank to accept and service savings and time deposits; (v) Must have competent management to handle the program; (vi) Must have sound liquidity and investment position; (vii) All banks regardless of performance in the previous livestock programs should obtain the accreditation from CB-DRBSLA before they would be allowed to implement and/or continue their financing under this program; (viii) The bank must have its own qualified livestock technician(s) to supervise the project. Preference shall be given to agriculture graduates, major in animal husbandry or graduates of veterinary medicine. However, other agriculture graduates (college or secondary) who have adequate training or experience in livestock management, nutrition, breeding and disease control may also qualify. In very exceptional cases and upon justification and recommendation of the CB-ACS, said bank(s) may be allowed to participate in the program without employing its own livestock technician(s): Provided , That: (aa) Its financial position does not warrant the hiring of a technician; and (bb) The volume of exposure to livestock loans is so limited to justify the employment of one: cdll If the above conditions exist, a qualified MA-BA livestock technician(s) will be detailed to the bank to assist in the program implementation. The Ministry of Agriculture livestock technician shall not be pulled out during the entire period of the project financed. In case of transfer, promotion, etc., the incoming technician should be oriented by the former technician as to names of borrowers and locations of the projects. (ix) The bank shall be required to hire additional livestock technician(s) if so warranted, in proportion to the number of farmer-borrowers being technically assisted as determined by and upon recommendation of the ACS covering said RB. (x) The bank must purchase the necessary veterinary equipment and instrument(s) for the use of its livestock technician(s). (xi) Only duly accredited rural banks, whose President/Manager and Production Technician have completed the required seminar on the bakahan/Cow-Calf, Kambingan/Kalabaw ng Barangay and/or Integrated Barangay Livestock Program conducted by the Central Bank Institute, Department of Personnel, are authorized to participate in said Programs. ( Effective April 4, 1984 ) (b) Borrowers (i) A prospective borrower must have ample experience and competence to operate the project with a minimum of external supervision and technical guidance. (ii) He must be willing to abide by the technical recommendation of the MA or RB/SLA livestock technician(s) as well as keeping of records and to follow repayment schedules. (iii) He must have the necessary watering and housing facilities and is willing to shoulder the labor and cost of putting-up of such necessary facilities for the project, such as pen, shed and fence. (iv) He must not have past due accounts in any lending institutions. (v) He must have an adequate area for forage production, preferably more than enough to sustain the needs of the animals, especially during the dry months. (c) Projects (i) The animal(s) to be purchased/acquired should come from a disease-free area and acquired from established and reputable breeders. (ii) Whenever necessary and practicable, a marketing contract will be entered into among the producer, buyer and the bank. (iii) No loan should be released unless all the project requirement are satisfied. (2) Lending policies (a) Purpose of the loan . The loan proceeds shall be used to finance the purchase of feeder stock (for fattening purposes), breeder stock of breeding age, pregnant animals, concentrate feeds, minerals, veterinary supplies and medicines, breeding fee and other incidental expenses and contingencies related to the procurement and production of the animals to be financed. (b) Loan basis (i) The loan amount shall be based on the actual but reasonable cost of the essential items enumerated above. (ii) The maximum number of animals or size of the project per farmer-borrower may depend on the individual qualifications, i.e., paying capacity, collateral, availability of stock, farm labor, adequacy of forage supplies, training and experiences of the proponent and availability of farm facilities. (c) Loan releases (i) if the initial fund will be coming from CB-DRBSLA in the form of STDs, the loan to the borrower will be released in lump sum and will be subsequently deposited under the special savings deposit (SSD) in the name of the borrower and thereafter will be withdrawn on a staggered basis in accordance with the approved plan and budget. (ii) If the initial fund comes from its bank resources, SSD shall not be maintained, hence, there will be one promissory note for every loan release as specified in the approved farm plan and budget. (iii) In both instances, as much as possible, all loans shall be released in kind or in the form of purchase orders, unless it is extremely unavoidable and upon the recommendations of the CB-ACS assigned in the area. (d) Size of loans (i) Notwithstanding the loan basis (lending policy No. 2), the size of the loan shall depend on the production credit requirements of the following project combinations wherein the borrower has the option to select: (aa) Model I One (1) breeder ready to be breed (bb) Model II One (1) breeder and one (1) fattener (cc) Model III One (1) breeder and two (2) fatteners (dd) Model IV One (1) breeder and three (3) fatteners The selection of any of the above models by the farmer-borrowers will be guided by RB/BAI technician(s), taking into account the availability of forage and stock as well as the technical feasibility of the project. (ii) Any deviation and/or increase on the number of animals, per model so stated, will require a justification from the technicians and endorsement by the ACS covering the area. (e) Loan term . The loan shall have a maturity of three (3) years, taking into consideration the feasibility of the project and re-payment schedule. (f) Interest rate . The loan to the borrower shall bear an interest rate prescribed under the CB rules and regulations as approved by the Monetary Board. (g) Security requirements . The loan under this financing program shall be secured by any or a combination of the following: (i) Real estate mortgage (ii) Chattel mortgage of the animals to be financed including offspring produced. (iii) Co-maker/s acceptable to the bank. (iv) Selda system. (3) Rediscounting procedures . Immediately after the release of the loan to the borrower, the promissory note executed by the borrower will be rediscounted with the Central Bank (DLC) as medium-term, which is payable within three (3) years and amortized on a yearly basis. The term of the loan of the borrower is co-terminus with that of the DLC. (4) Repayment of loan (Borrower to RB) . Repayment of the loan to RB will be on a yearly basis, based on simple declining balance of amortization. Loan Amount P15,000 Term of Loan 3 years Interest Rate 12% p.a. inclusive of 2% bank charges Repayment Schedules Year Principal Interest 1 yr. P5,000.00 P1,500.00 2 yr. P5,000.00 P1,000.00 3 yr. P5,000.00 P500.00 Total P15,000.00 P3,000.00 ========= ========= Year Bank Charges Amortizations Loan Balance 1 yr. P300.00 P6,800.00 P10,000.00 2 yr. 200.00 P6,200.00 P5,000.00 3 yr. 100.00 P5,600.00 Total P600.00 P18,600.00 xxx ========= ========= ========= (5) Incentive allowance . Production technicians from the MA on full or part time detail with the lending institution shall be given incentive allowance of one peso (P1.00) per farmer-cooperator per month but not to exceed the maximum number of cooperators to be supervised in a given period. The maximum number of farmer-borrowers to be supervised by each livestock production technician shall be as follows: prcd (a) One hundred fifty (150) farmers whose farms are contiguously located: Provided , That the technician is equipped with a motor vehicle and where borrowers have ample experience in supervised credit. (b) If the vehicle is not provided, then the above number shall be reduced to one hundred (100) borrowers. (c) Fifty (50) farmers for a technician who is hired on probation or as casual and has no previous experience in supervised credit. c. The guidelines prescribed in App. 18 shall be observed. SUBSECTION 3361.2 CB-DALL Fund (Bakahang Barangay) . This project denotes small-farmer cattle operation in a cooperative atmosphere. a. Objectives of the project (1) To maximize the benefits to be derived from backyard cattle operations which are the usual sources of supplemental income for the small farmer; (2) To include as many viable small farmers in the benefits of the industry; (3) To help the ranch-type operators in developing a stable and profitable beef industry; (4) To supplement farm mechanization by providing work animals to the agricultural sector; (5) To harness into production under utilized farm labor and increase national beef production output; (6) To convert farm wastes/residues into something of value. b. Details of implementation . To attain the objectives of this project, the Bakahang Barangay Management Committee (BBMC) shall spell out the details of the package of technology, credit and marketing, with a built-in collection of loans. The package of technology applied under this project refers to the modified Batangas method, which means handfeeding of cattle, but does not involve force feeding of the animal. Feeds for animal may consist of farm wastes and residues, ipil-ipil, cane tops, pasture grasses and legumes, with some supplement of rice, bran, corn bran, molasses. Credit which is a critical input for a backyard farmer, will be made available to him with a marketing system that has built-in mechanism to collect loans obtained by the farmer-borrower. c. Implementing strategy (1) Initial phase . For some years now, small farmers in Batangas, Pangasinan, and other provinces have been raising cattle in their backyard, and they have from experience acquired some degree of proficiency. In the early seventies, the CB-DRBSLA started a supervised credit financing scheme for backyard cattle raisers in Batangas and Pangasinan. This particular credit financing scheme has brought about interesting indications on the viability of backyard cattle raising. For this initial phase, therefore, the project will first concentrate on the provinces where the farmers already possess the expertise of raising cattle in the backyard, and where the preconditions of a successful backyard cattle operation exist. The first priority target provinces for launching the project are Batangas and Pangasinan where almost all, if not all, the foregoing preconditions prevail. (2) Main phase . A gap has been identified between the rancher and the backyard raiser. The rancher essentially operates a cowcalf project and is producing calves and yearlings for sale. The backyard raiser, on the other hand, wants to engage in cattle fattening to be with the short-term credit available from the rural banks or SLAs but there are no readily available feeder/finisher stock, aged 2 to 2-1/5 years, which we can finish in a year or shorter. In order to fill this gap, this project will start to work out a program for: (a) rancher-operated cattle growing units, and (b) backyard-operated cattle growing units, or a combination of these two. In each case, credit will most probably be the critical problem; therefore, the project will work on the credit aspect, including the other essential elements needed to attain the goals and objectives of the project. What is envisioned is for the farmer-grower to pick up calves and yearlings and to use short-term supervised credit of up to one year, so that the backyard raiser in turn, could finish the animal in six months to one year at maximum profitability, without the necessity of restructuring his short-term loans with the financial institution. The pre-fattening growing period is a critical gap which needs a more systematic approach. Usually, young unfinished cattle go straight from the ranch into the butcher's block. This is a deterrent to the development of the cattle industry because the full potential of these animals are often not recognized or taken advantage of by the prospective animal raisers. Hence, no efforts should be spared to solve this problem. In the Philippines, where material resources are scarce and labor plentiful, a step-by-step production pattern would seem most appropriate, particularly in beef cattle production which has a longer and complex business cycle. The concept of providing growing-staging areas (GSA), preferably near shipping ports should be introduced and developed. The GSA would also give the following beneficial effects: (a) It would lessen animal stress by providing an intermediate growing/holding/staging area in the movement of the animal from the ranch to various end-users the feeder finishers, the breeders and the work animal producers; (b) The GSA will serve as a taming area where the animal will be introduced to hand-feeding practices; (c) Branding and documentation, vaccination and other animal industry programs would be easier and more economically done in such a place where animals are more concentrated; (d) On the other hand, the spread of dangerous and communicable diseases could be checked at the site through alert and adequate quarantine practices and procedures; (e) Identification of the real potentials of an animal, whether it is for breeding, for work or just for meat, could also be made during this growing period; (f) More small farmers in ranch-type cattle provinces could be included to benefit from the cattle business; and (g) A "buffer zone" would be established to aid the government increase and conserve the cattle breeder base. d. Lending policies and procedures . Lending policies and procedures shall follow the CB-DRBSLA supervised credit guidelines on short-term livestock financing, which may be modified or amended upon the mutual consent of the signatories to the CB-DALL fund memorandum of agreement. e. Targets and target areas . The target set for this project is to disperse 10,000 heads of fatteners, including breeders, each year to benefit at least 5,000 farmer-families and thereby augment their income and redistribute wealth. The target areas shall be selected according to the following success factor criteria: (1) livestock market or livestock pooling place, where feeder or breeder stock could be obtained, or finished cattle or breeder stock may be sold; (2) feeds and feedstuffs; (3) feeder stock or breeder stock; (4) accredited abattoir; (5) production technology; (6) experienced rural bank/SLA willing to cooperate; (7) farmers willing to follow package of technology. f. Training of production technicians, PPOs, rural banks/SLA managers and CB-ACS, including farmer cooperators . As a means to insure the successful implementation of the project, a training program will be jointly undertaken by the Bureau of Animal Industry and the Central Bank-Department of Rural Banks and Savings and Loan Associations for BAI production technicians, PPOs, rural bank/SLA managers and technicians and CB-ACS. CB-DRBSLA will provide the training facilities and materials, including honoraria, board and lodging for resource persons. On its part, BAI will provide resource persons and facilitators for the training. Each participating agency will shoulder the transportation and per diems of its personnel who will attend the training program. In order to pursue a vigorous, effective and continuing training for workers assigned to or involved in the project, a training committee shall be created which will handle the training of participants involved in the project. Farmer classes will be held for the benefit of the cooperators. The training committee will be composed of the relevant staff of the Bureau of Animal Industry and the Department of Rural Banks and Savings and Loan Association, with the assistance of consultants and resource persons from outside. The staff to run this committee will be named by the BBMC. g. Organizational set-up . To implement the project at various levels, the following shall be organized: National Bakahang Barangay Management Committee (BBMC) Provincial Bakahang Barangay Livestock Committee (BBLC) Provincial Governor, Chairman, Provincial Veterinarian (PPO), Executive Vice Chairman, CB-DRBSLA, DLGCD, PC, private sector, Rural Bankers' Association, Members. Municipal Bakahang Barangay Municipal Team (BBMT). Mayor, Chairman, BAI Production Technician, Executive Vice Chairman, Rural Bank/SLA/Manager, Farmer's Representatives, Members. The project adopts the steps outlined in the implementing guidelines for short-term credit for livestock and poultry, now being used by the rural banking system, but for purposes of clarity and to overcome bottlenecks, the BBMC is hereby created. Among its functions will be to issue the necessary instructions/guidelines, memoranda to insure the efficient and successful implementation of the project. cdta The BBMC will oversee the implementation of the project with the assistance of a technical and a clerical staff. It will be the responsibility of the BBMC to meet as often as possible to coordinate the operations of the project. A technical staff composed of BAI and CB-DRBSLA personnel will backstop the management committee. In turn, the technical staff will be assisted by a clerical support unit. (1) Composition of the bakahang barangay management committee (BBMC) Management Committee Chairman Dir. Salvador H. Escudero III or his alternate Co-Chairman Dir. Consolacion V. Odra or her alternate Executive Secretary to be designated by DRBSLA Management Staff Member/Alternate Field DRBSLA Agricultural credit policies DRBSLA Monitoring and supervision BAI Production planning and Evaluation BAI Extension BAI Marketing Staff Support BAI Stenographer DRBSLA Clerk-Typist BAI Illustrator (2) Specific functions of the BBMC . It shall monitor and evaluate the implementation of the bakahang barangay project; prepare additional guidelines or revise existing ones to ensure the attainment of project objectives effectively, efficiently and economically. (3) Meeting . The BBMC shall meet at least once a month, and at any times as called by the chairman. (4) Honoraria . The Chairman and the Co-Chairman of the BBMC or their alternates shall receive an honorarium of P500.00 each per month, while the members including the Executive Secretary shall receive an honorarium of P400.00 each per month. Consultants to the committee shall be entitled to an honorarium of P100.00 per meeting, but not to exceed P400.00 per month. The personnel for staff support shall each be entitled to allowance of P150.00 per month. The funds for honoraria, allowance and miscellaneous expense shall come from the earnings of the CB-DALL Fund. h. Operational expenses . The estimated operating expenses for one year of the BBMC, including its support staff is P70,000.00, broken down as follows: (1) Honoraria P53,000.00 (2) Allowance for support staff 6,000.00 (3) Miscellaneous 11,000.00 SECTION 3362. Second Rural Development Settlement Project . The following rules and regulations shall govern the credit program under the second rural development-land settlement project to be carried out through the lending facilities of rural banks and stock savings and loan associations under the supervision of the Central Bank, for agricultural development: SUBSECTION 3362.1 Preliminary statements a. Loan funds for financing the term credit needs often settlers in the settlement areas established under this project will be made available utilizing the funds from a second rural development land settlement-loan with the International Bank for Reconstruction and Development (IBRD), thru the lending facilities of rural banks and savings and loan associations in the project area. b. Unless otherwise specified, the following terms have the following meanings whenever used in these rules and regulations. (1) CB The Central Bank of the Philippines (2) Financing Institution a rural bank or a stock savings and loan association selected by CB to participate in this credit program in accordance with Subsec. 3362.2a; (3) Loan the loan extended by CB to a financing institution; (4) Sub-loan the loan extended by a financing institution to a borrower; (5) Borrower the recipient of a subloan from a financing institution; (6) STD a special time deposit of CB for financing of loans to a financing institution and (7) IBRD the International Bank for Reconstruction and Development. c. Projects areas and dates . The areas covered are the Ministry of Agrarian Reform land settlement areas in Talacogon (Agusan del Sur), Kalilangan (Bukidnon), and Dumarao (Capiz), and the lending program starts from June 10, 1978, in Talacogon and Kalilangan and from June 10, 1979, in Dumarao. The closing date of this program will be on December 31, 1982. SUBSECTION 3362.2 Participating rural banks or stock savings and loan associations . a. CB shall select the financing institutions through its Department of Rural Banks and Savings and Loan Associations, taking into account the following: (1) Period of operation . A financing institution must have been in operation for not less than one (1) year prior to making an application for a loan. (2) Liquidity position . A financing institution must: (a) have sufficient working capital to meet its obligations to creditors and depositors, taking into account local conditions and past performance, and (b) have sufficient available legal reserves against deposit liabilities. (c) Amount of arrearages (i) Past due loans of financing institutions shall not exceed twenty-five percent (25%) in relation to total loan portfolio; Provided , however , That Masagana 99 loans in litigation shall not be included in the calculation of the past due ratio. (ii) If the accumulated arrears of principal and interest on medium and long-term loans made by a rural bank or stock savings and loan association shall exceed twenty per cent (20%) of the sum of all amounts falling due on such accounts during the immediately preceding twelve (12) month period plus the accumulated arrears on such accounts at the beginning of such twelve (12) month period such rural bank or stock savings and loan association shall not be eligible to participate or continue to participate in this credit program as a financing institution until it shall have improved its collections to reach such level. (iii) If any financing institution shall exceed such applicable levels of arrears mentioned in (i) or (ii), it shall cease to participate in this credit program and CB shall not extend to it any further loans until its collection performance shall have improved and reached such level. (iv) The financing institution shall submit to CB evidence that it qualifies or continues to qualify under this Item (c). (3) Investment position (a) Soundness of loan investments as to viability of projects, sufficiency of collateral, capacity to pay and character of borrowers. (b) Adherence to the objectives of the rural bank or stock savings and loan associations as to purpose of loans, actual credit requirements and eligibility of borrowers. (4) Credit standing (a) Its established credit reputation. (b) Character, capacity, competence and integrity of its officers. (5) Net worth (a) Results of operation (b) Ratio of unimpaired capital and surplus to risk assets. (6) Management competence to handle the program (a) Qualifications, training and experience of members of the board of directors and its principal officers, as prescribed by the Monetary Board. (b) Adherence to laws, decrees and general orders, and instructions of CB, by its board of directors and its principal officers. (7) Compliance . Compliance with circulars and memoranda embodying or implementing pertinent and applicable laws, decrees, general orders, rules and regulations. b. Loan limit . Whenever there are established in any law, decree, general order, rule, regulation, or other directive in force, standards or criteria by way of ratios, percentages, or otherwise, in relation to the factors enumerated in Item "a" hereof, such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of credit worthiness under said Item "a", Provided , however , That the provisions of Subsec. 3342.3 (Term loans) shall not hereto apply; and Provided , further , That grant of term loans by financing institutions shall be limited to a maximum of fifty percent (50%) of their outstanding portfolio or two hundred percent (200%) of their net worth plus one hundred percent (100%) of their savings and time deposits, whichever is higher. SUBSECTION 3362.3 Subloans extended by participating rural banks or stock savings and loan associations . cdtech a. Purpose of subloans . Only viable sub-projects where the potential for increased production is clearly established, or where the potential for satisfying domestic demand or exportation of the excesses over domestic consumption, will be eligible for financing. Investment eligible to be financed under subloans shall be: (1) Draft animals and implements (2) Chain saws (3) Mechanical rice threshers (4) Mechanical dryers (5) Abaca and coffee processing and marketing facilities: a) storage b) transport c) stripping machine d) baling press (6) Development of abaca and coffee plantation b. Eligibility of borrowers . The following are eligible to borrow under the program: (1) A farmer owning or cultivating not more than fifty (50) ha. of arable land dedicated to agricultural production in the project area; (2) A person engaging or intending to engage in development of abaca or coffee plantation; (3) An individual or cooperative engaging or intending to render processing and marketing services to settlers in the project area; (4) Agricultural cooperatives constituted only of members who qualify under the preceding paragraphs. c. Subloan limits (1) The amount of the subloan shall depend upon the cost of the agricultural development plan to be financed, the actual need of the borrower, the collateral offered, the borrower's repayment capacity including net proceeds of the proposed subloan and other factors bearing on the borrower's credit worthiness, and it shall in no case exceed ninety (90%) of the total project cost. (2) The amount of the subloan shall not exceed seventy percent (70%) of the appraised value of the immovable property offered as security, if titled, and shall not exceed fifty percent (50%) of such value, if the property is untitled. The appraised value shall be reasonable determined by the financing institution. (3) The amount of the subloan secured by a chattel mortgage or pledge shall not exceed fifty percent (50%) of the appraised value of the object offered as security, and where such object is new, fifty percent (50%) of the price in the bill of sale. (4) The amount of subloan guaranteed by the Department of Agrarian Reform "Fund for Direct Assistance" in favor of loan beneficiaries shall be within the extent it is not secured otherwise under Items No. (2) and (3) above. (d) Credit worthiness . Each financing institution shall decide on the credit worthiness of the borrowers applying to it for subloans. (e) Maturity of subloans . Subloan maturities shall be based on the economic life span of the object to be financed and the projected cash-flow to be derived from the project, and in each case shall not exceed. (1) Draft animals and implements up to four (4) years (2) Chain saws up to three (3) years (3) Mechanical rice threshers up to five (5) years (4) Mechanical dryers up to three (3) years (5) Abaca and coffee processing and marketing facilities. (a) storage facilities up to ten (10) years (b) transport: (i) light trucks up to 2,500 kgs. gross vehicle weight up to four (4) years. (ii) cargo trucks over 2,500 kgs. gross vehicle weight up to five (5) years. (c) Stripping machines up to three (3) years (d) Baling Press up to ten (10) years (6) Development of coffee or abaca plantations up to eight (8) years inclusive of four (4) years grace with accrued interest to be paid in the third and fourth years, and amortization in equal amounts thereafter for four (4) years. f. Loan repayment . Repayments shall be scheduled in approximately equal installments of principal and interest, annually, semi-annually or of a shorter period, except in cases where deferred payment plans have been granted so arranged as to fall due on the approximate periods of highest borrower's income or when the principal income of the borrower is normally available. However, financing institutions shall encourage borrowers to make deposits for amortization of subloans on an agreed interval in order to assure repayment as they become due. g. Interest rates . Subloans shall accrue interest at the rate of twelve percent (12%) per annum on the principal amount outstanding from time to time or such other higher rate as may be prescribed by the Monetary Board, and an additional fee to be charged separately in accordance with CB regulations. Such interest shall not be collected in advance. h. Barrio savings fund . In addition to the interest rate and service fees to be charged under Item "g" of this subsection, borrowers shall contribute an additional amount equivalent to three percent (3%) of the subloan during the first year of the project as their contribution to the barrio savings fund. Such barrio savings fund shall be used to purchase shares of stock in the financing institutions to increase its capitalization. i. Collateral (1) Subloans may be secured by a first mortgage on titled or untitled immovable property and/or chattel mortgage on movable property. Subloans may be secured with a guarantee by the Department of Agrarian Reform "Fund for Direct Assistance" to the extent they are not secured otherwise. (2) Government bonds and other securities issued by its agencies and instrumentalities guaranteed by the Republic of the Philippines may be accepted as collateral. (3) The financing institution shall require the presentation of the yearly real estate tax receipts and insurance premium receipts, as they fall due, and shall forward them to the loan officer concerned. (4) The financing institution may advance the property tax due on real estate and the insurance premium on the objects offered as collateral, such advances to be charged to the account of the borrower subject to prior notice. Such advances shall not be financed out of the proceeds of loans. j. Subloans application and processing (1) Applications for subloans shall be in the form prescribed by CB and except as CB shall otherwise agree, shall be filed with the financing institution nearest either the residence of the borrower or the site of the sub-project to be financed to ensure effective supervision and control. (2) Financing institution employing a supervised credit technician may process subloan applications in lieu of processing by a CB agricultural credit supervisor; Provided , however , That said technicians have completed training with CB: and, Provided , further , That subloan applications shall be subject to the final approval of the CB loan officer. (3) Financing institutions which have developed sufficient capability to appraise subloan applications may be granted full authority by CB to process, approve and thereafter supervise subloans falling within the limitations of the granted authority. The approval under the granted authority shall be final and the corresponding checks covering loans to such financing institution shall be issued after the submission of the required supporting documents to the CB loan team: Provided , however , That based on post-audit, the authority to approve subloan applications may be revoked by CB if the required standard of appraisal work is not maintained and the financing institution fails to improve the quality of appraisal within a reasonable period prescribed by CB. k. Release of subloan proceeds . Upon receipt of loan proceeds from CB, the financial institution shall deposit the same in a special account with its depository bank or disburse forthwith to the borrower dealer/contractor/supplier. Failure to disburse loan proceeds within thirty (30) days upon receipt shall subject the financing institution to a penalty of fourteen per cent (14%) per annum until the same is disbursed or returned to CB. l. Penalty for nonpayment . A penalty rate of interest of five percent (5%) per annum shall accrue, over and above the interest rate specified in Item "g" hereof, on any part of the principal of any subloan amortization not paid at its due date. m. Extension periods . In cases of default on the service of subloans arising from fortuitous events or force majeure , or in other cases clearly justified in the opinion of CB, the financing institution may grant the borrower a reasonable extension period subject to the approval of CB. In such cases, CB, may, at its entire discretion, grant the financing institution the same extension period on the corresponding loan. n. Subloans in litigation . In case of a suit for collection of the unpaid balance of a subloan, there shall be collected from the borrower, in addition to the interest and penal interest on the subloan imposed under Items "g" & "l" hereof, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and costs of the suit. o. Procurement (1) Procurement of agricultural machinery and equipment shall be limited to dealers who agree to provide the necessary training in the proper operation, care and upkeep of the machinery and equipment purchased, and who shall have immediately available spare parts and technical men and service shops at strategic places to repair and replenish the agricultural machinery and equipment sold by them and who are able to comply with CB requirements on participating dealers. cdpr (2) The financing institution shall ensure that procurement be affected prudently and that the prices paid by the borrower for agricultural machinery and equipment shall not exceed the maximum prices determined by the CB's Department of Rural Banks and Savings and Loan Associations. (3) Subloan applications in excess of P10,000.00 shall be supported by at least three (3) price quotations except in remote areas where dealer representation is insufficient, in which case, a certified statement by the financing institutions to the effect shall be required. SUBSECTION 3362.4 Loans by the Central Bank to the participating rural banks or stock savings and loan associations a. Credit line agreement . Each financing institution shall enter into a credit line agreement with CB for purposes of obtaining loans from CB. For this purpose, they shall submit the following documents to CB: (1) Board Resolution authorizing the financing institution to participate in the credit program, obtaining loans from CB and making subloans. (2) Evidence of the powers and specimen signature of the officers duly authorized to represent the financing institution , in all matters related to loans. b. Consortium of financing institutions . In order to cushion the impact of price increases in machinery, equipment and construction materials and to pave the way for the absorption of bigger subloans as envisioned under this program, two (2) or more financing institutions preferably situated within the same region may be allowed to undertake the financing of a single project in an amount not to exceed fifteen percent (15%) of the total combined net worth of such participating financing institutions: Provided , That the contribution to the subloan by each participating financing institution shall not exceed fifteen percent (15%) of its own net worth. Under this arrangement, the "consortium" shall designate a lead or "managing" financing institution which shall administer such loans in the same manner as CB:IBRD loans are normally administered, and in accordance with existing rules and regulations prescribed by the Central Bank. Privileges and responsibilities assigned, in these rules and regulations to financing institutions shall be in the event of financing by a "consortium", deemed as assigned to members of said "consortium", or the lead financing institution of the "consortium". c. Purpose of loans . The CB shall extend loans to financing institutions to finance subloans to be extended by them to borrowers in accordance with these rules and regulations. d. Loan limit . Not less than ten percent (10%) of each sub-project total cost shall be financed by the financing institution out of its own resources, except that rural banks which have been in operation for less than three (3) years and have a net worth not exceeding P500,000.00 (or such lower amounts as may be determined by CB from time to time) shall be required to contribute not less than five percent (5%) of such amount out of their own resources: Provided , That in the aggregate such contribution of all financing institutions to the sum of all sub-loans shall not be less than ten percent (10%). e. Maturity . The schedule of repayments of each loan shall approximately correspond to the schedule of repayments of the sub-loan to be financed by such loan. f. Interest rates . Loans shall accrue interest at a rate not less than seven percent (7%) per annum on the principal amount outstanding from time to time. Such interest shall not be collected in advance. g. Credit risk . The financing institution is fully liable for the service of any loan, whether or not the subloan financed by corresponding loan is timely serviced or not. h. Documentation . The financing institution shall execute and deliver to the CB a promissory note in respect and in the amount, of each loan extended to it. i. Security . As security for each loan, the financing institution shall endorse in favor of CB the promissory notes received from the corresponding borrower referred to in Subsec. 3362.3b, covering the total amount of the subloan to be financed. j. Processing of loan applications (1) Applications for subloans under the credit line agreement shall be submitted to the loan officer of the Department of Rural Banks and Savings and Loan Associations covering the particular area, for final approval or disapproval, with the exception of those financing institutions duly authorized to approve subloan applications by CB which shall submit their approved subloans to the loan officer for the preparation of covering checks. (2) In order to be processed, loan applications must be presented in the prescribed manner and supported by documentary evidence and other requirements that CB shall determine from time to time and set forth in appropriate instructions. k. Release of loan proceeds . Loan proceeds to financing institutions shall be released by the loan officer after submission of all required documents to perfect documentation of the loan and subloan. l. Prepayment of loans . The financing institution shall, to the extent any subloan shall be prepaid, prepay the corresponding amount of the loan obtained on account of such prepayment. m. Penal provisions . A penal rate of interest of five percent (5%) per annum shall accrue, over and above the interest rate specified in Item "f" hereof, on any part of the principal of any loan not paid at its maturity. n. Loans in litigation . In case of suit for collection of the unpaid balance of a loan, there shall be collected from the financing institution in default, in addition to the interest and penal interest on the loan imposed under Items "f" and "m" hereof, an attorney's fee equivalent to ten percent (10%) of the unpaid balance which shall in no case be less than one hundred pesos (P100.00) and costs of the suit. SUBSECTION 3362.5 Audits and reports from the participating rural bank/stock savings and loan association a. Subloan audit . Subloan documents of financing institutions shall be subject to audit by designated staff of CB for determination of compliance with rules and regulations. b. Audit . CB shall audit or cause to be audited, at least once a year, the accounts of the financing institutions which, for this purpose, shall make available to the CB's representatives or the auditors designated by CB all relevant documents. c. Monitoring . The financing institutions shall furnish CB with all reports and other information CB may reasonably request regarding this credit program. SECTION 3363. Food Quedan Financing Program . In accordance with the pertinent provisions of LOI Nos. 704, 1024 and 1139, dated June 9, 1978, May 22, 1980 and May 25, 1981, respectively, and Executive Order No. 849 dated November 26, 1982, the following guidelines govern the food quedan financing program. ( Effective April 18, 1984 ) SUBSECTION 3363.1 Objectives of the program a. To augment the operating capital of food businessmen and area marketing cooperatives and encourage their active participation in the local procurement of the basic food commodities; b. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD 717; c. To strengthen further the integrity and acceptability of the food quedan/chattel mortgage as collateral for loan availment; d. To enhance further the food supply and price stabilization program of the government; and e. To support the food production program of the government. ( Effective April 18, 1984 ). SUBSECTION 3363.2 Legal bases a. Letter of Instruction No. 696 dated May 24, 1978, making funds available to the National Food Authority (NFA) and the Central Bank for release to qualified rural banks in the form of special time deposits; b. Letter of instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; c. Letter of Instruction No. 1024, dated May 22, 1980, authorizing the Quedan Guarantee Fund Board created under Letter of Instruction No. 704 to include grains and other food commodities in its Quedan Financing Program; d. Presidential Decree No. 4, dated September 26, 1972, as amended by Presidential Decree Nos. 699 and 1485, dated May 12, 1975 and June 11, 1978, respectively, creating the NFA and prescribing its functions, powers and authorities; e. Presidential Decree No. 1770, dated January 14, 1981, reconstituting the NGA into the NFA and broadening its functions and powers; f. Letter of instruction No. 1139, dated May 25, 1981, directing the Quedan Guarantee Fund Board to implement the inclusion of other food commodities under the purview of the Quedan Financing Program; and g. Executive Order No. 849, dated November 26, 1982, increasing the loan value and guarantee coverage under the Food Quedan Financing Program and other purposes. ( Effective April 18, 1984 ) SUBSECTION 3363.3 Terminology a. Food businessman (FB) an NFA licensed/registered food businessman, NFA accredited farmer, Area Marketing Cooperatives AMC/Samahang Nayon endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed/registered with NFA, or producer/processor/ manufacturer/trader of food commodities other than grains or grains substitute. b. Lending bank (LB) any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines and accredited by the Quedan Board to participate in the Food Quedan Financing Program. c. Food quedan (FQ) simply known otherwise as quedan, negotiable warehouses receipt by the terms of which the food deposited in a bonded warehouse, duly licensed by the NFA/Bureau of Domestic Trade, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. prcd d. Food deposit (FD) a quantity of grains, grains substitutes and non-grain food commodities delivered to and accepted by a bonded warehouseman for the purpose of storage and for which quedan is issued/chattel mortgage executed, or the quantity of said food commodities owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued/chattel mortgage executed subject to NFA's requirements as to previous inspection and affidavit of ownership of the commodity in case of grains and/or grains substitute. For purposes of these rules, grains and grains substitutes shall include palay, milled rice, corngrains, sorghum, soybeans, mongo and peanuts. Non-grain food commodities shall include, but shall not be limited to garlic, onions, potatoes, oranges, pomelo, cheese curd, cheese pimiento, assorted meat, beef trimmings, boneless beef, broilers, cocoa butter, briskets, lamb legs, pork fats, veal hinds, process fruits, dried squid, marine products, shark meat, smoked fish, ham processed meat, fruit and orange concentrates. e. Special time deposit (STD) the amount deposited by CB with eligible rural banks pursuant to LOI No. 698 and its implementing memorandum to all rural banks. f. Quedan Guarantee Fund Board (QGFB) a group of officials, otherwise known as the Quedan Board, which is empowered to administer the fund and is composed of the NFA Administrator as Chairman, with the Central Bank Governor and the Minister of the Budget or their duly authorized representatives as members. g. Fund the quedan guarantee fund established under LOI No. 704, as amended, to guarantee the existence of food in storage covered by food quedan/chattel mortgage up to eighty percent (80%) of the outstanding loan. h. National Food Authority (NFA) a body corporate organized and existing under and by virtue of PD No. 4, as amended, for the integrated growth and development of the food industry. ( Effective April 18, 1984 ) SUBSECTION 3363.4 Statement of policies a. Purpose of loan To finance food businessmen in the procurement of food commodities and payment of other incidental expenses such as transporting, storage, processing and marketing. b. Eligibility requirements of food businessman . (1) He must be a depositor of locally produced food commodities in a bonded warehouse, duly licensed by the NFA/Bureau of Domestic Trade; (2) He must be a holder in due course of a negotiable food quedan or the owner of food commodities covered under the program and subject of a chattel mortgage; (3) In the case of Area Marketing Cooperatives (AMC), it must be duly endorsed by the Bureau of Cooperatives Development (BCOD) of the Ministry of Agriculture and likewise licensed by NFA. c. Terms and conditions (1) Collateral Deed of pledge on the negotiable food quedan issued by a duly licensed, bonded warehouseman in accordance with NFA rules and regulations or chattel mortgage on food deposits. (2) Loan ceiling The loan ceiling shall be as prescribed under Section of the General Banking Act. (3) Loan value The loan value shall be eighty percent (80%) of the face value of the quedan/chattel mortgage compared with the prevailing government support price. (4) Types and term of loan Straight loan for 180 days; or one year credit line made available in notes not exceeding 180 days. (5) Loan value, rediscount and lending rates The loan value, rediscount and lending rates stated in Sec. 3271 shall be observed. ( Effective Nov . 29, 1985 ) (6) Maturity Loans and advances against food quedan papers shall have a maturity period of not exceeding one hundred eighty (180) days. ( Effective Nov . 29, 1985 ) (7) Quedan guarantee fund The fund shall guarantee the existence of food deposits covered by quedan/chattel mortgage up to an amount equivalent to eighty per cent (80%) of the outstanding loan in accordance with the rules on guarantee coverage of food deposits covered by quedan/chattel mortgage. The QGF shall collect from the LB a guarantee of two per cent (2%) per annum based on the amount of loan which shall not be passed on to the LB." ( Effective May 30, 1985 ) (8) Purchase guarantee If the existing food deposit cannot be sold at a price higher than the prevailing NFA's buying price or government support prices, as the case may be, NFA shall purchase such portion of the existing food deposit equivalent to the outstanding loan covered by food quedan/chattel mortgage at the prevailing government support price and the sale proceeds thereof shall be applied for payment of the outstanding loan ( Effective April 18, 1984 ) SUBSECTION 3363.5 Responsibilities of participating agencies . a. Central Bank (CB) (1) To disseminate the terms and conditions of the program to eligible lending banks; (2) To administer the funds made available under LOI 696 and to grant STDs to eligible RBs; and (3) Within the bank's existing ceiling, to extend rediscounting facilities to all eligible papers under this food quedan financing program. b. Lending Bank (LB) (1) To disseminate the terms of loans as well as requirements to its branch offices and (2) To evaluate, process and extend loans under this program. c. National Food Authority (NFA) (1) To accredit the prospective borrowers (2) To periodically inspect and monitor bonded stocks per existing NFA inventory reporting system. (3) To supervise, control and monitor quedans issued by bonded warehouseman. (4) To conduct joint inspection of stocks with authorized representative of lending banks; (5) To ensure that stocks covered by the Food Quedan Financing Program are not allowed to be withdrawn unless the depositor has settled all his obligations with the LB; and (6) To purchase the food stocks equivalent to the outstanding loan covered by quedan at the option of lending bank upon maturity of the loans. d. Quedan Guarantee Food Board (QGFB) (1) To administer the food quedan guarantee fund; (2) To execute a guarantee agreement with eligible LBs. (3) To pay legitimate claims by LBs against the Fund, and (4) TO oversee the implementation of LOI 704, as amended, and its implementing rules and regulations. e. RBs, PNB, Land Bank as Masagana Creditor (MC) (Optional) (1) To enter into collection agreement with FBs and LBs; (2) To issue an authority to collect to FBs specifying the arrangements for the FBs assistance in loan collection of M-99. (3) To provide the FBs and LBs through Provincial Program Officers (PPOs) a list of Masagana borrowers who have outstanding obligations with their respective banks; and (4) To receive the amount representing collections turned over by the duly authorized FB for the payment of Masagana 99 loans of farmer-borrower, in accordance with authority to collect issued by the MC to the FB f. Bankers Association To circularize among member banks the implementing rules and regulations of this financing program and encourage them to participate in said program. g. Confederation of Filipino Rice and Corn Associations, inc . (CONFRCAI) (1) To recommend to participating banks eligible grains businessmen; (2) To assist in the collection of the loans granted to its recommended members, and (3) To circularize among its members the mechanics of the program. h. Bureau of Cooperatives Development (BCOD) (1) To certify and endorse eligible AMCs, and (2) To assist the lending banks in the collection of loans extended to AMCs. i. National Food and Agricultural Council (NFAC) Provincial Program Officers (PPOs) of Masagana 99 shall secure from MC the list of Masagana 99 borrowers to be given to grains businessman and lending banks ( Effective April 18, 1984 ). SUBSECTION 3363.6 Guidelines governing the grant of special time deposits (STDS) to rural banks to finance short-term commodity loans to eligible food businessmen pursuant to Letters of Instructions No . 696 and 704, as amended a. Eligibility requirements of rural banks (1) Must be operating substantially in accordance with laws, rules and regulations governing rural banks. casia (2) Shall be operating in priority food producing areas as determined by the NFA; (3) Shall have a ratio of past due loans to total loans outstanding not exceeding twenty-five percent (25%); (4) Its rediscounting obligations would be within prescribed ceilings on supervised credit; (5) Must not have past due obligations with Central Bank, in accordance with existing policy; (6) Participated for at least one (1) year in the Masagana 99, Maisagana or any of the supervised credit programs, and (7) Shall have a net worth of not less than P350,000. b. Terms and conditions of the STDs (1) The funds for the special financing program in the form of STDs shall be placed in rural banks for a period of not more than ninety (90) days subject to recall at any time in case the rural bank violates any provision of law or rules, regulations and instructions promulgated by the Monetary Board. (2) STDs shall be granted at eighty percent (80%) of the credit needs of eligible rural banks under the program. (3) Rural Banks shall pay interest on STD at the prevailing MRR 90 less 60 per annum. A penalty of thirty six per cent (36%) per annum, exclusive of interest, shall be charged for diversion/misappropriation or non-payment of the STD; (4) Any unauthorized use of the special time deposit by any rural bank shall subject such bank to automatic disqualification from participating in the program, in addition to payment of penalty on the amount involved at the rate of thirty six per cent (36%) per annum for the duration of such unauthorized use and, (5) Papers covering loans granted out of STDs under the special financing program shall not be rediscountable. ( Effective May 30, 1985 ) SUBSECTION 3363.7 Rules and regulations governing the guarantee coverage of food quedan and chattel mortgage on food deposits under the program Pursuant to Letter of Instructions No. 704, 1024 and 1139 dated June 9, 1978, May 22, 1980 and May 25, 1981, respectively, and Executive Order No. 849 dated November 26, 1982, the following rules and regulations governing the operations of the guarantee coverage of food quedan/chattel mortgage on food deposits apply: a. Definition of terms Unless otherwise specified, the following terms used in this Appendix shall mean: (1) Fund The Quedan Guarantee Fund established under LOI No. 704, as amended, to guarantee the existence of food in storage covered by food quedan/chattel mortgage up to eighty percent (80%) of the outstanding loan. (2) Food Quedan (FQ) simply known otherwise as quedan, a negotiable warehouse receipt by the terms of which the food deposit in a bonded warehouse duly licensed by NFA/Bureau of Domestic Trade, shall be delivered to the depositor or upon his order, or to bearer or holder in due course for value of the said receipt upon demand. (3) Food deposit a quantity of grains, grains substitutes and non-grain food commodities delivered to and accepted by a bonded warehouseman for the purpose of storage and for which a quedan is issued/chattel mortgage executed, or the quantity of said food commodities owned by a bonded warehouseman stored in his warehouse and for which a quedan is issued/chattel mortgage executed, subject to NFA's requirements as to previous inspection and affidavit of ownership of the commodity in case of grains and/or grains substitutes. For purposes of these rules, grains and grains substitutes shall include palay, milled rice, corngrains, sorghum, soybeans, mongo and peanuts. Non-grain food commodities shall include, but shall not be limited to garlic, onions, potatoes, oranges pomelo, cheese curd, cheese pimiento, assorted meat, beef trimmings, boneless beef, broilers, cocoa butter, briskets, lamb legs, pork fats, veal hinds, processed fruits, dried squid, marine products, shark meat, smoked fish, ham, processed meat, fruit and orange concentrates. (4) NFA the National Food Authority, a body corporate organized and existing under and by virtue of Presidential Decree No. 4, as amended by Presidential Decree No. 699, 1485 and 1770, for the integrated growth and development of the food industry. (5) Board a group of officials, otherwise known as the Quedan Guarantee Fund Board, which is empowered to administer the Fund, and is composed of the NFA, Administrator as Chairman, with, the Central Bank Governor and the Minister of Budget or their duly authorized representatives as members. (6) Food businessman (FB) an NFA licensed/registered food businessman; NFA accredited farmer. Area Marketing Cooperative (AMC)/Samahang Nayon endorsed by the Bureau of Cooperatives Development (BCOD) and likewise licensed/registered with NFA; or producer/processor/ manufacturer/trader of food commodities other than grains or grains substitutes. (7) Borrower a food businessman who intends to secure or in fact has secured a loan from/lending bank by pledging food quedans or executing a chattel mortgage on food deposits. (8) Lending bank any banking institution organized and existing under the laws of the Republic of the Philippines and duly authorized by the Central Bank of the Philippines and accredited by the Quedan Board to participate in the Food Quedan Financing Program. (9) Maturity of the loan the due date for the full payment of the loan granted by a lending bank to a businessman as appearing in the promissory note and/or other legal document or an earlier date than as above specified brought about by confirmed findings in a joint inspection that the food deposit is wholly or partially non-existent. (10) Bond an undertaking conditioned to respond or answer for the value of food commodities actually delivered and received at any time the warehouseman is unable to return said food deposit or to pay for its value. b. Purpose of the Fund The Fund has been established to further strengthen the integrity and acceptability of the food quedan/chattel mortgage on food deposits by undertaking to guarantee the existence of food deposits when said quedan is pledged/chattel mortgage executed by a food businessman with a lending bank and thereby develop the quedan/chattel mortgage as a convenient credit instrument for channelling the banking sector's loanable funds to augment the food businessman's working capital for food procurement operation and enhance the stabilization of farm prices of storable food commodities. ( Effective April 18, 1984 ). c. Administration of the Fund The Fund shall be administered as hereunder outlined: (1) The funds and money accruing to the Fund shall be administered by the Board; (2) The Board shall adopt such policies, rules and regulations as may be necessary to administer the fund and to effectively achieve the objective of the Food Quedan Financing program. (3) The Board management staff shall assist in the processing of application for guarantee coverage, claims for guarantee payments of lending banks and in other matters pertaining to the administration of the Fund. d. Eligible quedan/chattel mortgage for guarantee coverage . Only food quedans pledged/chattel mortgage covering food deposits stored in a duly licensed bonded warehouse executed by a food businessman for the purpose of securing commodity loan from a lending bank shall be eligible for guarantee coverage. e. Extent of the coverage . The Fund shall guarantee the existence of food deposits stored in a duly licensed bonded warehouse covered by quedan pledged or chattel mortgage executed in favor of a lending bank under the Food Quedan Financing Program up to an amount equivalent to eighty percent (80%) of the outstanding loan. f. Extent of liability of the Fund The liability of the Fund to the lending bank shall be up to eighty percent (80%) of the outstanding loan, inclusive of interest as of maturity date of loan, after deducting the sales proceeds of existing food deposits, if any, Provided , that the non-payment of said loans is due to the instances enumerated in Item "m" hereof. g. Requirements for guarantee coverage A lending bank desiring to avail of the guarantee coverage on quedans pledged/chattel mortgage for commodity loans to food businessman must comply with the following requirements. (1) The execution of a guarantee agreement with the Board in a prescribed form. (2) After the execution of the guarantee agreement and for as long as it is in full force and effect, the lending banks shall submit to the Board, or the regional/provincial offices of the National Food Authority (NFA) within fifteen (15) calendar days from the date of release of loans, the list of quedans/chattel for guarantee coverage in a prescribed form. The list shall be submitted directly to the Board or to the nearest NFA office, either through personal delivery or through registered mails. In the first case, the date of acknowledgment by any authorized representative of the Board/NFA on the copies of list filed or submitted and in the second case, the date of mailing postmarked on the envelop or the registry receipt shall be considered as the date of filing or submission and (3) The remittance of the guarantee fee to the Board directly or thru the nearest NFA office together with the list of quedans/chattel mortgage for guarantee coverage. h. Effectivity of guarantee coverage After the list of quedan/chattel mortgage for guarantee coverage shall have been submitted by the lending bank and consequently approved by the Board, the effectivity of the guarantee coverage shall retroact to the date of the submission of the said list as provided for in item "g(2)" above. All quedan/chattel mortgage loans with approved guarantee coverage shall continue to enjoy said guarantee even after the execution of a food trust receipt (FTR) pursuant to the guidelines on its use under the Food Quedan Financing Program and except as provided under Item "p(4)" hereof. i. Guarantee fee A guarantee fee of two per cent (2%) per annum of the amount of every loan extended to food businessman shall be paid by the lending bank to the Board. Said fee shall not be passed on to the borrower and shall be non-refundable. ( Effective May 30, 1985 ) j. Joint inspection of stocks In the event of failure of food businessman to pay wholly or in part his loan upon maturity, the lending bank shall, within fifteen (15) calendar days, notify the Board after which a joint inspection by authorized representatives of the lending bank, the Board and NFA shall be conducted for the purpose of assessing the quality and quantity of the food deposit covered by the quedan/chattel mortgage. A joint inspection may, likewise, be conducted even before the maturity of the loan at the instance of the lending bank, the Board or NFA. After the joint inspection, a report in a standard format shall immediately be submitted to the Board. k. Sale of food deposits upon maturity of the loan If on the basis of the findings of the joint inspection the existing food deposit is deemed sufficient to satisfy the outstanding loan, the lending bank shall allow the sale thereof by the borrower, within a reasonable period, under the supervision of the Board and/or NFA and proceeds of sale shall be applied to the outstanding loan. In case there has been a reduction in the quantity of food deposits and the value of the remainder is not sufficient to satisfy the outstanding loan, the lending bank shall, likewise, allow the sale of said stocks by the borrower as above specified and proceeds of sale shall be applied to the outstanding loan. The loan balance shall, thereafter, be subject for claim against the Fund to the extent provided for in Item "f" above. l. Purpose guarantee of food deposit If the existing food deposit cannot be sold at a price higher than the prevailing NFA's buying price or government support price, as the case may be, NFA shall purchase such portion of the existing food deposit equivalent to the outstanding loan covered by food quedan/chattel mortgage at the prevailing government support price and the sale proceeds thereof shall be applied for payment of the outstanding loan. m. Claim against the Fund The lending bank may file a claim against the guarantee fund to the extend provided for in Item "f" above, in case the loan is not fully paid upon maturity, in any of the following instances. (1) When there is total non-existence of stocks covered by pledged quedans/chattel mortgage as verified by the findings of joint inspection; or (2) When there has been a reduction in the quantity of food deposits covered by quedan/chattel mortgage, the sales proceeds of the remainder is not sufficient to satisfy the outstanding loan. a. Payment of claim The Board shall pay the guarantee claim within fifteen (15) working days from receipt thereof, to the extent allowed under Item "f" subject to the conditions set forth in Items "l" and "m" and after the lending bank shall have filed a claim for guarantee payment in the prescribed form; Provided , that the guarantee coverage shall not have been cancelled or nullified under any of the grounds enumerated in Item "p". o. Application and remittance of recoveries Any amount recovered or collected from the borrower and/or the bonds subsequent to the payment of claim against the fund shall be applied to the unpaid loan on a pro rata basis of eighty percent (80%) to the fund and twenty percent (20%) to the lending bank. The collected amount due the Fund shall, without necessity of demand, be remitted to the Board within fifteen (15) calendar days from date of collection, otherwise, the lending bank shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages and another one percent (10%) per month as interest thereon computed from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future application for guarantee coverage. p. Grounds for cancellation or nullification of guarantee coverage . Any of the following shall be a ground for cancellation or nullification of guarantee coverage and/or non-payment of guarantee claims: (1) When there is collusion between the borrower and the lending bank in the extension of credit to the prejudice of the Fund. Collusion exists when, (a) the borrower and the official(s) and/or employees of the lending bank enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; or (b) the lending bank receives the sales proceeds under the Food Trust Receipt Agreement for deposit in the name of the borrower before maturity of the loan but subsequently allows withdrawal of the name of borrower without payment of the loan, in violation of the provisions of said Agreement and to the prejudice of the Fund; (2) When the lending bank, makes false statements, misrepresentation, omission or concealment in the reports submitted to, and/or in the claims filed with the Board; (3) When the lending bank violates any of the provisions of these rules and regulations, and (4) When the lending bank fails to submit a copy of the Food Trust Receipt Agreement within fifteen (15) calendar days from date of execution of the FTR on the Quedan Board or the nearest NFA office. The aforementioned grounds shall not preclude the Board from cancelling or nullifying its guarantee coverage for other causes concerning fraud, bad faith or other machinations. q. Applicability of other penalties The penalties provided for in these rules and regulations shall be without prejudice to the imposition of other administrative sanctions as well as the filing of civil and/or criminal cases as may be warranted by circumstances. ( Effective April 18, 1984 ). SUBSECTION 3363.8 Food commodities in storage at the bonded warehouse of the Food Terminal, Inc . The food quedan financing program for food commodities in storage at the bonded warehouse of the Food Terminal, Inc. shall be in accordance with the provisions of Appendix 34. ( Effective April 18, 1984 ). SUBSECTION 3363.9 Guidelines on the use of food trust receipts under the Food Quedan Financing Program The guidelines on the use of food trust receipts under the Food Quedan Financing Program shall be in accordance with the provisions of Appendix 35. ( Effective April 18, 1984 ). SECTION 3364. Cooperative Finance System . The Cooperative Finance System (CFS) is specially designed to effectively lend and invest the Integrated Cooperative Finance Program (ICFP) loan and trust fund with well-managed and credit deserving eligible cooperatives so that they could in turn efficiently serve the needs of their members. The following rules and regulations are hereby promulgated to govern the operations of the CFS, particularly, the Cooperative Finance Group when it lends and invest the ICFP funds to eligible cooperatives thru banks, primarily the Cooperative Rural Banks (CRBs). ( Effective Dec . 18, 1985 ) SUBSECTION 3364.1 Definition of terms . Unless otherwise specified, the following terms used in these Rules and Regulations shall mean: a. Cooperative An organization composed primarily of small producers and consumers who voluntarily join together to form business enterprises which they themselves own, control or patronize including samahang nayons, area marketing cooperatives and any federation of such cooperatives. A small producer shall mean a self employed individual who, by himself or with his family provides the primary labor requirements of his business enterprise or one who earns at least fifty percent (50%) of his gross income from the payment, proceeds or income of the labor he provides. b. Samahang Nayon (SN) A body corporate composed primarily of small farmers residing and/or farming within the geographical limits of a barangay for the purpose of conducting business activities by and/or for its farmer members and of improving the quality of life of the people in the barangay. c. Area Marketing Cooperative (AMC) A voluntary business association of Samahang Nayons and pre-cooperatives duly registered with the Bureau of Cooperatives Development (BCOD), engaged primarily in the marketing of the produce of its members as well as in the supply of their production inputs and other requirements. d. Cooperative Rural Bank (CRB) A rural bank organized by samahang nayons and duly established cooperatives registered with BCOD and approved by the Central Bank under the Rural Banks Act (R.A. No. 729 as amended). e. Loan Fund That portion of USAID loan and Philippine Government Counterpart funds and other sources earmarked for lending to eligible cooperatives. f. Trust Fund That portion of Government of the Philippines (GOP) funds, USAID loan or funds from other sources earmarked for the purpose of expanding the equity base of eligible cooperatives. g. Guarantee Fund A fund established to cover possible losses arising from uncollected loans which cannot be covered by the liquidation of collaterals in accordance with pertinent provisions in these guidelines. h. Cooperative Finance Group (CFC) A special unit in the Central Bank created for the purpose of providing specialized handling, monitoring, supervision and servicing of loans to cooperatives made through CRBs/Banks. i. Debt-Equity Ratio Refers to the ratio of term liabilities to the networth of the borrowing cooperative. j. Special Time Deposit (STD) Funds made available to eligible participating CRB/Bank to finance the loan(s) applied for by eligible cooperative. k. Disposable Earnings Refers to the balance of net income plus non-cash expense items less mandatory cash deductions or appropriate for education, training, general reserve, kilusang bayan guarantee, etc . l. Risk Asset Ratio Refers to the ratio of a bank's networth to its risk assets. Risk asset is defined as total assets minus non-risk assets such as cash on hand due from Central Bank; evidence of indebtedness of the Republic of the Philippines and the Central Bank; loans covered by holdout on an assignment of deposits Bank premises furniture, fixture and equipments (depreciated); and others as approved by the Monetary Board. m. IGFP The Integrated Cooperative Finance Program. n. USAID The United States Agency for International Development. o. NEDA The National Economic and Development Authority. p. BCOD The Bureau of Cooperatives Development. q. NFA The National Food Authority. r. CFPI The Cooperative Foundation Philippines, Inc. s. CDLF The Cooperative Development Loan Fund. t. LBP - The Land Bank of the Philippines. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.2 General credit policies a. The extension of credit shall be consistent with sound lending and business principles so that the cooperatives may prosper and grow in size, scope and quality of service to their members. b. A loan to an eligible cooperative shall be based upon sound credit factors. It should be in an amount sufficient to accomplish the purpose for which it is intended and provide terms and conditions which reasonably assure repayment and protect the cooperative's credit base. c. Applicant cooperative must have capital contributions sufficient to meet the debt-equity ratio prescribed under these guidelines. d. Term loans that may be granted to an eligible cooperative shall be such that its total outstanding term liabilities would not exceed a debt-equity ratio of two is to one. e. The Cooperative Finance System shall pursue a policy of providing a total financing package for eligible cooperatives subject to a loan and capital package provided that: 1) The amortization of the term loan component must be repaid from disposable earnings of the cooperatives; 2) Seasonal and commodity loans shall be repaid as inventories of financed commodities and products are sold and proceeds collected, but in any event the loan shall be repaid within a period of 12 months or less and 3) The retirement of the capital assistance (Trust Fund) component must be paid from a capital build-up agreed to by the cooperative members and made a part of the loan agreement . f) Each borrower shall be required to invest a 5% out of advances on term loans and 3.75% out of advances on seasonal loans (except re-advances made within the year) in a Guarantee Fund established to cover losses arising from uncollected loans which cannot be covered by the liquidation of collaterals. Each borrower is to make investments at the above rates until such time as the amount of investment in the Guarantee Fund equals 10% of the borrower's combined loan outstanding. The funds are to be invested in prime securities by the CFG and the interest income shall accrue to the benefit of each borrower. Any net loss suffered from uncollected loans granted under this program shall be chargeable up to eighty five percent (85%) against the guarantee fund and the balance of fifteen percent (15%) against the CRB/Lender. Losses shall first be charged against the investment of the delinquent borrower in the Guarantee Fund. Any remaining losses will be charged against the investment of other borrowers. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.3 Types of financing . Loan and capital funds made available utilizing USAID Loan and Philippine Government Counterpart funds of the Cooperative Marketing Project (CMP) may be utilized for any or a combination of the following types of financing. a. Loans, Purposes 1) Seasonal operating capital and commodity loans may be extended to provide short term operating funds and to finance increases in inventories and receivables that shall be liquidated within a period of twelve months or less. 2) Term loans may be granted for long term or permanent working capital, for facilities and other non-current assets payable on amortization basis within a period of more than one to ten years. b. Joint or Split Financing A number of cooperatives which have loans outstanding from the other cooperative financing programs may need additional credit. Loans may be made to these cooperatives provided satisfactory arrangements can be made with the other lenders; for dividing collaterals, deferrals where necessary, appropriate repayment programs, etc. so that loans made under this authority can be granted on a sound basis. In some cases, cooperatives rent operating facilities owned by LBP. In the event that it is determined to be desirable, arrangements might be made whereby the borrower may acquire such facilities by issuing preferred stocks to the CMP for the purchase cost of said facilities or that LBP may be willing to sell the facilities under a long term purchase contract to be paid out of a separate program for repaying regular loans, or on a long term loan purchase contract. Split financing will be involved and should be allowed on the condition that satisfactory arrangements can be worked out with LBP and/or CDLF. c. Trust Fund Investment . Investment in preferred stocks of cooperatives not to exceed 100% of their paid-up capital or P1,000,000 may be made to supplement equity capital owned by members in order to provide an adequate capital base to support the regular term and seasonal loans that may be granted. Preferred stocks shall be preferred as to assets but not as to interest and shall earn interest only when interest is declared for common stocks and shall earn at a rate to 1/5 of the rate declared for common stocks. The preferred shares representing Trust Fund Investment in the capital stock of cooperative shall be retired within a period of ten (10) years in accordance with the capital build-up program of the eligible cooperative to be reckoned from the date of each release of capital assistance. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.4 Authorized lenders . Any Rural Bank/Bank that meets all the following requirements may be allowed to participate under this program: a. Rural Bank (1) It must be operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board. (2) Its ratio of past due loans to total loans outstanding does not exceed 25% at the time of application; (3) Its risk asset ratio should not fall below the 10% minimum requirement with the grant of the loan being applied for; (4) There must be no directive either from the Governor/Monetary Board prohibiting it from receiving financial assistance from the Central Bank. b. Other banking institutions not under the supervision of the SES Department III (1) Those certified by the appropriate Departments in the Central Bank supervising the same as operating substantially in accordance with laws, rules and regulations and directives of the Monetary Board; (2) The applicable requirements under 4.01 (b), (c), and (d). ( Effective Dec . 18, 1985 ) SUBSECTION 3364.5 Eligible borrowers . Cooperatives eligible to avail themselves of loans and capital assistance from the CB-CFG through participating CRBs/Banks under this program are the following. a. Cooperatives (as defined in Section 1) which met/agree to meet all the following requirements : (1) Those registered or re-registered with the Bureau of Cooperatives Development in accordance with P.D. 175 and LOI 23. (2) The main business activities are: a) The supply of certified seeds, fertilizers, and other farm inputs to members. b) The buying, storing, transporting, processing, and marketing of the produce of their cooperative members. c) A combination of the supply of farm inputs and the marketing of the produce of members; and d) Providing other economic services or on behalf of members. (3) At least 50% of the total business of the cooperative must be with its members. (4) Keeps and maintains acceptable and adequate accounting records and provides financial and operating statements in approved form. (5) Share capital shall earn interest at rates prescribed by the Bureau of Cooperatives Development. (6) All declaration of cash interests on share capital and patronage refunds shall be made only after prior approval by the CFG. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.6 Credit requirements . The Cooperative Finance Group may grant credit on the basis of careful analysis of, but not limited to, the following major credit factors: a. Management A cooperative seeking or obtaining credit should have responsible, competent and cooperative management and board of directors. b. Loan Purpose and Terms The purpose shall for a constructive use, as those defined in Subsections 1355.3.a, 2357.3.a, and 3364.3.a. of Books I, II and III, respectively, to further improve the cooperative's services to its members and patrons. The terms shall be in accordance with those prescribed under Subsections 1355.8.a, 2357.8.a, and 3364.8.a of Books I, II and III, respectively. c. Repayment Ability (1) Term Loans The determination of repayment ability acquires thorough analysis of the adequacy of historic and projected cash flows arising from operating margins, or retains out of payment for products, or from scheduled investments by members that will be available to meet loan repayments and build networth. (2) Seasonal Loans The determination of the repayment ability for seasonal loans requires an analysis of the cooperative's ability to properly utilize the loan and revolve its current assets. A seasonal loan should be related to the value of the current assets being financed or to the net working capital position, margining or supporting the loan. d. Financial Condition and Operations Sound financial condition and operations require the ability of the borrowing cooperative to honor obligations, to continue as an effective business organization and to protect the lender from undue risk in case of adversity. Financial analysis include the evaluation of the assets and their composition, the quantity and quality of net working capital, currency of liabilities and make-up of the networth as evidenced by balance sheets and supporting schedules. Operational analysis includes the evaluation of the type and volume of business, operating efficiency and net earnings as represented by profit and loss statements together with related schedules. e. Economic Environment An analysis of the economic environment should be made of the need for the cooperative and its ability to provide goods or services to its members at competitive prices. The report should include an analysis of member support, either direct or through the SN, an analysis of member support, either direct or through the SN, an analysis of competition, industry trend, any changes in the type of agricultural production, government policies and the legal climate in which the operations are conducted. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.7 Amount of loan . The amount or size of loan/financial assistance is determined according to the corporate needs of an applicant based on the feasibility study submitted which should be within the debt-equity ratio provided in these guidelines, but such loan shall be granted only to the extent of the amount needed which should be within the applicant's capacity to pay and the loan value of its collateral securities. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.8 Loan periods extension periods The periods shall be adopted to the kind of loan applied for: (1) Seasonal commodity loan shall have a term of not exceeding one year. (2) Seasonal operating loan shall have a term of not exceeding one year. (3) Term loan shall have a term of not exceeding ten years. (4) Special term loan shall have a term of not exceeding ten years. b. In cases of default by a borrower arising from fortuitous events or force majeure, or in other justifiable or meritorious cases, the CRB or other lender may, with prior approval of the CFG Loan Committee, allow restructuring of the loans. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.9 Collateral security loan value The type and amount of collateral required should be governed by the relative strengths and weaknesses of the cooperative's credit factors. Collateral should not be used as a sole basis for extending credit but it should nevertheless be sufficient to provide the lender reasonable protection from loss in the case of adversity. a. Whenever necessary and to assure reasonable safety, loans shall be granted with collateral security, such as: (1) Seasonal commodity loans shall be secured by eligible commodities or products pledged under satisfactory warehouse receipts or other title document or lien and by assigned current accounts receivable when arising from sale of pledged commodities. (2) Seasonal operating capital loans shall be secured by chattel mortgage or other first lien on revolving receivables and inventories. (3) Term loans shall be securely by real estate and chattel mortgaged on fixed assets such as land, building, machinery and equipment including rolling stocks. b. Loan Value ; (1) Loans against real estate security shall not exceed seventy percent (70%) of the appraised value of the respective real estate security, plus seventy percent (70%) of the appraised value of insured improvements, and such loans shall not be made unless title to the real estate, free from all encumbrances, shall be in the name of the mortgagor. (2) Similarly, loans on the security of chattels shall not exceed fifty percent (50%) of the appraised value (cost if new) of the security, and such loans shall not be made unless title to the chattels, free from all encumbrances, shall be in the mortgagor. (3) Where the CRB/Lender has effective control of the agricultural products given as security, the amount of loans may be increased to the extent of seventy percent (70%) of their marketable value in the case of rice, corn and sugar, and sixty percent (60%) of the marketable value of other store non-perishable crops. (4) Where the assigned accounts receivables arose from sale of pledged commodities to government agencies/ instrumentalities and responsible private corporations/ entities, the amount of loan shall not exceed seventy percent (70%) of such assigned receivables. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.9b.(5) (Additional provision as provided by CBP Circular 1140 dated April 13, 1987) SUBSECTION 3364.10 Interest rates a. Interest at the rate of nine percent (9%) per annum for seasonal operating and commodity loans and eight percent (8%) per annum for term and special terms loans shall be charged the borrowers. No interest shall be collected in advance and no service charge are allowed to be collected. b. Interest to be charged CRBs or other lenders on Special Time Deposits shall be at four percent (4%) per annum on seasonal operating and commodity loans and at five percent (5%) per annum on term and special term loans. c. Notwithstanding, provisions in a and b above, it should be the long term objective of CFS to provide the types of credit needed by eligible borrowers at the lowest reasonable cost on a sound business basis, taking into account money costs, appropriate and necessary reserves and expenses, capital requirements, and services provided by CRB/Lender and CFG. Loans made through the CFS shall bear such rate or rates as may be determined by the Integrated Cooperative Finance Committee (ICFC) with the approval or confirmation of the Monetary Board based on proper supporting documentation ( Effective Dec . 18, 1985 ) SUBSECTION 3364.11 Loan repayment schedule . Repayment shall be scheduled in approximately equal installments of principal and interest, monthly, quarterly and semi-annually, except in cases where payment plans have been granted so arranged as to fall due on the approximate periods of borrowers highest income or when the principal income of the borrower is available. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.12 Lending procedures a. Application for Financial Assistance (1) Any eligible cooperative seeking financial assistance under this program must file with the nearest authorized CRB/Bank the following: a) Duly accomplished application form for loan and/or capital assistance b) Project feasibility data on the object of financing c) Certificate of incumbency, listing of officers, their signature and address and expiration of term d) Board resolution authorizing certain officers to negotiate and contract for financial assistance or where Board does not have such authority, then a general assembly resolution authorizing certain officer to negotiate and contract for financial assistance e) Latest financial statement and operation audited financial statement and operations for the last three (3) years where practicable and available f) Certified copy of by-laws and articles of incorporation together with all amendments thereto; and g) Accreditation by National Food Authority approving the cooperative as a procurement agent/buyer and handler of specific commodities such as rice, where applicable/appropriate. (2) Upon proper positive evaluation of the application for loan and/or capital assistance submitted by a borrowing cooperative, the CRB/Bank shall file a duly accomplished application for STD with the CB-CFG together with the following. a) Application for loan and/or capital assistance of the cooperative together with the other requirements and the board resolution authorizing certain officers to negotiate and apply for loan, to invest in the AMC's Guarantee Fund and to abide by the terms and conditions of the loan agreement developed. b) CRB board resolution approving and endorsing the cooperative's application and authorizing its officers to negotiate for STD with CB-CFG. c) Copy of financial statement and supporting schedules as of date of application. d) Weekly report on required and available reserves against deposit liabilities for four consecutive weeks. e) Information sheet duly accomplished, in form approved by CFG. f) Terms and Conditions of Special Time Deposits. g) Certificate of time deposit in the name of CB-CFG signed in blank by authorized officer. b. Processing and Evaluation CB-CFG shall review and evaluate the application for loan and/or capital assistance. Field investigation shall be conducted to determine the actual purpose of loan and/or capital assistance, the eligibility of the applicant, the existence and condition of the securities offered and gather facts necessary to determine the viability and feasibility of the project. Recommendations made in the Business Analyst's report shall be the basis for the action of CFG Loan Committee on the loan application. c. Approval/Notice of final Action (1) The CFG Loan Committee shall take appropriate action on all application for loans and/or capital assistance together with the CRB's/Bank application for STD and shall prescribe the terms and conditions of the covering loan agreements. Pursuant to Monetary Board Resolution No. 657, dated April 21, 1978, all loans exceeding 15% of the networth of the sponsoring lender, shall be subject to the approval of the Head, SES Department III, and the confirmation by the Monetary Board. (2) Upon confirmation by the Monetary Board, the CFG shall inform the applicant cooperative so that they could complete the required documentation. d. Release of Loan Proceeds The CFG shall release the proceeds of STD to the CRB/Bank and/or subscribe to the preferred share of the applicant cooperative thru the CRB. The CRB/Bank shall then deposit the proceeds of STD in a operate bank account and release the same to a special savings account in the name of borrowing cooperative upon the completion of the loan documents such as promissory notes, loan agreements, etc. Withdrawal from the special savings account shall be subject to actual need and approval by the CRB/Bank Manager. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.13 Use of borrowed funds ; diversion . The proceeds of a loan shall be used only for the purposes for which it was granted; if used for other purposes, the contract of loan shall be deemed cancelled and the lending institution shall immediately demand repayment of the amounts released, without prejudice to the criminal prosecution of the borrower under the law. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.14 Application of payments ; remittance of CB-CFG a. Any payment made by a borrower to CRB/Bank shall first be applied to the interest due and payable; the balance, to the principal of the loan. b. Collection from the borrowing cooperative shall be remitted to CB-CFG within five (5) days from date of receipt, otherwise, the CRB/Bank shall pay an amount equivalent to three percent (3%) per month on the amount due as liquidated damages in addition to the interest rates prescribed under Section 10. ( Effective Dec . 18, 1985 ) SUBSECTION 3364.15 Default foreclosure . In cases where diligent collection procedures fail and where forbearance is not deemed advisable, the lender and CFG shall take immediate action deemed appropriate under the circumstances. The right to foreclose real/chattel mortgages, pledged commodities and assigned assets arises from the time the borrower defaults in the payment of the loan/amortizations or violates any condition of the loan agreement. ( Effective Dec . 18, 1985 ). SECTION 3365. Financing Program under the Consolidated Special Agricultural Rehabilitation Fund (Consolidated SARF) . The following guidelines shall govern the participation of rural banks, Agricultural Credit Administration (ACA) and Philippine National Bank (PNB) branches in this financing program. a. A rural bank/ACA/PNB branch qualified to participate under Consolidated SARF may avail of said SARF as agent of the Central Bank by filing an application in the prescribed form with the Department of Rural Banks and Savings and Loan Associations (DRBSLA) not later than the date recommended by the Ministry of Agriculture (MA). Such rural bank/ACA/PNB branch shall submit a sworn written undertaking that it will restructure past due loans affected by typhoons over a period of two and one-half (2-1/2) years for irrigated areas and three (3) years for rainfed areas. b. Only rural banks that are not eligible for Central Bank financial assistance in the form of special time deposits and rediscounting, and ACA/PNB branch shall be allowed to participate under this program. c. In order to be eligible for financing under the program, the farmer-borrower should meet the following requirements: (1) The farmer-borrower must be certified to by Provincial Program Officer (PPO) or other authorized representative of the Ministry of Agriculture, and for rice farmers, there must be further certification by the National Irrigation Authority (NIA), Farm System Development Corporation (FSDC) or by an authorized representative of the MA that the rice land he is cultivating is serviced by the NIA or otherwise adequately irrigated. A certification to this effect by the President/Manager of the applicant rural bank/ACA/PNB branch shall likewise be appended to the list. (2) The farmer-borrower must have suffered production losses due to typhoons. d. Loans granted shall not exceed the prescribed rate of the pertinent supervised credit scheme. e. Loans granted under the program shall be for a period not exceeding 190 days at an interest rate of ten per cent (10%) per annum plus a service charge of two per cent (2%) per annum. The service charge of two per cent (2%) shall be deducted from every loan release. Farmer-borrower under the program shall execute a promissory note in triplicate copies in favor of the Central Bank of the Philippines as administrator of the Consolidated SARF, the original of which shall be submitted to the DRBSLA. f. The rural bank/ACA/PNB branch as agent of the Central Bank shall receive a commission of three per cent (3%) on the amount collected for the fund in addition to the service charge of two per cent (2%) per annum. g. The rural bank/ACA/PNB branch shall assume/absorb for its account fifteen per cent (15%) of losses arising from non-payment of loans granted under this program. h. In implementing the program, the following procedures shall be observed: (1) The qualified farmer-borrower shall file his loan application with the participating rural bank/ACA/PNB branch. (2) The rural bank/ACA/PNB branch shall submit to DRBSLA, Central Bank, it's application for availment of special fund covering the applications of eligible farmer-borrowers. (3) The DRBSLA shall process the application and shall release to the rural bank/ACA/PNB branch through credit advice to the nearest PNB branch the amount approved from the Consolidated SARF. (4) The rural bank/ACA/PNB branch shall withdraw funds from the PNB branch and shall release loans to farmer-borrowers in accordance with this and existing supervised credit schemes guidelines, i.e., loans to farmer-borrowers shall be released in staggered amounts in accordance with the farm plan and budget jointly prepared by the farmer and the authorized technician. Every loan shall be covered by a separate promissory note and only one (1) ledger card shall be maintained for each borrower with the proper notation therein as "Consolidated SARF". Such loans releases shall be made immediately upon receipt of the credit advice. The rural bank/ACA/PNB branch shall submit to DRBSLA, Central Bank a list of farmers that were granted loans out of the said SARF within forty-five (45) days from the date of receipt of said fund. (5) Repayments received by the rural bank/ACA/PNB branch from farmer-borrowers on loans granted under the program, including interest thereon less three per cent (3%) commission on the amount collected, shall be remitted to the DRBSLA within five (5) banking days from receipt thereof. A rural bank/ACA/PNB branch that fails to remit the amount collected within the period mentioned above shall pay a penalty charge on the amount unremitted at the rate of fourteen per cent (14%) per annum until such amount is remitted in full to the Central Bank. i. Any amount received by the rural bank/ACA/PNB branch from the Central Bank shall be released to qualified farmer-borrowers within 45 days from receipt of the Consolidated SARF, and any unused portion thereof shall be returned to the DRBSLA, Central Bank with five (5) days after the 45-day period. A rural bank/ACA/PNB branch which fails to return such amount within this period shall pay interest on the amount not returned at the rate of fourteen per cent (14%) per annum until such amount is remitted in full to the Central Bank. Similarly, any unauthorized use of the Consolidated SARF by any rural bank/ACA/PNB branch shall subject such bank to the same interest on the amount involved at the rate of fourteen per cent (14%) per annum for the duration of such unauthorized use. j. Any misappropriation of funds received by the rural bank/ACA/PNB branch or failure of the rural bank/ACA/PNB branch to remit to the Central Bank loan repayments of farmer-borrowers of the amount from the Consolidated SARF not loaned out as provided in Item "i" above within the requisite period under this program shall subject the officers and employees responsible therefor to prosecution under Article 315 of the Revised Penal Code. k. The rural bank/ACA/PNB branch participating under this program shall keep separate books of account and records affecting transactions under the Consolidated SARF which shall be subject to inspection and examination of the Central Bank. Cash pertaining to this SARF shall, likewise, be physically segregated from other funds. Separate financial statements in the prescribed form shall be submitted monthly to the Central Bank by the participating rural bank/ACA/PNB branch. SECTION 3366. Small and Medium-Scale Fisheries Credit Program (Biyayang Dagat) . Among the three sectors of the fishing industry, the allocation of credit has historically been in favor of marine commercial and aquaculture projects because of the bankability of these projects and because the nature of activities in municipal fisheries is such that higher risks and higher administrative costs are involved. Compounding this problem of fund allocation is the indiscriminate granting of municipal credit in areas where the fishery resources are believed to be depleted. The Government has identified the need to work out a more viable and manageable credit program for municipal fisheries which can increase the absorption of credit, in the countryside. It is for this reason that the President announced that a Masagana 99 type of credit be extended to Municipal fisheries. However, the nature s not completely adaptable to a compact financing package like that of Masagana 99 . This new credit program, the Biyayang Dagat , shall therefore adopt the features of Masagana 99 which are applicable to fisheries projects. SUBSECTION 3366.1 Objectives a. To implement a new approach to credit which shall increase the absorption of credit in the countryside with better chances of viability; b. To encourage and assist the small and medium-scale capture fishermen, fish farmers and processors in the target areas in increasing their production by adopting the appropriate fishery projects and technology; c. To expand the participation of extension workers in the supervision of projects and in the repayment of loans; d. To provide marketing and infrastructure support in areas where they are needed and are not presently available. SUBSECTION 3366.2 Outline of credit scheme . To maximize the benefit from the program, the following strategies shall be adopted: a. Extension of credit to priority fishing projects and appropriate technology; b. Organization of viable group borrowers; c. Expansion of the role of extension workers in the supervision of projects and encouragement in the repayment of loans; d. Development support in the program areas in terms of marketing facilities, transport system and institutional coordination. SUBSECTION 3366.3 Targets . The program aims to cover some 13,000 fishermen beneficiaries for its first five years of implementation (1980-1984) with an estimated funding requirement of P244 million for the entire period. Projects to be financed both for marine municipal capture and inland fisheries are expected to have a total incremental production of 47,532 metric tons for five years or an average of 9,300 metric tons per year. SUBSECTION 3366.4 Organization, management and operations a. Implementing agencies and their principal responsibilities (1) Ministry of Natural Resources (MNR) The Ministry shall assume over-all responsibility for the whole Biyayang Dagat program. (2) Fishery Industry Development Council (FIDC) (a) coordinate, supervise and manage the planning of the Biyayang Dagat credit scheme; (b) study measures to improve the viability of small and medium-sized fishing projects and prepare financing packages for the same; (c) determine credit requirements and identify other sources of funds; (d) deposit a Fisheries Loan and Guarantee Fund (FLGF) to the Central Bank (as provided for in PD 704 and the memorandum of agreement between FIDC and CB) which shall be augmented from time to time from budgetary appropriations and other sources; (e) monitor and evaluate the results and status of implementation of the credit scheme. (3) Bureau of Fisheries and Aquatic Resources (BFAR) (a) coordinate, supervise and manage the planning and implementation of the Biyayang Dagat extension and training scheme; (b) recruit, train and deploy extension workers to targeted areas; (c) monitor and evaluate status and results of the implementation of the extension and training activities; (d) provide all the support for applied research, fishery law enforcement and conservation, training and demonstration on technology transfer. (4) Philippine Fish Marketing Authority (PFMA) (a) formulate plans and programs for the implementation of the Biyayang Dagat marketing and infrastructure scheme; (b) accelerate the construction of fishing ports, ice plants and cold storages and other fish marketing and infrastructure projects in Biyayang Dagat data areas which are included in its nationwide fish marketing infrastructure program; (c) formulate and recommend area-specific marketing schemes for Biyayang Dagat areas where there is lack of market outlets to absorb incremental production brought about by the program; (d) implement the PFMA Fish Trader's Credit Program in Biyayang Dagat areas where such is deemed workable; (e) operate a fish transport service program in Biyayang Dagat areas wherever economically feasible; (f) monitor market conditions in major fish landings and provide market information to interested fishermen/ fishermen's associations. (5) Bureau of Cooperatives Development (BCOD) (a) organize, supervise and regulate fishermen's cooperatives/samahang nayon in coordination with BFAR and other agencies concerned; (b) train managers, of the fishermen's cooperatives; (c) serve as consultants to fishermen's cooperatives, BFAR extension workers and bank technicians. (6) Central Bank of the Philippines (Central Bank) (a) Department of Rural Banks and Savings and Loan Associations (DRBSLA) (i) administer the FLGF which shall be made available to financial institutions for lending to qualified borrowers and/or as guarantee for losses up to eighty five per cent (85%) which may be suffered by the financial institutions in case of default by the fishermen/borrowers; (ii) utilize the FLGF by depositing with selected financial institutions special time deposits (STD) at three per cent (3%) per annum from which funds, the financial institutions may grant loans to qualified borrowers for financing fishing projects under the Biyayang Dagat program; (ii) keep the FIDC informed on its administration of the FLGF through written reports to be submitted monthly; (iv) evaluate jointly with FIDC the implementation of financing program as to types of projects financed, number of projects financed, repayment rates, economic impact of the program, etc.; (v) encourage financial institutions to participate in the program; (vi) verify, evaluate and recommend the financial institutions' application for STDs through its agricultural credit supervisors; (vii) supervise loaning operations of financial institutions and its technicians or those detailed with it for the efficient implementation of the program. (b) Department of Loans and Credit (DLC) (i) rediscount eligible loan papers granted under this program, subject to existing rules and regulations governing the rediscounting of eligible papers with the Central Bank. (7) Ministry of Labor and Employment through the Rural Workers Office (MOLE RWO) (a) register and certify the fishermen's associations as stable and viable organizations; (b) evaluate project proposals and endorse the same to the Land Bank of the Philippines for financing under LBP-MOLE Loan Guarantee Fund Scheme, subject to all guidelines and operating procedures based on the approved memorandum of agreement between the MOLE and the LBP; (c) coordinate with the BFAR, through the DAP-FIRM, the supervision and monitoring of approved fishery projects; (d) provide financing for approved fishery projects through the LBP, in accordance with the memorandum of agreement between the MOLE-RWO and the LBP (dated September 5, 1980). (8) Development Academy of the Philippines through the Fishery Resources Management Program (DAP-FIRM) (a) identify, recommend and submit to the MOLE-RWO a list of qualified fishermen's associations for registration; (b) assist the registered and accredited fishermen's associations to avail of the loans from the LBP through the provision of technical services, such as preparation of project feasibility studies, marketing and other related matters on loan management; (c) submit monthly progress reports to the MNR-BFAR Central Office, MOLE-RWO and the LBP. DAP-FIRM shall be under the umbrella of the BFAR in the implementation of the Biyayang Dagat program. (9) Other financial institutions(PNB, DBP, LBP) (a) provide credit assistance to small and medium scale fishermen through the financing of viable projects per region; (b) encourage fishermen-borrowers on the repayment of loans; (c) provide monthly reports on the status of loans of fishermen borrowers. b. Organizational set-up (1) Program Management Committee (PMC) . The PMC shall be in charge of the management of the Biyayang Dagat Program. It shall perform the following functions: (a) formulate policy guidelines on the implementation of the program; (b) review and assess program implementation on a regular basis; (c) review and recommend to the Minister modifications, changes and approval of plans and programs. The PMC shall be composed of heads of the following agencies and their designated representatives: (a) Ministry of Natural Resources; (b) Bureau of Fisheries and Aquatic Resources; (c) Fishery Industry Development Council; (d) Philippine Fish Marketing Authority; (e) Central Bank of the Philippines; (f) Development Bank of the Philippines; (g) Philippine National Bank; (h) Rural Bankers' Association of the Philippines. (2) Credit Committee (CC) . The Credit Committee shall perform the following functions: (a) act as advisory and recommending body to the PMC in matters pertaining to the credit component of the program and other fisheries financing; (b) determine the credit requirements of the program; identify possible fund sources; and negotiate the release of these funds; (c) set the policy directions and thrusts of fisheries credit program in coordination with appropriate financial organizations outside MNR; (d) act on problems or issues pertaining to the implementation of the credit component of the program brought to its attention by the implementing agencies and committees. The CC shall be composed of the Executive Director of FIDC as Chairman and representatives of the following agencies as members: (a) Fishery Industry Development Council, (b) Philippine National Bank; (c) Development Bank of the Philippines; (d) Bureau of Fisheries and Aquatic Resources; (e) Technical Board on Agricultural Credit; (f) Central Bank of the Philippines. (3) Inter-Agency Technical Committee (IATC) . The IATC shall perform the following functions: (a) monitor and consolidate reports of the participating agencies; (b) undertake analysis of program implementation as to its component; (c) review and evaluate proposals/studies directed to improve/facilitate program implementation; (d) prepare and update the operational plan; (e) submit and recommend policy actions or measures to the PMC; (f) undertake all other activities related to the program. The IATC shall be composed of the Chief of MNR Planning Service as Chairman and representatives of the following agencies as members: (a) Bureau of Fisheries and Aquatic Resources; (b) Fishery Industry Development Council; (c) Philippine Fish Marketing Authority; (d) Central Bank of the Philippines; (e) Philippine National Bank; (f) Development Bank of the Philippines; (g) Ministry of Labor and Employment Rural Workers Office. Directly under the PMC is the MNR Biyayang Dagat Staff who shall act as the Secretariat. c. Monitoring and evaluation system . For purposes of evaluating the Biyayang Dagat program, it is necessary that a specific reporting system be devised to ensure availability of accurate data. Monthly reports from the field and from agencies involved shall be submitted not later than the 15th day of the following month to the Minister as over-all chairman of the PMC and appropriate agencies furnished copies. The Inter-Agency Technical Committee (IATC) shall process, handle and interpret these data and come up with information relevant to the planning, decision making and policy formulation tasks of the Minister of Natural Resources and the PMC. To facilitate program monitoring, the separate agencies of MNR shall monitor activities under their respective areas of concern, as follows: BFAR Central Office Extension and training PFMA Marketing and infrastructure FIDC Credit assistance The FIRM shall report to the BFAR on the implementation of the Rural Workers Component of the Program. Participating financial institutions (Central Bank, PNB and DBP) shall submit reports on the implementation of the program to the PMC, furnishing FIDC a copy. LLpr The Ministry of the Budget (MOB) shall be furnished with regular consolidated reports on the program. The FIDC shall be responsible for submitting such reports to the MOB. d. Funding . An initial fund for the FLGF has been released by the Ministry of the Budget for the participation of the financial institutions. The FIDC shall coordinate with the Central Bank for the allocation of these funds in the identified program areas. The Central Bank shall administer the funds and shall take charge of their releases to the financial institutions in the program areas. The FIDC shall request the Ministry of the Budget for subsequent releases of funds as may be required by the program. The Central Bank shall release the funds to the participating financial institution in the program areas in the form of special time deposits which shall be made available for loans to interested and qualified fishermen based on the loan fund requirements of the identified fishery projects. e. Eligible projects, loan amounts and terms Maximum Kind of Project * Maximum Tonnage/ Term Area Municipal capture fisheries 5 years (1) Boat 30' - 40' (2) Engine gasoline 10 - 16HP diesel 10 - 16HP kerosene 10HP (3) Gears (a) Gill net drift gill net button set gill net encircling gill net (b) Tuna handline 10 sets (c) Button set longline (d) Hook and line (e) Payao bamboos (gear accessory) (f) Fish corral Fish cage (Tilapia) 1 year 180 sq. m. Oyster farm 1 year 1/2 hectare/ fishermen Tahong farm 1 year 1/2 hectare/ fishermen Fry collection 1 year No area involved Seaweeds 1 year 2,500 sq. m. Freshwater fishpond 1 year 2 hectares (1) Tilapia (2) Carp Fish corral 3 years 1 unit Small-scale processing activities such as : Drying Smoking Canning Maximum Amount Total Amount Kind of Project * of Loan Per of Loan Hectare/Unit ** Municipal capture fisheries (1) Boat 3,500 - 10,000 (2) Engine gasoline 4,000 - 5,000 diesel 7,000 - 15,000 kerosene 7,000 (3) Gears (a) Gill net drift gill net 4,500 - 14,000 botton set gill net 1,600 - 5,000 encircling gill net 3,000 - 12,000 (b) Tuna handline 1,200 - 1,500 (c) Botton set longline 1,500 - 5,000 (d) Hook and line 500 - 1,000 (e) Payao bamboos (gear accessory) 5,000 - 10,000 (f) Fish corral 5,000 - 7,500 Fish cage (Tilapia) 4,500/90 sq. m. P9,000 Oyster farm 6,000/2,500 sq. m 12,000 Tahong farm 4,500/2,500 sq. m. 9,000 Fry collection 1,000/borrower 1,000/borrower Seaweeds 6,000 6,000 Freshwater fishpond (1) Tilapia 7,000/ha. 14,000 (2) Carp 6,000/ha. 12,000 Fish corral 17,000/fisherman 17,000 Small-scale processing activities such as : Drying 5,000 - 10,000 Smoking 5,000 - 15,000 Canning 20,000 * Other projects to be financed would require approval of the Program Management Committee. ** Subject to change due to price increases. Each fisherman is entitled to borrow a maximum amount of P15,000. Fishermen who wish to group themselves to avail of a group loan may borrow an amount equivalent to the sum of the maximum amount each fisherman-member is entitled to borrow: Provided , That both categories of borrowers engaged in fishery activities outlined in Item e of the implementing guidelines: Provided, further , That proposed projects for financing not included in the list of eligible projects will require the approval of the PMC. cdtech f. Eligible borrowers and qualifications (1) Qualifications . A fisherman and any person who intends to engage in any fishery activity outlined in the implementing guidelines, whether member or non-member of fishermen's cooperatives or samahang nayon may avail of loans under the Biyayang Dagat Credit Program: Provided , That. (a) he is a bonafide fisherman/resident of the locality as certified by the local barangay captain and/or officials of active and registered fishermen's associations/samahang nayon; (b) he has no past due accounts on any fishery loan with any financial institutions; (c) he has been oriented towards the mechanics of the fishery project and is willing to abide by the technology therein under the close supervision of the BFAR extension worker in the area; (d) he has been assisted and endorsed by the BFAR extension worker as to his capacity and capability to participate in this credit program. (2) Categories of borrowers (a) individual who shall assume sole responsibility of the loan; (b) group of individuals, samahang nayon /FAs who shall have joint liability of the loan. To promote the cooperative system of operation, preference will be given to group borrowers. g. Participation of gear and equipment suppliers . In the absence of accreditation guidelines, submission of at least three (3) pro forma invoices accomplished by fishing suppliers-dealers of fishing gear and equipment would be required. The borrower has the option to select one (1) from the three (3) submitted invoices, the amount of which may not necessarily be the lowest quoted price. Formal accreditation would however be instituted upon the formulation of the accreditation guidelines. h. Credit procedures (1) Preparatory activities . As part of the preparatory activities, extension workers shall orient/brief interested borrowers on the program. They shall also identify viable projects in the area and assist in the preparation of feasibility studies. (2) Application . Interested loan borrowers, whether individuals or groups of individuals, must file their applications with the participating banks. The application of both types of borrowers must be endorsed by the BFAR extension worker and the barrio captain or authorized official of the samahang nayon /fishermen's association before submission to the participating bank for appropriate action. In the case of a group loan, the members will co-sign for one another in the loan application. (3) Loan Processing . Applications that have been endorsed to the rural banks or any financial institution, e.g., PNB and DBP shall be subject to credit investigation. Upon the approval of the application the rural bank shall apply for a STD with the Central Bank which shall approve and release the STD to the rural bank for release to loan recipients. In the case of other financial institutions, e . g ., PNB and DBP, the recommended applications shall be processed in their respective branches for approval. (4) Loan releases . Each fishery project shall have its respective loan amount which has been predetermined by special technological and economic studies. The proceeds of the loan shall be released in one (1) lump sum and immediately credited in a Special Savings Deposit (SSD) in the name of the individual borrower or in the case of a group of individuals, in the name of the selected representative of the group. The fishermen will be charged an interest of ten per cent (10%) per annum of the total amount of the loan plus service charge of two per cent (2%) per annum. Withdrawal from the SSD shall be staggered and in accordance with the approved budget per fishery unit. Upon the approval of the fishery loan, the bank shall issue serial-numbered chits (which are actually purchase orders for specific fishing gears and other paraphernalia) to the fishermen-borrowers. Different chits for different purposes can be obtained by the fishermen borrowers depending on the required inputs specified in the loan. The borrower shall then be required to sign the chattel mortgage. Upon receiving the chits, the fishermen shall secure the signature of the authorized bank representative and the BFAR officer on the chits. The seal of the bank shall then be stamped on the chits. The fishermen then proceed to prepare withdrawal slips against their SSDs for the corresponding amount. The fishermen take the chits to the selected dealers/suppliers in the area and obtain the inputs stated on the chits. They then sign the delivery portion of the chit and the dealer's invoice or delivery receipt. After delivery, they shall report to the bank for the necessary inspection and completion of the covering descriptive report required for the chattel mortgage document. The fishermen must obtain the inputs specified by the chit from the stated equipment and gear supplier/dealer within a one-week period. Expired chits may however be revalidated upon the approval of the extension worker of the bank. (5) Security of loans . Loans granted under the program shall be secured by chattel mortgage of fishing boat and paraphernalia acquired from the loan and/or the option of the financial institutions to require a co-maker or guarantor of the loan. Financial institutions, however, who will be requiring real estate collateral shall not be allowed to make use of the FLGF of the program but instead shall be advised to use their own funds. (6) Repayment conditions/procedures (a) Payment of dealers . The dealers/suppliers shall gather and compile all chits submitted to their enterprise during the week by fishermen and together with the supporting invoices, and/or delivery receipt, submit these to the participating bank. The bank shall then extend payment by withdrawing the amounts incurred by the chits from the SSDs of the fishermen-borrowers. The repayment process shall be undertaken on a weekly basis, the actual day being previously agreed upon by the bank and the suppliers/dealers. The supporting paid chits, invoices and/or delivery receipts shall be kept by the bank and filed for audit verification and for incorporation into the information system managed by the FIDC. (b) Repayment of the loans . The following are some suggested viable collection schemes which may be adopted by the banks depending on conditions prevailing in their area: (i) Use of an authorized collector for a group loan . An authorized collector shall be chosen among a group of borrowers who are members of a cooperative/ samahang nayon . The leader of the group shall follow up the repayment of his co-workers and hand over the amount to the collector. An agreed amount to be collected for a one-week period shall be predetermined. In order to enforce repayments, the cooperative shall set-up certain provisions and incentives such as fines and awards. Fines may be used as sources of funds for municipal projects or to cover part of loans of delinquent borrowers. The collection shall then be remitted to the financial institution by the cooperative, in case the loans are still outstanding. (ii) Use of bank credit collector . This involves the employment on a regular basis of additional bank collector to cover the expected number of fishermen-borrowers. The financial institutions' collecting agent will directly collect payment from fishermen-borrowers with the help of the extension worker. (iii) Use of barrio captain and/or extension worker . As the situation requires, the barangay captain and/or extension worker may act as collection coordinator to facilitate collection by gathering and assuring the presence of fishermen-borrowers on a designated place and time of visit of the credit collector. (iv) Use of fish broker/buyer . This scheme calls for the accreditation of selected fish brokers with whom the fishermen may want to transact business and who will deduct a certain percentage of the fishermen's daily catch to be deposited to the bank as repayment. The broker is expected to present a bond to the bank. (c) Organization of a fishermen's marketing cooperative . Fishermen borrowers will form an informal or formal aggrupation among themselves to sell their catch collectively which will evolve into a marketing cooperative. From the total sales, a certain percentage will be set aside as deposit to serve as repayment for the loan. (7) Schedule of payment . Short-term loans shall be repaid within a period of one (1) year, while medium-term loans shall be repaid within five (5) years in equal quarterly amortizations. (8) Penalty for overdue loans . Overdue loans will be charged a penalty interest of two per cent (2%) per, annum in addition to the regular interest. SUBSECTION 3366.5 Marketing of fishermen's catch . Although the program is mainly geared towards fish production, its success is also largely dependent on fish marketing which will determine repayment of loans. Hence, a fish marketing and infrastructure scheme shall be developed to support fish production activities. Since the program's area of operation is nationwide in scope, several general marketing scheme shall be developed from which the fishermen beneficiaries may select whichever alternative is applicable in their area depending on prevailing market conditions. Accordingly, the alternative scheme chosen shall be modified to suit the particular situation as verified by a detailed marketing study. These fish marketing activities shall be backed-up with foreshore infrastructures such as fishing ports both commercial and municipal. Ice plants and cold storages shall also be constructed in strategic points to accelerate the flow of fish from production areas to main consumer centers. Fish transport facilities as well as credit lines for fish trading purposes shall also be provided in areas where such are considered necessary and found to be economically feasible. SUBSECTION 3366.6 Role of RB technicians a. Encourage the fishermen to participate in the program; b. Provide the financial institution with a list of qualified fishermen-cooperators who are willing to participate in the program; c. Recommend to financial institution eligible fishermen and members of organized fishermen's cooperative who wish to avail of loans under the supervised credit program; d. Assist the fishermen in accomplishing the loan forms for approval of financial institution; e. Coordinate with financial institution in the orderly scheduling of loan approval and release; f. Check the status of loan collection in his area of supervision; g. Assure that loans under this program are channeled to the recommended projects as outlined in Subsec. 3366.4e of the implementing guidelines; h. Submit monthly itinerary and schedule of activities for financial institution's review and approval; the financial institution should be informed in advance of any deviation from the itinerary; i. Conduct regular visits to fishermen and be on the alert for any emergency occurrences in the implementation of the project; j. Assist the BFAR extension worker in reminding the fishermen in the payment of their obligations with the financial institution; k. Submit evaluation reports on projects financed. SUBSECTION 3366.7 Role of BFAR extension workers a. Educate fishermen on credit consciousness; b. Organize the eligible fishermen into cooperatives or samahang nayons where feasible; c. Assist individual fishermen and samahang nayons /cooperatives in identifying feasible projects; d. Provide technical assistance through dissemination of technical information, on site demonstration of appropriate technology to be promoted and introduction of new technology that can be adopted; e. Work with bank technicians in projects development, screening of fishermen-borrowers, preparation of loan documentation; f. Supervise utilization of credit by fishermen-borrowers and cooperative-borrowers; g. Supervise activities of fishermen-borrowers and cooperative-borrowers; h. Encourage borrowers to repay the loans. SECTION 3367. The Cottage Industry Guarantee and Loan Fund (CIGLF) . The following rules and regulations will govern the guarantee and credit program to be carried out through the lending facilities of the Philippine National Bank (PNB), the Development Bank of the Philippines (DBP), the rural banks, stock savings and loan associations, and private development banks under the supervision of the Central Bank of the Philippines (CBP) for the financing of fixed assets and working capital of cottage industries duly registered/revalidated by the National Cottage Industry Development Authority (NACIDA). SUBSECTION 3367.1 Definition of terms . Unless otherwise specified, the following terms shall have the following meaning whenever used in this section: a. Borrowers : NACIDA-registered/revalidated members availing of the loan. b. Cottage Industry The term Cottage Industry shall mean a modest economic activity for profit using primarily indigenous raw materials in the production of various articles that generally highlight craftsmanship, artistic skills and tradition of a country: Provided, however , That all cottage industries shall be owned and operated by Filipino citizens, or by corporations, partnerships or cooperatives at least seventy-five percent (75%) of the capital investment of which shall be owned by Filipino citizens and whose members of the board of directors shall be Filipino citizens: Provided, further , That the total assets of which shall not exceed One Hundred Thousand Pesos (P100,000.00) at the time of registration with the NACIDA. The NACIDA board, however, shall be empowered to redefine cottage industries as needed with presidential approval. c. Financing Institutions DBP, PNB rural banks, private development banks and stock savings and loan associations qualified to participate in this credit program. d. Fund . The Cottage Industry Guarantee and Loan Fund. e. Guarantee Undertaking of the Fund to pay eighty-five percent (85%) of the unsecured portion of the loan covered by the guarantee. f. Guarantor The Philippine Government as represented by the Central Bank of the Philippines as administrator of the Fund. g. Loan The loan extended by a financing institution to a borrower under the Cottage Industry loan program under Executive Order 622. h. Losses Amount of the loan covered by the guarantee which, upon exhaustion of all means of collection by the financing institution concerned, remains uncollected. i. NACIDA The National Cottage Industry Development Authority. j. STD Special time deposit made by CB with rural banks, private development banks and stock savings and loan associations as seed fund for extending loans to cottage industries. SUBSECTION 3367.2 Participating financing institutions ; eligibility requirements . Initially, the DBP and the PNB shall be eligible to participate in the financing of cottage industries. Subsequently, such rural banks, private development banks and stock savings and loan associations as may be determined by the Central Bank, through its Department or Rural Banks and Savings and Loan Associations, as qualified to participate in this program shall be eligible to participate therein. SUBSECTION 3367.3 Loans extended by participating financing institutions to borrowers a. Purpose of loan . Fixed assets and working capital loans will be made available to viable cottage industries where the potential market and existing markets, domestic and foreign, are already established for any of the following industries: (1) Fibercraft such as but not exclusive to, making of abaca ropes and twines, buntal fiber extracting and buri leaf braiding; (2) Woodcraft such as but not exclusive to making of wooden shoes, wooden fans, walking sticks (canes) and woodcarving; (3) Hat weaving such as, but not exclusive to, calacio, buri, rafia, korogomoy, buntal and bamboo hats, salakot and helmet; (4) Mat weaving such as but not exclusive to, doormats, sleeping mats made of buri, pandans, balilan, sakutan, and other similar materials; (5) Metalcraft such as, but not exclusive to, making of jewelry, knives, bolos, scissors, razors, silverwares and brassworks; (6) Ceramics such as, but not exclusive to, making of potteries, hollow blocks, tiles, firebricks clay stoves and other ceramic products; (7) Shellcraft such as, but not exclusive to, making of seashell buttons and coconut shell products; (8) Bamboo and rattancraft such as, but not exclusive to, making of hammocks, basketry, making of sawali and other bamboo and rattan furniture and articles; (9) Small agricultural hand tools such as, but not exclusive to, making of plow points; (10) Toycraft such as but not exclusive to, making of dolls and toys; (11) Embroidery ; (12) Needlecraft (including knitting and crocheting); (13) Loom weaving , such as, but not exclusive to, making of fishnets, making of mosquito nets, weaving of Ilocano cloth, Igorot weaving, pia (barong Pilipino), jusi and sinamay; (14) Machine parts manufacture ; (15) Home cigar-making ; (16) Food preservation and canning including the making of vinegar, wine, lambanog, pili or peanuts confectionery or coconut candy (bucayo); (17) Other related crafts such as but not exclusive to, making of brooms, pandan, nito and buri bags, korogomoy bags, bead making, guitar and other manual instruments; (18) Leather products (19) Rubber products ; (20) Manufacturing industries done in the home with the aid of electrical gadgets and/or manual dexterity. b. Eligibility of borrowers . The applicant must be duly registered and/or revalidated with the NACIDA and provided that he has no past-due obligations with any government or private financing institutions or with any NACIDA loan program. c. Security . Loans may be secured by real estate mortgage and/or chattel mortgage (on movable properties) like machinery and equipment and other movable properties acceptable to the participating banks. Loans may be secured by sales contract, irrevocable letters of credit (domestic/foreign), confirmed purchase orders and/or signatures of co-maker(s) subject to existing policies and rules and regulations of the participating financial institutions. d. Loan limit . The maximum loan that may be granted to a borrower shall be governed by the provisions of Section 23 of the General Banking Act, as amended, but in no case shall such exceed one hundred thousand pesos (P100,000.00) e. Term of loans . Term of loans shall be as follows: Working capital loans maximum of three (3) years Fixed asset loans maximum of ten (10) years f. Interest rate . The loan shall bear an interest rate in accordance with existing Central Bank policy on maximum lending rates. g. Penalty for non-payment . A penalty rate not exceeding five percent (5%) per annum shall accrue over and above the interest rate specified in Item "f" hereof on any past-due amount. h. Loan application and processing (1) Loan applications shall be in the prescribed form and supported by the documentary requirements of the lending institutions concerned. (2) The financing institutions shall process, approve/disapprove the loan applications in twenty-one (21) days from submission of complete loan application. i. Loans in litigation . In case of a suit for collection of the unpaid balance of a loan, there shall be collected from the borrower, in addition to the interest and penalty on the loan, an attorney's fee equivalent to ten percent (10%) of the unpaid balance, and cost of suit. SUBSECTION 3367.4 Cottage industry guarantee operations a. Loan eligible for guarantee coverage . All loans to qualified borrowers shall be eligible for guarantee coverage, except: (1) Loans which are fully secured by real estate and/or chattel mortgage. (2) Secured portions of partially secured loans. b. Extent of liability of the fund . The guarantee undertaking of the fund shall extend to an amount up to eighty-five percent (85%) of the loss of the guaranteed portion of the loan, with the remaining fifteen percent (15%) of such loss to be borne by the financing institution. c. Requirements for guarantee coverage (1) DBP and PNB shall enter into a guarantee agreement with MI-NACIDA, owner of the fund, preparatory to the extension of loan accommodations to cottage industries qualified herein. An application for guarantee of loan already approved shall be submitted to CB-DRBSLA, copy furnished MI-NACIDA every 15th and end of the month by way of a list of borrowers indicating addresses, branch location, loan amounts, unsecured portion of the loan for guarantee, date approved, purpose of the loan, and loan terms. (2) A private banking institution desiring to avail itself of the guarantee coverage shall submit to the Central Bank for consideration an application in the prescribed form together with the following: (a) List of borrowers in the prescribed form which must be submitted to the CB-DRBSLA within fifteen (15) days from the date of the release of such loans by the private banking institution; (b) Guarantee agreement for those borrowers duly signed by the authorized officer of the private banking institution; (c) List of borrowers which may be submitted directly to the CB-DRBSLA either by personal delivery or by mail. The date of submission of the list shall be determined by the date of acknowledgment by any authorized representative of the CB-DRBSLA, if the list is submitted by personal delivery or by the date of mailing postmarked on the envelope or the registry receipt, if the list is sent by mail. d. Guarantee agreement . Upon approval of the applications for guarantee, and the counter signature of the guarantee agreement by the CB-DRBSLA, the financing institution shall pay the corresponding guarantee fee within ten (10) days therefrom. aisadc e. Guarantee fee . The guarantee fee shall be two percent (2%) per annum of the amount representing the guaranteed portion of the loans. Failure to pay the guarantee fee within the period specified under Item "d" hereof shall constitute a ground for cancellation of the guarantee coverage and/or non-payment of any claim against the guarantee. This guarantee fee shall be passed on to the borrower. f. Commitments of the financial institutions by reason of guarantee . Upon approval by the CB-DRBSLA of the application for guarantee, the financing institution shall commit itself to: (1) Continue to exert the same diligent efforts in collecting the loan and exhaust all avenues open to it as it might have exercised and availed of, if no guarantee has been furnished by the fund; (2) Adopt, after consultation with the CB-DRBSLA such measures as may be recommended by CB-DRBSLA to facilitate collection of the guaranteed portion of the loan; (3) Apply prior payments to the unsecured portion of the loan; (4) Keep the CB-DRBSLA posted on the status of past-due loans and the portion under guarantee thereof every end of the quarter. g. Filing of claims for guarantee payment (1) Claims for guarantee shall apply to losses pertaining to the unsecured portion of the outstanding loan principal; (2) Such claims shall be filed using the prescribed form with CB-DRBSLA. h. Payment of claims . The fund shall pay the claim to the extent allowed under Item "b" hereof, except in the following cases: (1) Where a claim for guarantee payment is disapproved due to causes enumerated in Item "i" hereof; (2) Where the proceeds of the foreclosed and sold mortgaged property are sufficient to liquidate the loan. In the case of private banking institutions before effecting such payment, the banking institution shall execute in favor of the CB-DRBSLA a deed authorizing the subrogation of the CB-DRBSLA to the right of the private banking institution to collect from the borrower the unpaid portion of the loan: Provided , That such collections may be undertaken by the CB-DRBSLA through the private banking institution: and Provided, further , That the proceeds of claims in connection with rediscounted loans shall be remitted to the CB-DLC. Any amount recovered or collected from the borrower subsequent to the guarantee payments of the unpaid portion of the loan on the basis of eighty-five percent (85%) to the Fund and fifteen percent (15%) to the private banking institution. In case the private banking institution undertakes the collection, the collected amount due the Fund shall, without necessity of demand. be remitted to the CB-DRBSLA within seven (7) days from date of collection, otherwise the private banking institution shall pay an amount equivalent to one percent (1%) per month on the amount due as liquidated damages as well as interest thereon at the rate of one percent (1%) per month from the date of collection up to the date of remittance. In addition, such violation shall constitute a ground for disapproval of future applications for guarantee coverage. i. Reports on recoveries/collections . Within thirty (30) days after every calendar quarter, each private banking institution shall submit to the CB-DRBSLA a status report showing, among others, the names and addresses of borrowers, original amounts of loans granted, outstanding balances of the loans, amount and dates of payment of claims by the fund, and collection thereon. No unpaid loans which are the subject of guarantee payment by the fund shall be written off without the prior approval of the CB. j. Grounds for non-extension, cancellation or extinguishment of guarantee coverage . The following shall constitute grounds for non-extension, cancellation or extinguishment of guarantee coverage and/or non-payment of guarantee claims: (1) Where the financing institution has allowed the borrower to deviate from the approved projects and/or divert the proceeds of his loan to purposes other than those for which it was granted; (2) Where there was collusion between the borrower and the financing institution in the extension of credit to the prejudice of the Fund. Collusion exists when the borrower and the officials and/or employees of the financing institution enter into an agreement for fraudulent purposes or whenever said parties conspire to defraud the Fund; (3) Where the financing institution made any material false statement, misrepresentation, omission, or concealment in the application, reports submitted to and/or in the claim filed with the CB-DRBSLA; and (4) Where the financing institution violated any of the provisions of these rules and regulations: Provided , That the enumeration of the above shall not preclude the CB-DRBSLA from cancelling or extinguishing its guarantee coverage for other causes or reasons evidencing fraud, bad faith or other machinations. SUBSECTION 3367.5 Special time deposit (STD) a. Special time deposit application . The Central Bank shall extend special time deposits with interest rate of three percent (3%) per annum to private banking institutions to finance one hundred percent (100%) of the loans to be extended by them to applicants in accordance with this section. At any time, a private banking institution may submit to CB-DRBSLA its application for special time deposit supported by the following documents: (1) The list of borrowers with the corresponding projects to be financed and the amount of approved loans; (2) Corresponding certificates of registration/revalidation with NACIDA; (3) Duly signed certificate of special time deposit issued by the private banking institution which will be filled up with the amount of the STD that will be approved by CB-DRBSLA; (4) Latest statement of financial condition and statement of income and expenses; (5) Reports of required and available reserves against deposit liabilities for the past four (4) weeks immediately preceding the date of application. b. Terms of STD . The STD shall be issued for a term of sixty (60) days. Within thirty (30) days from the receipt of STD, the participating private financing institution must either release the same to the end-user or refund the unreleased portion to the CB-DRBSLA if not released after thirty (30) days from receipt. Failure on the part of the private financing institution to refund the unreleased portion of the STD shall subject the said private financing institution to a penalty of fourteen percent (14%) per annum over and above the three percent (3%) p.a. interest on the STD. SUBSECTION 3367.6 Rediscounting a. Rediscounting application (1) Loans granted under this program shall be rediscounted with the CB-DLC. (2) The application for rediscounting shall be supported by the following: (a) Duly accomplished rediscount schedule; (b) Borrowers' promissory notes duly endorsed by the financing institution together with the corresponding certificate of registration and/or revalidation as of January 1, 1981 with the NACIDA and any or all collateral documents securing said loans; (c) The private banking institution advice to CB-DLC to remit rediscounting proceeds to the CB-DRBSLA to be applied in payment of the outstanding STD of the applicant financing institution; (d) The private financing institution's signed promissory note in favor of the Central Bank; (e) Resolution of the board of directors authorizing the private financing institution to negotiate for the loan with the Central Bank and designating the officers authorized to endorse the promissory notes and sign all papers pertaining to the loan; (f) Latest statement of financial condition and statement of income and expenses; (g) Latest report on required and available reserves together with a certification that the financing institution has not incurred net reserve deficiencies for four (4) consecutive weeks immediately preceding the date of its application; and (h) Report on average monthly savings and time deposits during the past four (4) months immediately preceding the date of its application. b. Rate and term of rediscounting . The CB-DLC shall rediscount eligible loans granted under this program in accordance with CB rediscounting policy on supervised credit. c. Repayment of rediscounting obligations Repayment of rediscounting obligations must be in accordance with the existing rules and regulations of the Central Bank. SECTION 3368. CB-MEC Supervised Experience Education Program . The rules and regulations governing the operations of the Central Bank-Ministry of Education and Culture Loan Fund (CB-MEC LF) under the CB-MEC Supervised Experience Education Program, as approved by the Monetary Board, follow: SUBSECTION 3368.1 Objectives . The memorandum of agreement to implement the Supervised Experience Education Program (SEEP) aims to promote socio-economic development in the rural and other urban areas served by this program. Specifically, the program envisions to: a. Provide a supervised experience based classroom instruction in the school in order to equip the student with the knowledge, manipulative and managerial skills of operating profitable enterprise; b. Generate production, profit and savings in a bank within three (3) curricular years through an economic scale project(s), train and encourage the students on the proper and wise use of institutional credit and its facilities; c. Develop an appreciation for the importance of honest work, acceptable personal and work habits and the ability to work with others; and d. Produce a student who will not only be highly trainable and can be gainfully employed but also be a knowledgeable and responsible citizen. SUBSECTION 3368.2 Definition of terms . As used in the implementing rules and regulations, the following terms/phrases are defined as follows: a. The Supervised Experience Education Program (SEEP) refers to a series of practical activities in which the student applies the knowledge, manipulative and managerial skills, and effective behavior learned in the organized vocational instructional program. b. Manipulative skills refer to all skills needed in the operation of the enterprise chosen by the student such as reading skills on labels and instructions; writing skills for advices and keeping records; calculating skills for yield and keeping accounts; and technical skills in the specific enterprise. c. Managerial skills refer to the skills in planning, organizing, implementing, and evaluating the use of new and currently available resources to achieve the established goals of the student's enterprise. d. Special Time Deposits (STDS) refer to special funds deposited in rural banks to finance agricultural production and commodity loans of eligible borrowers. e. Rediscount availments refer to short-term obligations of banks with the Central Bank of the Philippines. f. Supervised credit refers to a system of lending wherein the farmer-borrower agrees in writing that he will apply proven farm practices necessary to conserve the land, improve its fertility and increase its production, and abide by the approved farm plan and budget prepared by an accredited supervised credit technician. g. Seed fund (money) refers to the amount of money deposited by MEC with and administered by the Central Bank. h. Write-off refers to the process of condoning the past due loans of student-borrowers caused by force majeure after exhausting all possible ways of recovering investment chargeable against the seed fund i. Special Savings Deposit (SSD) represents loans granted by a rural bank to a farmer-borrower under the special financing program of the Government for agricultural production released in one lump sum and credited to the farmer-borrowers account. Withdrawal from SSDs is allowed on a staggered basis. j. Certificate of credibility refers to a certification issued by the participating rural bank concurred in by the school to the student-borrower in recognition of a good credit standing. k. Accredited schools refer to those schools which are qualified to participate in the supervised experience education program as approved by the Ministry of Education and Culture. l. National Management Committee refers to a body created to provide an overall direction, recommend policies and guidelines in the execution and implementation of the program. m. Regional Management Committee refers to a body created at the regional level to oversee, supervise and monitor the activities carried out by the participating institutions in line with the policies promulgated by the National Management Committee. n. Subsistence allowance refers to the amount of money specifically allocated for the daily expenses of the borrower while undertaking the project. o. Specific implementing plan of the schools refers to the summarized budgetary loan requirements accomplished by each school to be submitted to the rural bank before each school semester. p. Marketing agreement refers to an arrangement entered into by the trader and the student to buy and sell the products with the assistance of the schools and the rural banks. q. Technical assistance refers to the provision of software, such as training, work-shops, conferences, seminars, publication of teaching materials, travels and others that may contribute to the effective implementation of the program. r. Administration of the fund refers to the usual expenditures incurred in managing the funds such as honoraria, travel documents papers, communications and other operational expenses. SUBSECTION 3368.3 Priority protects . In order to provide the student farmers an intensive learning process and better opportunities and to enable them to contribute towards the attainment of the objectives of the government on food production, the following projects will be given funding: a. Rice production; b. Corn and feed grains production; c. Poultry production; d. Swine production breeding and fattening; e. Field crops production in addition to Items "a" and "b" above; f. Fish production. g. Vegetable production; h. Cattle fattening; i. Duck raising; j. Goat fattening; k. Rabbit production; l. Sugarcane production; m. Mushroom culture; n. Dairying (solely for milk production); o. Cotton production; p. Quail raising; q. Production of any agricultural food crops and other non-agricultural-based projects, i.e. handicraft, cottage etc. preferred by the students and shown to be economically feasible in the area. The funding of any of the above mentioned projects shall be based on the profitability of the enterprise in the community as jointly determined by the rural bank and the school. SUBSECTION 3368.4 General policies a. The Ministry of Education and Culture (MEC) provides the Central Bank of the Philippines, Department of Rural Banks and Savings and Loan Associations (CB-DRBSLA) with seed fund which will be released to and used for re-lending by rural banks to qualified participants under the supervised experience education program. cdta b. CB-DRBSLA shall release seed fund to participating rural banks in the form of Special Time Deposits (STDs). This will be granted for a maximum period of 60-90 days subject to recall anytime if the RB does not utilize the amount in accordance with the terms and conditions stipulated herein. c. Central Bank of the Philippines, Department of Loans and Credit (CB-DLC) shall rediscount at one hundred percent (100%) the outstanding balance of all eligible papers under the program at a preferential rate given to loans granted under supervised credit. All STDs granted under the program shall be kept in a separate account by the rural banks and shall not be utilized other than for the purposes stated herein. All loans except those guaranteed by the Land Bank extended by the rural banks from the STDs shall be automatically guaranteed by the fund up to the extent of eighty-five percent (85%) of the losses due to force majeure or fortuitous events such as typhoons, floods, rat infestations, drought, epidemics, etc. and other causes beyond the control of the borrowers. In case of force majeure or fortuitous event, certification of the Teacher Credit Technician (TCT) and the school administrator on the extent of damage incurred shall be made to the rural bank subject to the verification of the agricultural credit supervisor assigned in the area. The rural banks shall be allowed to restructure their loans granted under the program in case of force majeure or fortuitous events subject to the provision of Subsec. 3368.5f. Student borrowers, together with the whole student population of the school, shall be encouraged by the teachers to save and deposit with rural banks in line with the "Savings Mobilization Program" of the government. Participants under the supervised experience education program shall be limited to rural banks selected by the CB-DRBSLA and the schools chosen, by the Ministry of Education and Culture (MEC). Any participating rural bank selected to participate in the program may be substituted in case of non-cooperation and lack of interest, through the recommendation of the participating school subject to the approval of the CB-DRBSLA. MEC, through its regional offices shall require each participating school to designate teachers who have been trained on the supervised credit program to act as teachers credit technicians under the program. CB-DRBSLA shall assign a CB-credit supervisor to coordinate with the rural banks and the schools for an effective program implementation. Teacher credit technicians involved under the CB-MEC supervised experience education program shall be automatically entitled to an incentive allowance and a bonus as follows: (1) For loans P750 and above per student farmer-borrower and/or farming unit: (a) Incentive allowance of P0.50 per borrower per month during the production season. (b) Bonus of P6.00 for every loan paid in full on or before the date of maturity. (2) For loans below P750 per student farmer-borrower and/or farming unit: (a) Incentive allowance of P0.25 per borrower per month during the production season. (b) Bonus of P3.00 for every loan paid in full on or before the date of maturity. (3) The foregoing incentive allowances and bonus arrangements should at all times be aligned with the incentive allowances and bonus arrangements of the NFAC program. However, the following provisions shall be applied: (a) For loans P750 and above per student borrower/farming unit, there shall be a P1.00 deduction from the P6.00 bonus for every month the loan is past due. In no case, however, shall the production technician receive less than P3.00 on the fourth month that the loan is past due or thereafter when the loan is fully repaid. (b) For loans below P750 per student borrower/farming unit, there shall be a P0.50 deduction from the P3.00 bonus for every month the loan is past due. In no case, however, shall the production technician receive less than P1.50 on the fourth month that the loan is past due or thereafter when the loan is fully repaid. The above provisions, (3)(a) & (3)(b), shall also cover restructured loans. d. Management committees at the national and regional level shall be organized in accordance with the memorandum of agreement with the following duties and responsibilities: (1) National Management Committee . The membership shall be composed of representatives from MEC, CBP, LBP and other members that the committee may recommend to the MEC. (a) The committee shall provide an over-all direction in the implementation of the program. (b) It shall determine the composition of the membership of the regional management committee and recommend to the regional directors. (c) Plan the actions to facilitate achievement of the objectives of the program. (d) Recommend policies and guidelines in the execution of the program. (e) Make sure that the policies and guidelines so promulgated are observed and followed by all concerned. (f) Attend to problems and constraints presented by those in the field for solution/action. (g) Conduct a regular review of the over-all project implementation to effect improved project implementation. The management committee shall be authorized to hire the services of a consultant within existing rules and regulations. (2) Regional Management Committee This committee shall be headed by the Regional Director who shall be responsible in, the supervision and monitoring of the supervised experience education program at the regional level. The committee shall see to it that policies promulgated by the management committee are being carried-out by the participating institutions. It shall perform other functions deemed necessary for an effective implementation of the program in the region. The committee shall be composed of three members; the regional director as chairman, a Central Bank representative and a representative from the regional Confederation of rural bankers to be recommended by the RBAP President. (a) Subsistence allowance . In addition to the amount of loan to be released to the student-borrowers, a certain percentage based on the loan applied for to be determined by the National Management Committee may be allocated as subsistence allowance of the borrower: Provided, however , That availment of such allowance shall be granted only once either at the time of the first loan application or in time when he is in dire need subject to the recommendation of his teacher credit technician. (b) Accredited schools . Only duly accredited schools by the MEC as listed in App. 19 shall be eligible to participate in the program. A certificate of credibility shall be issued to student-borrower by the participating rural bank concurred in by the school in recognition of a good credit standing on or before graduation time. SUBSECTION 3368.5 Lending operations a. Loan priorities . Student borrowers, in-or off-campus, duly recommended by the teacher credit technician must be extended loans according to their capability to under-take the project and in line with the following priorities: (1) First year and/or second year students, as the case may be, shall undertake only one enterprise (Mono-project) as they are still starting to learn the process; (2) Third year students may be allowed to undertake two enterprises if they so desire; and (3) Fourth year and the second year post-secondary students may be allowed to undertake an integrated agricultural enterprises (Multi-project) if they so desire. b. Security of the loan (1) Loans extended under the program shall be secured by chattel mortgage of standing crops, livestock, poultry, fish and/or other projects financed by their parents and/or any person acceptable to the rural banks as co-borrowers and the members of the farming units, selda and/or damayan as co-makers. (2) All loans granted by the rural banks from the STD shall be automatically guaranteed by the fund except those covered by the Land Bank guarantee in accordance with Item "c" of this subsection up to the extent of eighty-five percent (85%) of the losses due to force majeure or fortuitous events such as typhoons, floods, rat infestations, epidemic, drought, etc. and other causes beyond the control of the borrowers upon certification of the teacher credit technicians and the school administrator subject to the verification of the CB-credit supervisor assigned in the area. c. Loans eligible for guarantee ; guarantee coverage . All loans granted by the rural banks not covered by Land Bank guarantee fund to student borrowers shall be eligible for guarantee coverage and chargeable against the fund: Provided, however , That only fifty percent (50%) of the fund from the source (LF-MEC) shall be allotted to support the guarantee coverage in accordance with Item b(2) hereof and Subsec. 3368.4c; Provided, further , That application to avail of the guarantee shall follow the Central Bank's ruling and policy on the matter. The basic Central Bank policy regarding guarantee shall be adhered to, i.e., the lender (RB) is the one guaranteed against losses. In case of force majeure or fortuitous event, the participating rural bank shall first reschedule (restructure) payment of the loans of adversely affected student borrowers under the supervised experience education program. A new loan shall be granted immediately thereafter to enable the student borrowers to produce so they can pay both the new and restructured loans. Writing off the loan shall be resorted to only as a last resort and after the rural bank concerned shall have exhausted all means to collect. d. Implementing plan and budget . The student-borrower, with the assistance of the teacher credit technician, will prepare the farm plan and budget of the projects to be financed. The teacher credit technician will submit the specific implementing plan of the school indicating the list of borrowers to the rural bank; the projects to be financed, area in hectares, or number of heads; loan amount and date needed and other project information. The teacher credit technician will submit the accomplished implementing plans and budget, together with the marketing plan of the product financed, of prospective student farmer-borrowers to the rural bank for approval. e. Loan application . Student borrowers should apply for a loan. The student borrowers, with the assistance of the TCT shall prepare the loan forms for submission to the rural bank for appropriate action. To facilitate loan approval and to promote group action the TCT may organized the student borrowers into unit/ selda /or damayan , cooperatives or student corporations. The members will co-sign for one another in the promissory note and loan application. f. Loan budget and releases . The loan budget will depend on the credit requirements of the projects to be financed under the CB-MEC-supervised experience education program. Loan releases will be synchronized with the credit needs of the projects based on the farm plan and budget. Loan proceeds shall be released in lump sum and to be automatically credited to the Special Savings Deposit (SSD) account in the name of the student borrower. The SSD shall earn interest in accordance with Central Bank policies. g. SSD withdrawals . All withdrawals from the SSD will have to be countersigned by the TCT to authenticate the legitimate need for the money in financing the project according to the farm plan and budget. Savings deposit withdrawals of student borrowers will also be countersigned by the TCT to ascertain the need and to confirm that the same is justified and in line with the objectives of the program. h. Interest, maturity and repayments Loans granted under the program shall be charged an interest rate of ten per cent (10%) per annum and shall not be deducted in advance but to be paid on maturity date. However, when the loan is granted, rural banks are allowed to charge service fee of two per cent (2%) or P150 per annum, whichever is lower, on the total amount granted. A penalty of two per cent (2%) per annum, shall be charged against the past due balance. No other costs and charges shall be passed on to the student borrowers. Maturity of the loans will depend on the projects to be financed but in no case shall it exceed a period of one year or twelve (12) months. Loans shall be repaid on or before the project's maturity date out of the income realized from the projects financed and/or other sources. SUBSECTION 3368.6 Implementing agencies and their responsibilities a. Ministry of Education and Culture (MEC) . The MEC shall deposit the seed money with the CB-DRBSLA to be utilized for STDs with RBs, coordinate and supervise all schools participating under the program through the regional offices, submit feedback reports to the National Management Committee, assist in the information drive in the implementation of the program, accredit schools qualified to participate in the program, and be responsible in monitoring the implementation of the program. b. Central Bank of the Philippines (CBP) (1) The Department of Rural Banks and Savings and Loan Associations (DRBSLA) shall: (a) Administer the seed fund intended for qualified rural banks to participate under the program; (b) Provide supervisory personnel to coordinate in program implementation; (c) Facilitate the Process of loaning operations for smooth and accelerated implementation of the program; (d) Encourage rural banks to participate actively in the implementation of the SEEP; and (e) Assist in the information drive in the implementation of the program. (2) The Department of Loans and Credit (DLC) shall: Rediscount all eligible papers under the supervised experienced education program at a preferential rate of rediscounting given to loans granted under the program. c. Rural banks . The rural banks shall: (1) Grant production loans to student borrowers to be financed under the program. (2) Abide with the rules and regulations in the implementation of the program. (3) Undertake the principal responsibilities in the collection of loans with the assistance of the TCT, give incentive allowance and bonus to TCT-SCT as provided for under general policy of these rules and regulations. (4) Issue Certificate of Credibility upon graduation to deserving student borrowers. (5) Assist in establishing marketing tie-ups with student borrowers. (6) Expedite the processing of loan applications. (7) Submit quarterly reports to the Central Bank. SUBSECTION 3368.7 Personnel of implementing agencies and their responsibilities a. CB-DRBSLA agricultural credit supervisors. They shall: (1) Encourage the rural banks to participate actively in the implementation of the supervised experience education program. (2) Coordinate and facilitate the activities of rural banks and participating schools for effective program implementation. (3) Verify, evaluate and recommend the applications for STDs of participating rural banks. (4) Expedite the release of STDs and supervise the utilization of the same. (5) Supervise the preparation of quarterly and summary reports of the RBs and review the same before submission to the CB-DRBSLA. (6) Test check pricing, delivery and application inputs including the utilization of the cash portion of the loan by student farmers. (7) Verify expenses incurred by RBs under the program prior to reimbursement by CB-DLC of the rebates from rediscounting. (8) Submit recommendation and proposals to improve and accelerate program implementation. b. School administrators They shall: (1) Serve as project coordinators in the implementation of the program within their respective areas of coverage. (2) Supervise the activities of all school personnel involved in the SEEP and institute disciplinary action. (3) Assume the responsibilities in the implementation of the program. (4) Make sure that the supervised farming projects of student borrowers are conducted in a business-like manner. (5) Make proposals on the educational and administrative management of the program. (6) Assist the rural banks in the collection of loans granted under the program. (7) Submit annual consolidated reports of the SEEP every end of the school year to the Regional Management Committee. c. Teacher Credit Technicians ( TCT ) They shall: (1) Assist the student farmers in the preparation of the farm plan and budget and other loan documents. (2) Render technical supervision to student farmers financed under the program from production stage until marketing time. (3) Make sure that the supervised farming projects of student borrowers are conducted in a business-like manner. (4) Assist the rural banks in the collection of loans extended under the program. (5) Teach the student borrowers simple record keeping and conduct a periodic check-up of the same. (6) Keep accurate records of the SEEP projects under their respective supervision. (7) Submit quarterly and summary reports to the school administrator. (8) Consult the school administrator, CB-credit supervisor and the rural bank manager on problems concerning the program. (9) Have frequent dialogues with the rural banks managers and student borrowers together with their parents to gain their full support and cooperation in the implementation of the program. (10) Countersign withdrawal slips of students in withdrawing their savings account. d. Parents or guardians of student borrowers They shall: (1) Attend meetings called by the school authorities concerning the supervised experience education program. (2) Provide all the necessary support and cooperation to the school, the bank and the students in the implementation of the program. (3) Make consultations with the school authorities from time to time for the benefit of the students and the program. (4) Make certain that their children work on their SEEP projects even during off-school hours. (5) Act as co-borrowers of their children. e. Student borrowers . They shall: (1) Prepare the farm plan and budget for their respective projects with the assistance of the TCT. (2) Apply the package of technology on improved farm practices and follow the technical recommendations of the TCT from production until marketing. (3) Spend the loan proceeds granted under the program according to the needs of their respective projects and in accordance with the farm plan and budget. (4) Prepare, keep and submit regularly records of their individual projects financed under the program. (5) Work religiously and diligently on their projects even during off-school hours. (6) Consult the TCT on problems or any deviation from the approved farm plan and budget. (7) Prepare progress, summary and evaluation reports every end of the production season and submit them to the TCT. (8) Pay their loans with the rural bank on or before the maturity date. (9) Immediately deposit their income from the project with the rural banks and not withdraw the same without the approval of the TCT SUBSECTION 3368.8 Monitoring system . Student borrowers shall submit regularly a report to the TCT using the prescribed forms. The TCT shall collect reports from student borrowers, summarize them and prepare other reports and submit the same to the school administrator. The school administrator shall review all reports and indorse them to the regional director. He shall also furnish the RB with a status report. At the same time the RB shall also submit quarterly status reports to the administrator and the CB. (See Appendix 1). The regional director shall review all reports of the participating institutions at the region. A summary progress report of the institutions shall be accomplished and the same shall be submitted to the Bureau of Secondary Education (BSE). The BSE shall, in turn, summarize reports of the regional directors and furnish copies to the Office of the Minister of Education and Culture, DRBSLA and the National Management Committee. At the same time, the CB-DRBSLA shall furnish every quarter the National Management Committee with the consolidated rural bank report and other financial reports. SUBSECTION 3368.9 Program review and evaluation An annual program review shall be conducted among the participating agencies to thresh-out constraints of the implementation of the program. An incentive system shall be developed to recognize the performance of the participants in the program. The program shall be evaluated at least every three (3) years upon recommendation of the National Management Committee. SECTION 3369. Integrated Agricultural Financing for Ilocos Region . The following guidelines shall govern credit extension for the production of quality Virginia tobacco by rural banks. Qualified commercial banks may also participate in this program. SUBSECTION 3369.1 Preliminary statement . After considering the outcome of the 1978-1979 Virginia tobacco production and trading season and the results of the "new PVTA technology" of production in PVTA demonstration and compact forms and the increased floor prices of Virginia tobacco, the Virginia Technical Committee (VTTC) has decided to further intensify the production of quality Virginia tobacco through two (2) new programs to be known as: a. IAF-VI-1000 Program where the average production per hectare using the "old technology" is targeted at 1000 kgs. of good quality tobacco. b. IAF-VT-1450 Program where the average production per hectare using the "new PVTA technology" is targeted at 1450 kgs. of good quality tobacco. The VTTC after further considering the increased cost of producing Virginia tobacco due to increased cost of gasoline, fertilizer, insecticides, labor, etc. hereby issue the following new additional guidelines to supersede/supplement the original guidelines issued under the integrated agricultural financing program for Ilocos Region. SUBSECTION 3369.2 Eligible borrowers a. IAF-VIT 1000 (1) Holders of PVTA issued ID cards with valid tobacco deliveries posted therein; (2) Those having no unpaid loans with rural banks, PNB/ACA branches; (3) Those who are members of selda/damayan and/or who can offer collateral or security such as real or chattel mortgages or who can put up at least two co-makers acceptable to the bank; (4) Those who agree to plant their Virginia tobacco in accordance with the prescribed PVTA technology and willing to be supervised by a PVTA Technician; and (5) Corporations engaged in Virginia tobacco production; b. IAF-VT - 1450 (1) Those complying with requirements under a(1), (2) and (3) above and any of the following: (2) Those who are cooperators under the PVTA supervised/accredited compact farms; (3) Those who have been trained under the "New PVTA Technology" seminars conducted by PVTA; (4) Those who agree to use their loans to plant their tobacco under the "New PVTA Technology" under the direction of a PVTA Technician; and (5) Corporations engaged in Virginia tobacco production. SUBSECTION 3369.3 Loan per hectare . The participating rural bank, PNB shall extend loans to qualified borrowers, the amount of which shall not exceed P4,000.00 for the VT 1000 and P6,000.00 for VT 1450 as shown in the following schedule: a. IAF-VT 1000 (1) Cash portions portion Land preparation P 320.00 Transplanting, replanting & watering 160.00 Fertilizing and irrigating 130.00 Harvesting/Priming 170.00 Sticking 110.00 Loading and unloading 90.00 Curing 120.00 Repair of barn and flue-tubes 80.00 Classification 200.00 Transportation 35.00 Sub-total P1,415.00 (2) Input portion Bamboo, hay, etc. P107.00 Fertilizers 659.00 Pesticides 295.00 Gasoline, oil and lubricant 314.00 GI sheets for flue-tubes 190.00 Firewood 940.00 Spare parts of water pumps & implements 60.00 Sticks 20.00 Sub-total P2,585.00 Total P4,000.00 * * To be added will be the cost of one sprayer if farmer desires to purchase but not to exceed P500.00. b. IAF-VT 1450 (1) Cash portion Land preparation P609.00 Transplanting, replanting & watering 359.00 Fertilizing and irrigating 357.00 Harvesting/priming 250.00 Sticking 184.00 Loading and unloading of barn 150.00 Curing 200.00 Repair of barn and flue-tubes 80.00 Classification 290.00 Transportation 35.00 Sub-total P2,514.00 (2) Input Portion Bamboo, hay, etc. P107.00 Fertilizers 856.00 Pesticides 316.00 Gasoline, oil and lubricant 504.00 GI sheets for flue-tubes 198.00 Firewood 1,365.00 Spare parts of water pumps and implements 120.00 Sticks 20.00 Sub-total P3,486.00 Total P6,000.00 * * To be added will be the cost of one sprayer if farmer desires to purchase but not to exceed P500.00. SUBSECTION 3369.4 Interest rate . Production loans to be granted shall bear interest at twelve per cent (12%) per annum, inclusive of service and other charges. SUBSECTION 3369.5 Rediscounting . The loans granted under the IAF-VT-1000 and IAF-VT 1450 programs shall be rediscountable at such rates as provided under Subsecs. 3271.1 a(1) and 3271.2a(1). SUBSECTION 3369.6 Special time deposits . Participating rural banks may be granted special time deposits equal to one hundred per cent (100%) of the list of loans to be granted. Said special time deposits shall be for a term of not more than 270 days and shall bear interest at three per cent (3%) per annum. SUBSECTION 3369.7 SES Department III is hereby authorized to impose on participating rural banks interest up to twenty-five per cent (25%) per annum and on the erring rural bank officer fine of not less than fifty pesos (P50 . 00) but not more than one hundred fifty pesos (P150 . 00) a day : a. For failure to remit unused special time deposits (STD) to SES Department III within five (5) days after the thirty-day (30) period that the STD is prescribed to be utilized; and b. For failure to remit collections from Virginia tobacco loans funded by PVTA-IAF program special time deposits to SES Department III within five (5) days from date of collections. ( Effective July 9, 1984 ) SUBSECTION 3369.8 In order not to delay the release of special time deposits to banks participating under the Virginia Tobacco Financing Program so that said banks will not also be delayed in approving production loans to tobacco farmers and releasing the initial loans releases for seed-bedding : a. Beginning September of each year, participating rural banks may apply for STDs under the Virginia Tobacco Financing Program by presenting to CB-SES III their list of prospective borrowers for the current season duly certified to, by the Rural Bank/PVTA Technician detailed with the participating bank. b. On the basis thereof, CB-SES III may immediately release one-third of the total loans required to the participating rural bank, provided the proceeds of the STD shall be used exclusively to finance initial partial loan releases to borrowers for seed-bedding purposes. This initial STD shall be placed in a separate account in order to prevent its use for other purposes. c. All banks participating in the 1982-83 tobacco season shall be eligible to apply for the "advance 1/3 STD" even if they have past due IAF STDs, provided, they do not have unremitted collections from tobacco loans granted in the preceding seasons. d. Banks that receive the "advance one-third STD" which shall divert the same for other purposes shall be charged 18% per annum from date of diversion up to date of refund or remittance. e. As soon as the "advance one-third STD" is fully released to eligible borrowers per list submitted and approved, the participating rural bank may request for the release of "2/3 balance of STD", and this shall be subject to the covering rules of the program as to past due loans and unremitted collections. (Effective Jan. 6, 1984) SECTION 3370. Burley Tobacco Supervised Credit Program . The following are the guidelines for the burley tobacco supervised credit program by rural banks. Qualified commercial banks may also participate in this program. SUBSECTION 3370.1 Rationale . Burley tobacco is an important ingredient in the local manufacture of aromatic cigarettes. Presently, the country is producing about 16 million kilograms but continues to import about 3 million kilograms annually to meet the domestic requirement for this type of tobacco. Burley tobacco is mainly grown and is the major cash crop of farmers in Eastern Pangasinan, Occidental Mindoro, Northern and Western Tarlac. The agro-climatic conditions of these areas are suitable for the cultivation of this tobacco type and given the proper government attention for its development, will greatly help increase the income, hence, the socio-economic conditions of farmers in these areas. The export potential for burley tobacco is very promising considering the fact that our neighboring countries like Japan, Singapore and Malaysia are importing, mainly from the United States, substantial quantities of this type of tobacco. If the quality of locally grown burley tobacco can be improved to equal or even surpass that of the imported ones, these foreign markets can easily be tapped considering our proximity to these countries. One of the recognized approaches in accelerating agricultural development is the provision of a supervised credit scheme. Generally, farmers are caught in a cycle of low productivity-low income and low savings. Supervised credit tries to break this cycle by augmenting the low savings of farmers to enable them to adopt innovative technology, thereby, increasing their productivity and income. Cognizant of the importance of the burley tobacco to the livelihood of our tobacco farmers and to the government's effort to improve the country's foreign exchange standing, a supervised credit program for burley tobacco is being launched to initiate the promotion, development and stability of the industry. SUBSECTION 3370.2 Objectives a. General . To accelerate the development and stability of the burley tobacco industry through supervised credit program. b. Specific (1) To increase the productivity and increase the small farmer's production of burley tobacco by providing them with the necessary credit and technical support; (2) To help promote the growth and development of strong and viable farmers associations and/or organizations; and (3) To effectively and efficiently implement integration of extension activities on rice and tobacco production and development in the area. SUBSECTION 3370.3 Target areas a. Geographic coverage . Financing the production of burley tobacco will be confined to three (3) provinces, namely: (1) Pangasinan (2) Tarlac (3) Occidental Mindoro b. Number of farmers, area and credit requirement . The initial phase of the program will involve the participation of an estimated 6,200 farmers who are tilling about 4,960 hectares of burley tobacco. The target number of farmers, areas and credit requirements distributed as follows: Credit No . of Area Requirement Farmers Planted (P Million ) Burley 4,000 3,200 12.00 Tarlac 200 160 .60 Occ. Mindoro 2,000 1,600 6.00 Total 6,200 4,960 18.60 SUBSECTION 3370.4 Strategy of implementation a. Funding (1) Short-term production credit . Portion of the funds already deposited with the CB-DRBSLA under a special time deposit shall be utilized as seed fund for participating rural banks to provide the credit assistance for burley tobacco production. (2) Medium-term credit . Likewise, from the funds deposited with the CB-DRBSLA for the purpose under IAF on Virginia tobacco, shall be used as seed fund for participating rural banks to finance the construction of air curing barns and/or the purchase of irrigation pumps and accessories. b. " Seed " STD funding and procedures (1) The RB supervised credit technicians/production technicians assist farmer-borrowers in the preparation of their farm plans and budgets for the production of burley tobacco. (2) The rural bank prepares the application for a credit line based on its annual bank plan and loan budget which will be the basis in the releases of STDs by the CB-DRBSLA. (3) The rural bank submits the application for a credit line together with the annual bank plan and budget (three copies) to CB-DRBSLA. The application shall be supported by the required number of blank special time deposit certificates, the latest statement of financial condition, and other CB requirements. (4) CB-DRBSLA processes and approves the application and annual bank plan and budget of the participating rural bank. (5) CB-DRBSLA furnishes CB-DLC two (2) copies of the approved application and the annual bank plan and-budget which shall be the basis of rediscounting of the rural bank concerned. The latter in turn furnishes CB-DLC Regional Office a copy of the same which shall be the basis of subsequent rediscounting of the rural bank. (6) The CB-DRBSLA fills up the first STD certificate according to the annual bank plan and loan budget and releases the first STD to the rural bank by credit advice or telegraphic transfer to participating rural bank's depository bank. c. Second and subsequent STD releases based on "Schedule of Releases" previously submitted by the rural bank to the CB-DRBSLA, the latter now releases automatically the additional STDs (equal to fifty percent (50%) of the schedule loan releases) to the rural bank. The proceeds of the STDs are deposited in the rural bank's depository bank and rural bank is notified by telegram. d. Rediscounting (1) CB-DLC rediscounts at one hundred percent (100%) loan value all eligible papers for short-term production at a preferential rate of one percent (1%) per annum. (a) First rediscount and STD refund (i) Rural bank rediscounts the first promissory note with CB-DLC by submitting with the rediscount schedule a copy of the borrower's application, and promissory note. (ii) Upon approval of rural bank's application, CB-DLC automatically credit fifty percent (50%) of the rediscounting proceeds of the rural bank's STD account with CB-DRBSLA and the remaining fifty percent (50%) to the rural bank's depository bank and the rural bank is notified by telegram. (b) Second and subsequent rediscounting (i) Rural bank rediscounts the second and subsequent promissory notes by submitting to the nearest CB-DLC Regional Office its rediscount schedule supported with promissory notes only. The schedule should state whether the promissory notes are second, third, fourth, etc. under the integrated agricultural financing program. (ii) As in Item d(1)(a)(ii), CB-DLC upon approval of the second or subsequent rediscounting, automatically applies fifty percent (50%) of the rediscounting proceeds to the rural bank's STD account with CB-DRBSLA and credits the remaining fifty percent (50%) to the rural bank's depository bank account. The rural bank notified by telegram accordingly. SUBSECTION 3370.5 Guidelines and policies a. Short-term (1) Purpose and Amount of Loan The production loan for burley tobacco in Pangasinan, Tarlac, and Occidental Mindoro shall be based on the actual needs of the farmer but not to exceed P4,000 per hectare and P500 for the purchase of sprayer. This shall be used to defray expenses for the following: (a) Cash Portion Land Preparation 500 00 Miscellaneous 240.00 Sub-Total P740 00 (b) Input Portion Fertilizers P1,400.00 Gasoline and Oil 1,080.00 Insecticides 780.00 Sub-Total 3260.00 Total P4,000,000 ( Effective Jan . 18, 1984 ) (2) Eligible borrowers : (a) Members of Class A and Class B samahang nayons . They should be organized into seldas/damayans from 5-15 members with one acting as production leader. The members of the selda are jointly and severally liable for the unpaid loan of each member. (b) Members of farmer's cooperatives of good credit standing. (c) Farmer to be financed should be cultivating at least one-half (.5) hectare but not more than five (5) hectares. (d) Owner cultivator and beneficiaries of agrarian reform. (e) Corporations engaged in burley tobacco production. (3) Requirements (a) The farmer-applicant, with the assistance of a production technician, prepares his arm plan and budget to reflect his credit needs for burley tobacco production. (b) The farmer should get a certification from the barangay leader attesting that he is a bonafide farmer in that barangay. Furthermore, all farmer-borrowers should be issued an ID by PVTA indicating the area of their farms and their barangay. These ID must indicate the validity period for it to be honored by the Bank. (c) The farmer-borrower signs written promise and/or marketing agreement to the bank to deliver/sell his tobacco produce with trading center/operator buyer of his choice duly accredited by the PVTA. (d) The farmer then applies for the loan by filling up the prescribed forms of the bank, attaching with it his farm plan and budget, his certification of identity, tax account number and residence certificate and a copy of the written promise/marketing agreement. (e) The selda leader consolidates the loan applications of the individual members of the selda and submits these to bank through the production technician. (4) Release of loan proceeds . The proceeds of the loan is released in lump sum and it is automatically credited to the farmer-borrower's Special Savings Deposit (SSD) account from where the borrower shall withdraw his needs with the prior approval of the production technician. The SSD earns an annual interest rate of ten percent (10%) while the farmer is charged ten percent (10%) rate of interest on the total loan amount. Cash withdrawal from the SSD are on a staggered basis in accordance with the approved farm plan and budget. Likewise, withdrawals for inputs are staggered and effected through chit system. (5) Securities, interest, service fees and maturity of the loan (a) The loan shall be secured by any or a combination of the following: (i) Selda/Damayan joint liability; (ii) Standing crop ; (iii) Chattel mortgage of livestock, farm machineries, and buildings; (iv) Real estate; (v) Two (2) solvent co-makers who are acceptable to the rural bank. (b) Production loans to be granted shall bear interest at twelve per cent (12%) per annum, inclusive of service and other charges. (c) Said loans shall mature within a period of nine (9) months or 270 days. (6) The Chit System (a) All chemical inputs (pesticides and herbicides) shall be coded for easy references. Farmer-borrowers shall be given a copy of this coded list together with a list of accredited dealers' outlets and accredited credit lines carried from where the farmer selects the desired inputs. The same list of accredited dealers/outlets and the lines carried shall also be posted in the lending banks and accredited dealers/outlets. (b) Upon approval of the loan, the technician secures and issues three (3) separate chits from the lending bank corresponding to the following: (i) Chit A for fertilizer (basal application) (ii) Chit B for chemicals (insecticides and fungicides) (iii) Chit C for fertilizer (top dressing) (c) The production technician then accomplishes the following: (i) name of farmer (ii) effective date of chit (iii) type of infestation to be prevented/controlled (iv) area for which input shall be applied (v) amount intended for the specified input (vi) technician's signature (d) Upon issuance of chit, the technician indicates the group of pesticides most suitable to prevent or control infestation in the farmer's field. The farmer selects from list of coded inputs and writes down the code number of the chit. The technician issues bank's and dealer's copies to the farmer and retains the stub for reference. Chits shall be issued according to the schedule specified in the farm plan and budget. (e) The farmer then takes accomplished chit to the lending bank for validation. The bank verifies the schedule of input release and the corresponding amount to be withdrawn against the SSD. The farmer accomplishes withdrawal slip from SSD. The bank stamps its seal on both copies and returns dealer's copy to the farmer. A validated chit is good only for fifteen (15) days. Hence, the farmer-borrower must withdraw his inputs from his chosen dealer within the indicated term. If the farmer fails to get his inputs within the specified period, he could revalidate his expired chits subject to the approval of the technician and bank involved. (f) The farmer brings validated chit to an accredited dealer. The dealer verifies the effectivity of the chit and checks the code number and/or brand name of inputs. Changes in the effectivity period of the chit can only made by the technician depending upon the necessity of the input. The dealers should not in any way substitute the input preferred by the farmer indicated on the chit. Chits submitted before or after its effectivity date should not be honored. The dealer issues the input with an invoice receipt indicating clearly the code number and the exact name, quantity and price of the accredited input. Using the chit stubs as reference, technician visits the farmer and verifies actual input withdrawn and supervise its usage. (g) The dealer summarizes serviced chits every end of the week and submits these to the lending banks with the corresponding invoice receipts. The bank pays dealer for the accredited inputs withdrawn by the farmer. (7) Loan collection and marketing strategy (a) Direct payment (i) The production technician reports to the bank concerned the expected date of harvest of the farmers under his supervision immediately after curing, the technician reports the volume of harvest to the bank and thereafter continuously reports to the lending institution all harvesting and curing in progress including the yield if possible. (ii) The technician reminds the farmers of their loans and the amount they should immediately pay after curing. (iii) The technician informs the farmers that they are freed of the marketing agreement contained in the promissory note if they pay in cash. (b) Deposit of farmer's produce at trading centers/buying stations (i) Not later than two (2) months before the burley tobacco harvest, rural banks shall furnish PVTA Central Office the list of farmer-borrowers financed under the program. (ii) PVTA Central Office in turn shall furnish their accredited trading centers/buying stations and/or sub-buyers the same list of farmer-borrowers. (iii) Two (2) weeks before the harvest of tobacco, the trading center/operator buyer may open: (aa) A savings account with participating rural banks; or (bb) A checking account with commercial/rural bank of his choice. Said commercial bank/rural bank shall make the concerned rural banks where the farmer has a loan, its correspondent bank. (iv) Upon receipt of farmers' delivery of the produce, the trading center/operator buyer shall deduct the whole or fractions thereof of the loan of the farmer-borrower, based on estimated production stated on farmers' ID for each delivery made as follows: fifty per cent (50%) for first delivery, thirty per cent (30%) for the second and twenty per cent (20%) of the third. The amount collected shall be accumulated and shall accrue to the account of the rural bank until such time that the rural bank collector and/or person designated by the rural bank association for the purpose collects the farmers' payment together with the summary list of collections made for the rural bank. (v) The equivalent cash or "check" shall be issued by the training center/operator buyer on amount collected on production/facility loans of farmers and to be properly receipted by the rural bank collector. (8) Special time deposits . Participating banks may be granted special time deposits equal to one hundred per cent (100%) of the list of loans to be granted. Such special time deposits shall be for a term of not more than two hundred seventy (270) days and shall bear interest at three per cent (3%) per annum. b. Medium-term (1) Eligible projects (a) Construction of air curing barn burley tobacco. (b) Irrigation pumps and accessories. Provided , That no burley tobacco production loans shall be granted to any farmer who does not have an existing air-curing barn, or who has not applied simultaneously for a facility loan to construct an air-curing barn or repair an existing one not in working condition. ( Effective October 22, 1982 ) (2) Eligible borrowers : (a) Class A and Class B samahang nayons , farmers cooperatives and/or its members. (b) Seldas/Damayans of good credit standing and/or its members. (c) Owner-cultivators and farmers who are beneficiaries of agrarian reform. (d) Corporations engaged in burley tobacco production. (3) Requirements (a) SN/Selda/Damayans and/or farmer-applicant prepare the plan and the economic feasibility study of the air-curing barn jointly with the RB/VTA technician. (b) Get the certification of identity from the barangay chairman and/or SN President. (c) Apply for the loan by filling up the loan application, attaching the plan and feasibility study of the burley tobacco curing barn certification of identify, tax account number residence certificate. (4) Amount of facility loan. The amount of loan shall depend on the plan and economic feasibility study prepared jointly by the farmer-borrower and the PVTA/RB technician. For every hectare planted to burley tobacco, a farmer may be granted a maximum loan of P25,000 for the construction of a new air-curing barn or the repair of an existing one not in working condition, and P380.00 for irrigation pumps and accessories. ( Effective October 22, 1982 ) (5) Release of loan . Loan releases shall be based on the plan and feasibility study and upon recommendation of the PVTA/RB technician. (6) Security of the loan . All loans granted under this medium term financing shall be secured by any or a combination of the following: (a) Real estate mortgage sufficient to cover the loan amount in case of individual borrower. (b) Samahang nayons shall guarantee the loan through its barrio guarantee fund and/or barrio savings fund; (c) Seldas/Damayans shall be jointly and severally liable for the loan; (d) Two (2) solvent co-makers who are acceptable to the rural bank. (e) Chattel mortgage of the project: (7) Maturity of the loan . All loans shall mature within a period of five (5) years and payable after the harvest of burley tobacco in five (5) yearly amortizations. Loans for the construction of a new air-curing barn shall be for a maximum term of seven (7) years, and up to three (3) years on loans for the repair of an existing one not in working condition. ( Effective October 22 , 1982 ). (8) Interest and other charges (a) Loans granted under the program shall bear an interest of twelve per cent (12%) per annum and shall not be deducted in advance. (b) Service fees and other charges shall not exceed two per cent (2%) or P150.00 per annum whichever is lower. c. PVTA-Philip Morris Project in Isabela Farmer-cooperators under the PVTA-Philip Morris Burley Tobacco Project in Isabela may be granted production loans per hectare of P11,000 and P12,500 for the construction/repair of air-curing barns, subject to the following conditions: (1) That the farmer-cooperators shall put up the collaterals required under the IMF Program with the Central Bank. (2) That Philip Morris shall guarantee to buy the tobaccos of the selected farmer-cooperators at a minimum price of P15.00/kilo in 1984 plus additional price increases in the years to come and that they shall continue to buy Burley Tobacco from selected farmers during the lifetime of the facility loans which is 3-5 years. (3) That Philip Morris shall be responsible in selecting the farmer-participants as to their capabilities and area for good quality Burley Tobacco production. (4) That Philip Morris shall help the rural bank in the collection of the loan repayments of the farmer-cooperators. (5) That farmers who have no air-curing barns but are willing to construct their own barns shall put up their equity investments in addition to the amount that they can borrow under the medium-term loan of the IAF Program. ( Effective Jan . 18, 1984 ) SUBSECTION 3370.6 SES Department III is hereby authorized to impose an participating rural banks penalty up to twenty-five per cent (25%) per annum and on the erring rural bank officer fine of not less than fifty pesos (P50 . 00) but not more than one hundred fifty pesos (P150 . 00) a day : a. For failure to remit unused special time deposits (STD) to SES Department III within five (5) days after the thirty-day (30) period that the STD is prescribed to be utilized; and b. For failure to remit collections from burley tobacco loans funded by PVT-IAF program special time deposits to SES Department III within five (5) days from date of collections. ( Effective July 9, 1984 ) SUBSECTION 3370.7 In order not to delay the release of special time deposits to banks participating under the Burley Tobacco Financing Program so that said banks will not also be delayed in approving production loans to tobacco farmers and releasing the initial loan releases for seed-bedding . a. Beginning September of each year, participating rural banks may apply for STDs under the Burley Tobacco Financing Program by presenting to CB SES III their list of prospective borrowers for the current season duly certified to, by the Rural Bank/PVTA Technician detailed with the participating bank. b. On the basis thereof, the CB-SES III may immediately release one-third of the total loans required, to the participating rural bank, provided the proceeds of the STD shall be used exclusively to finance initial partial loan releases to borrowers for seed-bedding purposes. This initial STD shall be placed in a separate account in order to prevent its use for other purposes. c. All banks participating in the 1982-83 tobacco season shall be eligible to apply for the "advance 1/3 STD" even if they have past due IAF STDs, provided, they do not have unremitted collections from tobacco loans granted in the preceding seasons. d. Banks that receive the "advance one-third STD" which shall divert the same for other purposes shall be charged 18% per annum from date of diversion up to date of refund or remittance. e. As soon as the "advance one-third STD" is fully released to eligible borrowers per list submitted and approved, the participating rural bank may request for the release of "2/3 balance of STD", and this shall be subject to the covering rules of the program as to past due loans and unremitted collections. ( Effective Jan . 6, 1984 ) SECTION 3371. Fourth CB : IBRD Rural Credit Project . Loan funds for financing the expansion of the medium and long-term activities of rural banks, stock savings and loan associations, private development banks, and non-bank financial intermediaries, will be made available utilizing the funds from a fourth Central Bank credit line with the International Bank for Reconstruction and Development (IBRD). The following rules and regulations shall govern this credit program to be carried out through the lending facilities of rural banks, stock savings and loan associations, private development banks and non-bank financial intermediaries under the supervision of the Central Bank. SUBSECTION 3371.1 Definition of terms . Unless otherwise, specified, the following terms shall have their respective meanings as indicated hereunder: a. CB the Central Bank of the Philippines; b. Financing institution a rural bank (RB), a stock savings and loan association (SSLA), private development bank (PDB) or non-bank financial intermediary (NBFI) selected by CB to anticipate this credit program in accordance with Subsec. 3371.2; c. Loan the loan extended by CB to a financing institution; d. Subloan the loan extended by a financing institution to a borrower; e. Borrower the recipient of a subloan from a financing institution; and f. STD a special time deposit of CB for financing of loans to a financing institution; and g. IBRD the International Bank for Reconstruction and Development. SUBSECTION 3371.2 Participating institutions; eligibility requirements . CB shall select the financing institutions through the Department of Rural Banks and Savings and Loan Associations, taking into account the following: a. Period of operation A financing institution must have been in operation for not less than One (1) year prior to making an application for a loan. b. Liquidity position ; arrearages (1) A financing institution must have sufficient working capital to meet its obligations to creditors and depositors, taking into account local conditions and past performances and sufficient legal reserves against deposit liabilities. (2) Past due loans of financing institutions shall not exceed twenty-five per cent (25%) in relation to total loan portfolio, or such other ratio as may be prescribed by CB with the prior approval of IBRD. If the accumulated arrears of principal and interest, in excess of 90 days, on medium and long-term loans made by financing institution shall exceed twenty per cent (20%) of the sum of all amounts falling due on such accounts from the beginning of the immediately preceding twelve-month period, such financing institution shall not be eligible to participate or continue to participate in this credit program until it shall have improved its collections to reach such level: Provided, however , That such past due ratio may be increased to thirty per cent (30%) on a case-to-case basis, at the discretion of the Central Bank. If any financing institution shall exceed such applicable level of arrears mentioned above, it shall cease to participate in this cre- * capacity to pay and character of borrowers; and (2) Adherence to the objectives of the rural bank as to purpose of loans, actual credit requirements and eligibility of borrowers. d. Credit standing (1) Its established credit reputation; and (2) Character, capacity, competence and integrity of its officers. e. Net worth (1) Results of operation; and (2) Ratio of unimpaired capital and surplus to risk assets. f. Management competence to handle the program (1) Qualifications, training and experience of members of the board of directors and its principal officers, as prescribed by the Monetary Boards; and (2) Adherence to laws, decrees and general orders and instructions of CB, by its board of directors and its principal officers. g. C ompliance . Compliance with circulars and memoranda embodying or implementing pertinent and applicable laws, decrees, general orders, Cads rules and regulations. SUBSECTION 3371.3 Other eligibility requirements Wherever there are established in any law, decree, general order, rule, regulation, or other active in force, standards or criteria by way of ratios, percentages or otherwise, in relation; to the factors enumerated in Subsec. 3371.2 such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of creditworthiness under said Subsec. 3371.2 SUBSECTION 3371.4 Subloans extended by participating financial institutions ; purposes . Only viable subprojects where the potential for increased production, employment or value added is clearly established, or where the potential for satisfying domestic demand or exportation of the excesses over domestic consumption, will be eligible for financing. Investments eligible to be financed under subloans shall include: a. Farm mechanization (1) Tractors, including implements and associated equipment not exceeding sixty eight (68) HP. For sugarcane production in areas where sugarcane is grown extensively and cultivated throughout the year, the preceding limit may be increased to a maximum of ninety (90) HP; (2) Power tillers, including attachments; (3) Portable threshers not exceeding thirteen (13) tons per day; (4) Private irrigation facilities including pumps; (5) Machinery and equipment for the development of abaca, coffee, cacao, citrus and ipil-ipil including facilities for processing and marketing such as: storage, transport, stripping and baling press. (6) Chain saws b. Transportation (1) Light trucks not exceeding 5,000 kgs. GVW; and (2) Trucks, primarily for the transport of agricultural produce, not exceeding twenty five (25) tons GVW: Provided, however , That the financing of such vehicles shall be limited to areas outside of Metro Manila, and to not more than three (3) vehicles per borrower. c. Fisheries development (1) Fishing boats of up to forty (40) gross tons capacity, including gear and equipment and initial working capital; and (2) Fishponds and fishpens, and initial working capital. d. Small-scale livestock development . Facilities and initial working capital for the following subprojects: poultry, swine, backyard cattle breeding/fattening; and draft animals and implements. e. Plantation crop development . Development and rehabilitation plantation of abaca, coffee, citrus, ipil-ipil and others such as rubber, mango, etc. f. Cottage and agro-industries . Manufacturing facilities including initial working capital, but excluding cost of land, for the following subprojects; Provided, however , That the total subprojects investment, of which the subloan shall constitute a part, shall not exceed P1,000,000.00, but shall not be less than P10,000.00, including initial working capital, but excluding the cost of land: (1) Ricemills; (2) Farm implements and manufacturing; (3) Woodworking; (4) Concrete products; and (5) Handicrafts. g. Other projects as may be approved by CB . The CB shall determine the feasibility of financing other categories and include them under this program without prior approval of the World Bank: Provided, That the credit requirement does not exceed P1,000,000.00, as required under Subsec. 3371.6. SUBSECTION 3371.5 Eligibility of borrowers . The following are eligible to borrow under the program: a. A person, partnership or corporation owning or cultivating not more than fifty (50) hectares of arable land devoted to agricultural production: Provided , That borrowers cultivating more than fifty (50) hectares may borrow from RBs/SLAs/PDBs/NBFIs at the discretion of the Central Bank for the purpose of financing the acquisition of tractors. b. A person, partnership or corporation engaging or intending to engage in a cottage or agro-industry or eligible transportation enterprise with a pre-project capital investment of not more than P500,000.00 excluding land. c. A person, partnership or corporation engaging or intending to engage in the development of a poultry, swine or cattle breeding/fattening enterprise; d. A person, partnership or corporation engaging or intending to engage in the development of plantation crops or other agricultural enterprise as set out in Subsec. 3371.4. e. A person, partnership or corporation engaging or intending to engage in fishpond/fishpen development or coastal fishing having a pre-project capital investment, excluding land, of not more than P500,000.00. f. Agricultural cooperatives constituted only of members who qualify under the preceding items. SUBSECTION 3371.6 Subloan limits a. For interests of continued attention to small enterprises, the maximum loan that may be extended under the project shall not exceed P1,000,000.00. Loans in excess of such amount may be waived by the bank in specific areas of economic merit, i.e., employment effect: Provided , That such waiver shall be based on the submission by the Central Bank to the World Bank of an evaluation of the individual proposal in question. b. The amount of the subloan shall depend upon the cost of development plan to be financed, the actual need of the borrower, the collateral fired, the borrower's repayment capacity including the proceeds of the project to be financed, the actual need of the borrower, the collateral offered, the borrower's repayment capacity including net proceeds of the project to be financed by the proposed subloan and other factors bearing on the borrower's creditworthiness, and it shall in no case exceed ninety per cent (90%) of the total project cost: Provided, however , That small farmers and small fishermen who cannot put up the ten per cent (10%) equity may be extended a subloan of up to ninety five per cent (95%) of the total project cost. The balance of total project cost may be contributed by the borrower in the form of: (1) cash; (2) material to be appraised at reasonable replacement cost; (3) labor of the borrower or other unpaid labor, to be valued at the locally-prevailing rate. c. The amount of the subloan shall not exceed seventy per cent (70%) of the appraised value of the immovable property offered as security if titled, and shall not exceed fifty per cent (50%) of such value, if the property is untitled. The appraised value shall be reasonably determined by the financing institution. d. The amount of the subloan secured by a chattel mortgage or pledge shall not exceed fifty per cent (50%) of the appraised value of the object offered as security; and where such object is new, fifty per cent (50%) of the price in the bill of sale. e. The amount of subloan guaranteed by the "Agricultural Guarantee Fund" for agrarian reform beneficiaries and small fishing boat operators, shall be within the extent if it is not secured otherwise under Items "c" and "d" above. SUBSECTION 3371.7 Creditworthiness . Each financing institution shall ascertain the creditworthiness of the borrowers applying for subloans. SUBSECTION 3371.8 Maturity of subloans . Subloan maturities shall be based on the economic life span of the major object to be financed and the projected cash flow to be derived from the project, and in each case shall not exceed the terms as herein below indicated. a. Farm implements with four-wheel tractors and power tillers as prime movers; (1) With prime mover the loan term applicable to the prime mover; (2) Without prime mover four (4) years; (3) With prime mover purchased at an earlier date four (4) years or the remaining term of any loan received for its purpose of financing the said loan term of the prime mover whichever is greater. b. Other farm implements four (4) years; c. Light machineries up to 20 HP four (4) years; d. Heavy machineries over 20 HP seven (7) years; e. Light/heavy trucks four (4) years; f. Irrigation pumps and engines five (5) years; g. Complete development of an irrigation system ten (10) years; h. Piggery project seven (7) years with appropriate grace period; i. Poultry project seven (7) years with appropriate grace period; j. Cattle breeding/fattening project ten (10) years with appropriate grace period; k. Complete development of fishpond ten (10) years with appropriate grace period; l. Fishpen financing three (3) years; m. Fishing boats up to 40 gross tons ten (10) years; n. Fishing gear and equipment: (i) With fishing boat ten (10) years; and (ii) Without fishing boat seven (7) years; o. Ricemill ten (10) years with appropriate grace period; p. Manufacture of farm implements ten (10) years with appropriate grace period; q. Woodworking five (5) years with appropriate grace period; r. Manufacture of concrete products five (5) years with appropriate grace period. s. Handicraft five (5) years with appropriate grace period. t. Permanent working capital five (5) years with appropriate grace period; u. Other cottage and agro-industries ten (10) years with appropriate grace period to be decided by CB; v. Development of plantation crops up to fifteen (15) years with appropriate grace period; w. Plantation crop, processing and marketing facilities: (1) Storage facilities up to ten (10 years; (2) Transportation up to four (4) years; (3) Stripping machine up to three (3) years; and (4) Baling press up to ten (10) years; x. Other items to be determined by CB. SUBSECTION 3371.9 Loan repayment . Repayments shall be scheduled in approximately equal installment of principal and interest, annually, semi-annually, or of a shorter period, except in cases where deferred payment plans have been granted, so arranged as to fall due on the approximate periods of highest borrower's income or when the principal income of the borrower is normally available. However, financing institutions shall encourage borrowers to make deposits for amortization of subloans on an agreed interval in order to assure payment as they become due. SUBSECTION 3371.10 Grace period . Subloans may include a grace period not exceeding three (3) years for fixed assets and twelve (12) months for permanent working capital depending on the cash flow pattern of the project or at such other terms as may be determined by the Central Bank. For rubber, the grace period may be extended to a period not exceeding seven (7) years. Such deferred payments shall only apply to the principal of the subloan and the total repayment period prescribed in Subsec. 3371.8 hereof shall not be extended on account of such grace period. SUBSECTION 3371.11 Interest rates . Subloans shall accrue interest at the rate of fourteen per cent (14%) per annum on the principal amount outstanding from time to time or such higher rate as may be prescribed by the Monetary Board except for agrarian reform beneficiaries who shall be charged twelve per cent (12%) per annum, and an additional fee to be charged separately in accordance with CB regulations. Such interest shall not be collected in advance. SUBSECTION 3371.12 Collateral a. Subloans may be secured by a first mortgage on titled or untitled immovable property and/or chattel mortgage on movable property. In cases of livestock and fisheries development, the production stock may be mortgaged. Subloans for agrarian reform beneficiaries and small fishing boat operators may be secured with a guarantee by the "Agricultural Guarantee Fund" to the extent of the unsecured portion. b. Government bonds and other securities issued by its agencies and instrumentalities guaranteed by the Republic of the Philippines may be accepted as collateral. c. The financing institution shall require the presentation of the yearly real estate tax receipts and insurance premium receipts, as they fall due, and shall forward them to the loan officer concerned; and d. The Financing institution may advance the property tax due on real estate and the insurance premium on the objects offered as collateral, such advances to be charged to the account of the borrower subject to prior notice. Such advances shall not be financed out of the proceeds of the loans. SUBSECTION 3371.13 Subloan applications and processing a. Application for subloans shall be in the form prescribed by CB and, except as CB shall otherwise agree, shall be filed with the financing institution nearest either the residence of the borrower or the site of the subproject to be financed to ensure effective supervision and control. b. Financing institutions employing a supervised credit technician may process subloan applications in lieu of processing by a CB agricultural credit supervisor or loan evaluator of CB loan team: Provided, however , That each corresponding loan application shall be subject to the final approval of the CB loan officer; and c. Note Standing "a" and "b" above, financing institutions who have developed sufficient capability to appraise subloan applications may be granted full authority by CB to process, approve and thereafter supervise subloans falling within the limitations of the granted authority. The approval under the granted authority shall be final and the corresponding checks covering loans to such financing institutions shall be issued after the submission of the required supporting documents to the CB loan team: Provided, however , That based on post audit, the authority to approve subloan applications may be revoked by CB if the required standard of appraisal work is not maintained and the financing institutions fail to improve the quality of appraisal within a reasonable period prescribed by CB. SUBSECTION 3371.14 Release of subloan proceeds Upon receipt of loan proceeds from CB, the financing institution shall deposit the same in a special account with its depository bank or disburse forthwith to the borrower/dealer/contractor/supplier. Failure to disburse loan proceeds within thirty (30) days of receipt shall subject the financing institution to a penalty of fourteen per cent (14%) per annum until the same is disbursed or returned to CB. SUBSECTION 3371.15 Penalty for non-payment . penal rate of interest of five per cent (5%) per annum or such higher rate as may be prescribed by the Monetary Board shall accrue over and above the interest rate specified in Subsec. 3371.11 on any part of the principal of any subloan amortization not paid at its due date. SUBSECTION 371.16 Extension periods . In cases of default on the service of subloans arising from fortuitous events of force majeure , or in other cases clearly justified in the opinion of the CB, the financing institution may grant the borrower a reasonable extension period subject to the approval of the CB. In such cases, CB may, at its entire discretion, grant the financing institution the same extension period on the corresponding loan. SUBSECTION 3371.17 Subloans in litigation . In case of a suit for collection of the unpaid balance of a subloan, there shall be collected from the borrower, in addition to the interest and penal interest on the subloan imposed under Subsecs. 3371.11 and 3371.15, an attorney's fee equivalent to ten per cent (10%) of the unpaid balance, and costs of the suit. SUBSECTION 3371.18 Procurement a. Procurement of agricultural machinery and equipment shall be limited to dealer, accredited by the Central Bank and the Agricultural Machinery Distributors and Manufacturers Accreditation Committee (AMDAC), who agree to provide the necessary training in the proper operation, care and upkeep of the machinery and equipment purchased, and who shall have immediately available spare parts and technical men and service shops at strategic places to repair and replenish the agricultural machinery and equipment sold by them and who are able to comply with CB and AMDAC requirements on participating dealers. b. The Financing institution shall ensure that procurement be effected prudently and that the prices paid by the borrowers for agricultural machinery and equipment shall not exceed the maximum prices determined by the CB's Department of Rural Banks and Savings and Loan Associations in coordination with AMDAC. SUBSECTION 3371.19 CB loans to participating financing institutions a. Accreditation . Each financing institution shall apply for accreditation with CB for purposes of obtaining loans: Provided , That in the case of NBFI, their initial accreditation, with the exception of the Private Development Corporation of the Philippines, shall require prior approval of the IBRD. The application shall be supported by the following documents: (1) Board resolution authorizing the financing institution to participate in the credit program obtaining loans from CB and making subloans; (2) Evidence of the powers and specimen signatures of the officers duly authorized to represent the financing institution in all matters related to loans; (3) Latest audited statement of financial condition, income and expenses; and b. Consortium of financing institutions . In order to cushion the impact of price increases in machinery, equipment and construction materials and to pave the way for the absorption of higher subloans as envisioned under this program, two (2) or more financing institutions preferably situated within the same region may be allowed to undertake the financing of a single project, in an amount not exceeding fifteen per cent (15%) of the total combined net worth of such participating financing institutions: Provided , That the contribution to the subloan by each participating financing institution shall not exceed fifteen per cent (15%) of its own net worth. Under this arrangement, the consortium shall designate a lead or managing financing institution which shall administer such loans in the same manner as CB:IBRD loans are normally administered, and in accordance with existing rules and regulations prescribed by the Central Bank. Privileges and responsibilities assigned in the rules and regulations to financing institutions shall be, in the event of financing by a consortium, deemed as assigned to members of the said consortium, or the lead financing institution of the consortium. c. Purpose of loan . The CB shall extend loans to financing institutions to finance subloans to be extended by them to borrowers in accordance with these rules and regulations. d. Loan limit . Not less than ten per cent (10%) of each subproject total costs shall be financed by the financing institution out of its own resources, except that rural banks which have been in operation for less than three (3) years and have a networth not exceeding P500,000.00 (or such lower amounts as may be determined by CB from time to time, or where the subloan recipients is a small beneficiary, may contribute less than ten per cent but not less than five per cent (5%) of such amount out of their own resources. e. Maturity . The schedule of repayments of each loan shall approximately correspond to the schedule of repayments of the subloans to be financed by such loan. f. Interest rates . Loan shall accrue interest at a rate not less than nine per cent (9%) per annum on the principal amount of the loan outstanding from time to time except for loans covering subloans for agrarian reform beneficiaries, which shall accrue interest at seven per cent (7%) per annum. Such interest shall not be collected in advance. g. Credit risk . The financing institution is fully liable for the service of any loan, whether or not the subloan financed by the corresponding loan is timely serviced or not. h. Documentation . The financing institution shall execute and deliver to CB a promissory note in respect, and in the amount, of each loan extended to it. i. S ecurity . As security for each loan, the financing institution shall endorse in favor of CB, the promissory notes received from the corresponding borrower referred to in Subsec. 3371.5 covering the total amount of the subloan to be financed. j. Processing of loan applications (1) Applications for subloans together with the loan application shall be submitted to the loan officer of the Department of Rural Banks and Savings and Loan Associations covering the particular area, for final approval or disapproval, with the exception of those financing institutions duly authorized to approve subloan applications by CB which shall submit their approved subloans to the loan officer for the preparation of covering checks. (2) In order to be processed, loan applications must be presented in the prescribed form and supported by documentary evidence and other requirements that CB shall determine from time to time and set forth in appropriate instructions. k. Release of loan proceeds . CB checks covering loan proceeds to financing institutions shall be released by the loan officer after submission of all required documents to perfect documentation of the loan and the subloan. l. Prepayment of loans . The financing institution shall prepay, to the extent that any subloan shall be prepaid, the corresponding amount of the loan obtained on account of such subloan within ten (10) days from receipt of such prepayment. m. Penal provisions . A penal rate of interest of five per cent (50%) per annum shall accrue over and above the interest rate specified in Item "f" of this subsection on any part of the principal of any loan not paid within fifteen (15) days from its maturity. n. Loans in litigation . In case of suit for collection of the unpaid balance of a loan there shall be collected from the financing institutions in default, in addition to the interest and penal interest on the loan imposed under Items "f" and "m" of this subsection, an attorney's fee equivalent to ten per cent (10%) of the unpaid balance, which shall in no case be less than one hundred pesos (P100.00), and costs of the suit. SUBSECTION 3371.20 Auditing and reportorial requirements a. Subloan documents of financing institutions shall be subject to audit by designated staff of CB for compliance with rules and regulations. b. CB shall audit or cause to be audited, at least once a year, the accounts of the financing institutions. All relevant documents shall be made available to the CB's representatives or its designated auditors. c. The financing institutions shall furnish to CB all reports and other information that the CB may deem necessary regarding this credit program. SUBSECTION 3371.21 Guidelines on restructuring * The following guidelines shall be observed in the restructuring of CB:IBRD loans under the 3rd and 4th Rural Credit Projects. a. The RB/SLA application for restructuring shall include a sworn certification of its manager to the effect that: (1) The borrower/end-users whose loans are to be restructured have defaulted in the payment of at least one amortization and their default was due to force majeure/causes beyond their control as verified by the RB/SLA concerned: (2) The extension period of the loan for restructuring shall not exceed one-half of the original term of such loans and the new term shall, in no case, exceed the original term of the loans; (3) The borrowers/end-users whose loans are to be restructured possess the necessary capacity to meet/comply with their obligations, which fact has been duly ascertained/verified by the applicant bank; and (4) None of the loans for restructuring has fully matured. b. The restructuring of notes shall be subject to the payment of at least twenty five per cent (25%) of all past due interest and penalties on the principal portion of amortization due, and other accrued charges due to the financing institutions and the Central Bank. However, in cases where the farmer-borrowers do not have sufficient cash, as verified by the financing institution and the Central Bank loan team, such required payment may be dispensed with. c. The promissory note of the RB/SLA which will cover the restructured loans shall contain a provision that all such loans are sufficiently covered by the original mortgage(s) if such be the fact. However, in the event that the loan value of the original mortgage(s) be deficient to cover any excess amount(s) of the restructured loans, the RB/SLA shall require the borrowers/end-users concerned to execute and deliver to the RB/SLA such additional securities as may be necessary to cover the deficiency. The term of the new RB/SLA promissory note shall be adjusted to conform with the maturity date(s) of the borrowers/end-users' notes. d. All RB/SLA promissory notes and those of the borrowers/end-users shall be in quadruplicate copies, the original and duplicate copies of which shall be forwarded to the Central Bank of the Philippines, one copy furnished the borrower and the last copy shall be kept in the individual credit file of the borrower concerned, together with other related documents. e. All loans restructured under App. 26 shall continue to be governed under the guidelines therein issued: Provided, however , That such loans may further be restructured subject to the conditions prescribed in the sworn certification of the RB/SLA Manager enumerated in Item a above. f. No fully matured notes shall be eligible for restructuring. (An illustrative case on the steps to be taken by the RB/SLA is shown in App. 25). SECTION 3372. Cotton Supervised Credit Financing Program . The Cotton Financing Program is to be administered b the CB-DRBSLA through rural banks, stock savings and loan associations, the Philippines National Bank, the Development Bank of the Philippines; and the Land Bank of the Philippines; and private commercial banks under the supervised credit program whereby adequate credit and competent technical assistance are timely extended to cotton-farmer-borrowers. Rural Banks and savings and loan associations desiring to participate in the program shall comply with the following requirements. a. Ratio of past due loans to total loan portfolio shall not exceed fifty per cent (50%); b. Unpaid managed obligations with the Central Bank in the form of rediscounting and special time deposits shall not exceed P1 million: Provided , That: (1) The risk asset ratio shall not be less than ten per cent (10%) after taking into account the second paragraph of Subsec. 3116.2a(8); (2) There are no irregularities/serious exceptions in the operations of the bank; and (3) All past due loans under the cotton financing program shall be excluded in the computation of total past due accounts of the bank seeking financial assistance from the Central Bank under its various special financing programs. SUBSECTION 3372.1 Objectives a. General . To attain self-sufficiency in cotton within the shortest possible time. b. specific (1) To increase the production and farm income of farmers. (2) To reduce our foreign exchange expenditure. (3) To generate employment particularly in the rural areas. SUBSECTION 3372.2 Strategy of implementation a. Funding . The Philippine Cotton Corporation deposited the amount of P5M with the CB-DRBSLA under a special time deposit to augment the initial deposit made by the National Food and Agriculture Council for cotton financing, which is to be utilized as seed starter fund by the participating financial institutions for granting, production loans to cotton farmers. b. " Seed" STD funding and procedures (1) The PhilCotton production technicians assist farmer-borrowers in the preparation of their farm plans and budgets. These are submitted to the participating bank together with the other required documents. (2) The participating bank prepares an STD application based on the target areas prepared by the Philippine Cotton Corporation which will be the basis for granting STD's by the CB-DRBSLA. (3) The Participating bank submits the STD application to CB-DRBSLA. The application shall be supported by the required number of blank STD certificates, the latest statement of financial condition and other CB requirements. (4) CB-DRBSLA processes and approves the STD application of the participating bank. (5) CB-DRBSLA furnishes CB-DLC two (2) copies of the approved application which shall be the basis of rediscounting of the participating bank concerned. The latter in turn furnishes CB-DLC regional office a copy of subsequent rediscounting of the participating bank. (6) CB-DRBSLA fills up the STD certificates and releases the STD to the participating bank by credit advice or telegraphic transfer to the participating bank's depository bank. The term of the STD shall be ninety (90) days: Provided , That if loans to eligible borrowers are one hundred per cent (100%) funded by STD the term of such STD shall be two hundred ten (210) days. ( Effective Dec . 17, 1984 ) (7) The interest rate on Special Time Deposits (STD) under the Cotton Supervised Credit Financing Program was increased from three per cent (3%) per annum to six per cent (6%) per annum. ( Effective Dec . 28, 1984 ) (8) Any unauthorized use of the Special Time Deposit (STD) and of collections from farmer-borrowers by any bank on loans funded from the STD shall subject said bank, in addition to the ordinary 6% p.a. interest on STD, to a penalty at an annual rate of 36% or MRR 90 + 6, whichever is higher, which penalty shall be imposed from the date of such unauthorized use, and to automatic disqualification from participating in the program. ( Effective July 26, 1985 ) c. Additional STD funding and procedures (1) In addition to the provisions on the use of the cotton loan fund as a starter fund, CB-DRBSLA shall be authorized to grant additional STDs to participating banks which may be unable to get additional funds for releases to cotton farmers through rediscounting. (2) Initial STDs amounting to fifty percent (50%) of the total credit requirements per hectare of cotton financed shall be issued under this special CSCP. This shall have a term of ninety (90) days. In cases where subsequently, additional STD funding is provided, the initial STD term shall be extended by one hundred twenty (120) days. STDs issued in addition to the original releases shall mature two hundred ten (210) days from the date of initial STD, Second and third STD releases shall not exceed twenty five per cent (25%) of the total credit requirements per hectare per release and shall be made eight (8) and twelve (12) weeks, respectively, after the first STD releases. d. Rediscounting . All eligible papers may be rediscounted with the Central Bank's Department of Loans and Credit (CB-DLC) at such value and rate as may be prescribed by the Central Bank. Provided , That loans to eligible borrowers that are one hundred per cent (100%) funded by STD shall not be rediscountable. (Effective Dec. 17, 1984) (1) The participating bank rediscounts the promissory note with CB-DLC submitting with the rediscounting schedule a copy of the borrowers application and promissory note and farm plan and budget. (2) Upon approval of the participating bank's application, CB-DLC automatically credits fifty per cent (50%)of the rediscounting proceeds to the participating bank's STD account with CB-DRBSLA and the remaining fifty per cent (50%) to the participating bank's depository bank. The participating banks are notified by telegram. e. Policies and procedures (1) Project areas . The project areas shall be those determined by the Philippine Cotton Corporation as suitable for cotton production these include the following areas and other areas/provinces which will be officially announced by Philcotton from time to time. Area I Ilocos Norte, Ilocos Sur, Abra Area II La Union, Pangasinan, Zambales Area III Cagayan, Kalinga-Apayao Area IV Isabela, Nueva Vizcaya, Quirino Area V Tarlac, Nueva Ecija, Pampanga, Bulacan Area VI Rizal, Laguna, Batangas, Cavite, Mindoro Area VII Negros Occidental, Iloilo, Antique, Capiz, Aklan Area VIII South Cotabato, Sultan Kudarat, Maguindanao Area IX Cebu, Negros Oriental, Misamis Oriental, Bukidnon (2) Eligible borrowers (a) Only bonafide individual farmers, corporation, partnerships, associations and cooperatives as recommended/accredited by the PCC in coordination with the lending bank in designated project areas who are interested in growing cotton are qualified under the program. (b) Farmers with past dues on M-99 loans up to P3,000 may qualify for a cotton loan. It is left to the discretion of the manager to accept the loan application of farmer-borrowers with the past dues of more than P3,000 considering his past experience and evaluation of the loan application. (3) Requirements . The following requisite documents as attachments to a farmer-borrower's loan application shall be submitted to the bank. Cotton technicians shall ensure the completion and thoroughness of said documents to initiate and prevent delays in processing activity. Moreover, participating banks are likewise enjoined to refrain from additional requirements inconsistent with the guidelines. (a) Farm plan, and budget be prepared by the farmer with the assistance of the cotton production technicians. (b) Certificate of identity of the farmer-borrower signed by the barangay captain or samahang nayon presidents NFAC identification card. (c) The farmer must sign a Marketing Agreement with PhilCotton. (d) Additional requirements such as the farmers' ID picture and residence certificate. (e) For agrarian reform beneficiaries, a MAR certificate is required. (4) Loan per hectare . The amount of loan shall be as follows. (a) For farmers applying for cotton loans for two (2) hectares or less, a maximum amount of P5,500 per hectare shall be granted. ( Effective Feb . 6, 1984 ). (b) (Deleted Effective February 6, 1984) (c) For farmers who may need to purchase sprayers, an additional loan of up to P700 per hectare shall be granted. The proceeds of the loan shall be budgeted as shown in App. 20. (5) Loan releases (a) Upon approval of the loan, the entire loan proceeds shall be released and automatically credited to the Special Savings Deposit (SSD) account in the name of the borrower. This SSD shall earn interest at the same rate such borrower has been charged on his loan. ( Effective Dec . 17, 1984 ) (b) Loan releases shall be based on the farm plan and budget upon the recommendation of the PhilCotton production technician. (6) Security of the loan (a) For individual farmer-borrowers applying for cotton loans for six (6) hectares or less, a chattel mortgage on the standing crop or deed of assignment of produce shall suffice, in such cases, registration of the chattel mortgage or deed of assignment shall be done by the participating bank. The registration fee shall be for the account of the farmer. (b) For areas beyond six (6) hectares per borrower, the manager of participating banks shall have the discretion as to be required collateral and securities consistent with their bank's lending policies and guidelines. (7) Processing of loan application (a) The participating bank shall begin accepting cotton loan applications effective January and shall process them within one (1) month from date of receipt of complete application forms and requirements and effect provisional approval thereon or certify or eligibility of farmer for cotton financing subject to the provisions of the succeeding paragraph. (b) Unless otherwise indicated, the final loan approval shall be subject to the repayment of the borrower's outstanding obligations or restructuring of the unpaid portion of the current loan. The matured portion of the restructured loan shall be deducted from the proceeds of the seedcotton sales of the borrower to Philcotton. However, such deductions shall not exceed thirty per cent (30%) of the net proceeds due to the borrower after deducting the cotton loan and interest that may have accrued thereon. (8) Maturity of the loan . All loans shall mature within a period of seven (7) months or two hundred ten (210) days. (9) Interest and other charges . Loans shall be subject to a maximum interest equivalent to MRR 90 less 2 per cent per annum, inclusive of service and other charges Provided, That loans that are one hundred per cent (100%) funded by STD shall bear interest of fifteen per cent (15%) per annum, inclusive of all charges, or at such rate as may be prescribed by the Central Bank. ( Effective Dec . 17, 1984 ) (10) SSD withdrawal and purchasing of inputs (a) All cash withdrawals from the SSD must be in accordance with the farm plan and budget. (b) Purchase of needed production inputs like seeds, fertilizer, sprayer and chemicals shall be done through the chit system of purchase order. Banks shall be prohibited from specifying the dealer where the inputs will be purchased. Farmers shall be left to choose from among the accredited dealers. (c) Based on the actual needs of the crop, the production technician issues the chit indicating the name of the farmer, effective date of chit input/amount required. The technician issues the participating bank's and dealer's copies to the farmer and retains the stub for reference. (d) Chits must be validated by bank prior to use. A validated chit is good only for a period of fifteen (15) days. Unused chits may however be revalidated subject to approval by bank. (e) Liquidation of serviced chits shall be accomplished weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. (f) Before a farmer-borrower can make use of chits, he must first have it validated. (i) Farmer takes accomplished chit to the participating banks. (ii) The participating bank verifies the schedule of input releases and the corresponding amount to be withdrawn against the SSD. (iii) Farmer accomplishes withdrawal slip from the SSD. (iv) The participating bank stamps its seal on booth copies and returns dealer's copy to the farmer. A validated chit is good only for fifteen (15) days. Hence, the farmer-borrower must withdraw his inputs from the accredited dealer within the indicated term. If, however, the farmer fails to get his inputs from the dealer within the specified span of time, he could revalidate his expired chits, subject to the approval of the technician and the participating bank involved. (v) Farmer brings validated chit to an accredited dealer. (vi) Dealer issues the input with an invoice receipt indicating clearly the name, quantity and price of the inputs. (g) Liquidation of service chit is done weekly upon dealer's presentation of a summary of serviced chits with the corresponding invoice receipts. (11) Repayment and marketing strategy (a) At the start of the cropping season, the PhilCotton guarantees a floor price and market to the farmer-borrowers involved in the cotton financing program. The floor price shall be announced at least two (2) months before the start of the planting season. (b) Farmers shall deliver their produce to PhilCotton collection centers where they will be issued receipts indicating the quantity and value of harvest delivered. (c) PhilCotton shall deposit adequate funds for seedcotton purchases with the participating bank at least two (2) weeks before purchasing. (d) PhilCotton shall pay the cotton deliveries through the lending bank. (e) The participating bank credits the amount to the farmer's account to offset his loan. Any excess amount is given to the farmer. (12) Restructuring . Participating banks shall be allowed to restructure the loans granted under this program in case of force majeure or fortuitous events upon certification by area production technician, duly attested by his area supervisor and subject to verification by the CB agricultural credit supervisors of RBs/SLAs or by the representatives of PNB, DBP and LBP or Private commercial bank. (13) Guarantee feature . The Philippine Crop Insurance (PCIC) shall guarantee any loss up to eighty-five per cent (85%) that may be incurred by the RB/SLA as a result of non-payment of loans due to unforeseen circumstances beyond the control of the farmer-borrower under the Agricultural Guarantee Program. The guarantee fee of one per cent (1%) of the amount of production loans granted shall be paid by the banking institution to the PCIC regional office concerned. (14) Monitoring . participating banks shall accomplish a monthly progress report to be submitted to the CB(DRBSLA) and to PhilCotton. A standard supervised credit monitoring form shall be used for this purpose. (15) Evaluation of farm projects after the end of the crop year . The technician evaluates the projects after the end of the crop season to determine the problems encountered by the farmer-borrowers in order to formulate recommendations and solutions to improve the farmers' future farming operations. (16) Savings consciousness . To instill savings consciousness among cotton borrowers, they shall be encouraged to maintain a portion of the net proceeds of their seedcotton sales in a savings account with the lender bank. SECTION 3373. Medium-term Financing under the Special Cotton Financing Program . Financing under this Program shall be governed by the guidelines as provided in App. 21. SECTION 3374. Pukyutang Barangay Program . For purposes of financing backyard honeybee raisers, as well as small-scale and medium scale bee projects under the Pukyutang Barangay Program, the network of rural banks (RBs) and stock savings and loan association (stock SLAs), is being utilized to finance the production of honey, pollen and beeswax. SUBSECTION 3374.1 Strategy of implementation a. Before implementing the program in the rural bank/stock SLA, a bench mark survey should be conducted by the banking institution itself to determine if the project is viable and feasible in the area. b. If the project is found to be viable and feasible, a meeting should be held at the municipal level among all the people to be involved in the project, such as suppliers of foundation stock, and prospective honeybee raisers and/or persons with on-going projects, as well as municipal officials and barangay leaders. c. A series of meetings should likewise be conducted on the barrio level to orient the prospective borrowers on the supervised credit scheme and to discuss fully the mechanics and guidelines of the program. d. In the initial stage of implementation, five (5) colonies per borrower may be considered. e. The ratio between the production technician and borrower should not be more than 1:100 at the initial implementation of the program. f. The pilot areas selected to initially implement the program should be accessible to land transportation, and as much as possible compact, to ensure efficient control and supervision. g. The project may be gradually expanded if the project upon evaluation is found viable. SUBSECTION 3374.2 Eligibility requirements . The following criteria shall be observed by participating institutions and borrowers under the program. a. RB's/stock SLA's (1) Must be operating in accordance with laws as well as regulations, instructions and directives of the Monetary Board; (2) Must have no internal dissension which may jeopardize the government investment and financial assistance to the bank; (3) Must be eligible to rediscount with the Central Bank; (4) Must have been authorized by the Central Bank to accept and service savings and time deposits; (5) Must have sound liquidity and investment position; (6) Must have a qualified technician and/or government technician to supervise the project; and (7) Must be duly accredited by the Management Committee of the program. b. Borrowers (1) A prospective borrower must have ample experience and adequate competence to operate the project with a minimum of external supervision and technical assistance; (2) He must have undergone or be willing to undergo training of not less than one (1) week, and be certified by the RB/stock SLA technician. (3) He must be a resident of the locality where transportation is easily accessible and the peace and order situation is not a problem; (4) He must be willing to abide by the technical recommendations of the RB/stock SLA/Bureau of Animal Industry/Central Bank technician, as a means to insure the delivery and adoption of the suitable technology package; (5) He must be of good moral character, possesses the three (3) C's of credit and does not have past due loans with other financing institutions; (6) He must have other sources of income in addition to the project to be financed; (7) He must be a bonafide small-scale beekeeper whose total investment does not exceed P30,000.00 in semi-commercial bee project; and (8) In the case of the initial honeybee raiser, he must possess all the essential factors mentioned in Items (1) to (5) above. SUBSECTION 3374.3 Purpose of the loan . The loan proceeds shall be used to finance, in the case of backyard honeybee raiser, the purchase of initial colonies (a minimum of five (5) and a maximum of twenty (20) colonies), feed supplements, bottles, utilities, equipment and labor. In the case of semi-commercial bee projects, such proceeds shall be utilized to augment their present capital. SUBSECTION 3374.4 Loan basis . The amount or size of loan is to be determined according to the actual costs of essential items mentioned above. However, in the case of semi-commercial bee projects, the maximum amount of loan shall be P25,000.00 with at least P5,000.00 equity of the borrower. SUBSECTION 3374.5 Loan releases . The loan shall be covered by one (1) promissory note the proceeds of which shall be released only upon compliance with the requirements under Subsec. 3374.2 and in accordance with the farm plan and budget. SUBSECTION 3374.6 Loan term . Loans shall have a maturity not exceeding one (1) year for all project categories. SUBSECTION 3374.7 Interest rate . The interest rate shall be twelve per cent (12%) per annum inclusive of service and other bank charges which shall be discounted in advance. SUBSECTION 3374.8 Loan repayment . The loan shall be paid upon maturity or at periodic intervals to coincide with the harvest and sale of honey and its by-products. SUBSECTION 3374.9 Security . Loans under this project shall be secured by any or a combination of the following: a. Selda or damayan of at least five (5) members; b. Two (2) Solvent co-makers acceptable to the rural bank; c. Real estate collateral free from all liens and encumbrances may be required by the bank, for semi-commercial bee projects. d. Chattel mortgage of stocks (colonies) accompanied by a deed of undertaking certifying to the fact that the borrower shall at any given time, have the same number of bee colonies. e. Deed of assignment of the honey and by-products to be financed. SUBSECTION 3374.10 Priority areas . The whole country is the total targeted area of the program. Initially, pilot projects shall be established in the eastern portions of Laguna, Batangas and Quezon provinces in view of the wide areas planted to coconuts, mangoes and other flowering trees, their nearness to forested areas which are the natural sanctuaries of bees and their proximity to the Pukyutang Barangay Training Center at Sta. Anastacia, Sto. Tomas, Batangas and to Metro Manila, the primary market. SUBSECTION 3374.11 Financing requirements . Financing for a bee project should meet the following minimum requirements to insure the success of the program: a. Training of borrowers . The borrowers should undergo training of not less than one (1) week, duly certified by the Pukyutang Barangay Training Center or by the Ministry Agriculture/Central Bank/RB/stock SLA technician. b. Facilities for bee keeping . The release of the loan to cover the purchase of bee stock should be made only when the borrower is ready with the boxes equipped with frames wax foundation and other paraphernalia and shed for his bees. c. Marketing agreement . A signed marketing agreement between producer and buyer shall be required of a borrower as a guarantee for the market of his produce (honey, beeswax, pollen). d. Supervision of the project . The borrower shall sign an agreement with the RB/stock SLA signifying his willingness to have his project come under the supervision of the Ministry of Agriculture/Central Bank/RB/s stock SLA technicians; as a means of insuring the delivery and adoption of suitable technology package for bee culture. SUBSECTION 3374.12 Training and accreditation . In order to insure the success of the program, only RBs/stock SLAs that have been trained and accredited by the Pukyutang Barangay Program Management Committee shall be allowed to secure special time deposits and rediscounting from the Central Bank of the Philippines. SUBSECTION 3374.13 Special time deposits for RBs/stock SLAs . Application for special time deposits shall have the favorable endorsement of the agricultural credit supervisor assigned to the RB/s stock SLA concerned. SUBSECTION 3374.14 Recommended procedures/points to consider on loan processing for short-term supervised credit loans a. Interested farmer-borrower, who had previously attended at least one (1) barrio meeting on supervised credit may approach the nearest qualified rural bank/stock SLA to his residence or place of project and have a personal dialogue with the rural bank management (President/Manager and Technician) signifying his desire to participate with the newly-conceived program for the locality. b. Rural bank/stock SLA management should reorient the prospective borrower as to the basic requirements of the project, his duties and responsibilities, including the benefits/privileges that can be derived from the program. c. If the prospective borrower appears eligible after evaluating his credit worthiness, the rural bank/government technician together with the prospective borrower shall prepare the farm plan and budget in the field. Actual inspection of the project site by the technician should not be overlooked as this finally determines the viability of the project to be undertaken by the borrower. d. If all requirements are met and the project is found viable, the loan shall be processed and upon approval by bank management, the loan shall be released in lump sum to be automatically credited in the special savings deposit of the borrower. Subsequent withdrawals from the special savings deposit shall be in accordance with the farm plan and budget. e. All withdrawals must be in the form of purchase orders (chit), except in cases wherein withdrawals in the form of cash is unvoidable. The withdrawals against special savings deposit account shall be allowed only in the amount specified in the approved farm plan and budget, certified to by the production technician. However, if the initial fund will come from banks' own resources, the procedure will be one promissory note for every release of loan proceeds based on the prepared farm plan and budget jointly prepared by the borrower and production technician. f. The procurement of honeybee colonies shall at all times be undertaken in the presence of the farmer-borrower, production technician and the rural bank/stock SLA representatives. g. During the lifetime of the loan, periodic visits shall be conducted by the production technician on the project to insure that the farmer is following the recommended farm practices. h. In all cases, borrowers who intend to dispose of their products financed shall be reported first to the rural bank/stock SLA management and/or the production technician. Liquidation of the corresponding loan should immediately follow after the sale of such product. i. After repayment of loan, the results of the project must again be evaluated by the production technician. * zation, however, should not exceed twenty-five (25). 5. The recommended loan ceiling for each project under the Program are as follows. a. Beef-Cattle Fattening Project P4,500 per head of cattle per OSY borrower. b. Goat Production Project P3,150 per OSY borrower for the purchase of five (5) native breeders and to share in the cost of one (1) Anglo-Nubian buck with four (4) other OSY cooperators. c. Legume Production Project Mungo P1,900 per one (1) hectare per OSY borrower. d. Legume Production Project Peanut P2,500 per one (1) hectare per OSY borrower ( Effective Nov . 20, 1985 ) The MA technicians shall determine the actual credit requirement of the OSY borrower, but in no case shall it exceed the recommended loan ceilings. The KASAKA Executive Committee is hereby authorized to raise the loan ceiling of KASAKA Projects up to an amount not exceeding 10% within a given year without consulting the KASAKA, Technical Committee concerned for flexibility to changing price conditions in the market. ( Effective March 21, 1983 ). 6. The terms and conditions under which the qualified rural bank shall grant loans to qualified OSYs shall include the following. a. Loans to OSYs shall earn interest at ten per cent (10%) per annum plus two percent (2%) per annum service charge. b. The maturity of the loan shall not exceed 1) Two (2) years for loans under Beef-Cattle Fattening Project. provided that should the animal financed be sold at any time before the maturity of the loan, the borrower shall be required to make full payment thereof ( Effective October 17, 1983 ). (2) 150 days for loans under the Legume Production Project. 7. Upon the release of the loan, it shall be the responsibility of the MA technicians to assist the OSY in the proper management of his agricultural project. 8. The OSY borrower under this Program shall execute a promissory note in triplicate copies in favor of the Central Bank as Administrator of the KASAKA Fund, the original of which shall be submitted to DRBSLA, Central Bank. 9. The participating rural bank shall receive a commission of three per cent (3%) on the amount collected for the Fund in addition to the service charge of two per cent (2%) per annum. 10. The rural bank shall assume/absorb for its account fifteen per cent (15%) of losses arising from non-payment of loans granted under this Program. 11. In implementing the Program, the following procedure shall be observed. a. The qualified OSY borrower shall file his loan application with the participating rural bank; b. The rural bank shall submit to DRBSLA, Central Bank thru NFAC its application for availment of KASAKA Fund covering the applications of eligible OSY borrowers duly recommended by the Provincial Agricultural Officer (PAO) of MA. c. Upon endorsement of NFAC, the DRBSLA shall process the application and shall release to the rural bank thru credit advise to the nearest PNB branch the amount approved from the KASAKA Fund. d. The rural bank shall withdraw funds from the PNB branch and shall release loans to OSY borrowers in accordance with this and existing supervised credit schemes guidelines, i.e., loans to OSY borrowers shall be released in staggered amounts in accordance with the farm plan and budget jointly prepared by the OSY borrower and the MA technician. Every loan shall be covered by a separate promissory note and only one ledger card shall be maintained for each OSY borrower with the proper notation therein as "KASAKA". Such loan releases shall be made immediately upon receipt of the credit advice. The rural bank shall submit to DRBSLA, Central Bank a list of OSY borrowers that were granted loans out of the KASAKA Fund within forty-five (45) days from the date of receipt of said Fund. e. Repayments received by rural banks from OSY borrowers on loans granted under the Program shall be remitted to CB-SES Department III or to the nearest CB Clearing Office within five (5) banking days from receipt thereof. A rural bank that fails to remit the amount collected within the period mentioned above shall pay a penalty charge on the unremitted amount at the rate of forty-two percent (42%) per annum inclusive of interest on STD until such amount is remitted in full to the Central Bank ( Effective Nov . 20, 1985 ) f. Loan Renewal/Refinancing The rural bank shall be allowed to finance projects of OSYs with proven credit-worthiness by using funds from repayments prior to maturity. This shall be applicable only to selected and outstanding rural banks financing livestock projects based on the recommendation of the KASAKA Provincial Coordinator-Senior Rural Youth Development Officer (SRYDO). This shall be extended to OSYs if and only if the following conditions are met: (1) The recipient will be the same OSY who repaid in full his previous loan; (2) The same project will be undertaken. (3) The second financing will be an amount equal to the previous loan; (4) The second loan will be released to the OSY within thirty (30) days from date of full payment; and (5) The second loan should be paid within the maturity period of the previous loan. Should the OSY be given another loan for livestock projects, the interest rate of 10% and service charge of 2% will continue to be charged on an annual basis. ( Effective Nov . 20, 1985 ) g. Restructuring of Loans and Re-financing of KASAKA Program Projects (1) Loans under this program may be restructured but in no case to exceed three (3) years if the non-payment is due to diseases, pest and/or causes beyond the control of OSYs and not traceable to any concurrent fault or negligence on their part; (2) Past due KASAKA Fund released to rural banks may also be restructured subject to the above conditions; (3) Re-financing of the projects with restructured loans may be granted provided that such refinancing could be justified by feasibility studies and recommendation by the Provincial Program Coordinator; and (4) The above restructuring of loans and KASAKA Fund and re-financing of projects with restructured loans may be considered retroactive from the start of the KASAKA Program (1983). ( Effective Nov . 20, 1985 ) 12. Any amount received by the rural bank from the Central Bank shall be released to qualified OSY borrowers within forty-five (45) days from receipt of the KASAKA Fund, and any unused portion thereof shall be returned to the Central Bank within five (5) days after the forty-five (45)-day period. A rural bank which fails to return such mount within this period shall pay interest on the amount not returned at the rate of forty-two percent (42%) per annum inclusive of interest on STD until such amount is remitted in full to the Central Bank. Similarly, any unauthorized use of the KASAKA Fund by any rural bank shall subject such bank to the same interest on the amount involved at the rate of forty-two percent (42%) per annum inclusive of interest on STD for the duration of such unauthorized use. ( Effective Nov . 20, 1985 ) 13. Any misappropriation of funds received by the rural bank or failure of the rural bank to remit to the Central Bank loan repayments of OSY borrowers and the amount from the KASAKA Fund not loaned out as provided in paragraph 12 above within the requisite period under this Program shall subject the officers and employees responsible thereof to prosecution under Article 315 of the Revised Penal Code. 14. The rural bank participating under this Program shall keep separate books of account and records affecting transactions under the KASAKA Program which shall be subject to inspection and examination of the Central Bank Cash pertaining to this KASAKA Program shall, likewise, be physically segregated from other funds. Separate financial statements in the prescribed form shall be submitted to the Central Bank every month. Accounting entries for these transactions shall be as those prescribed in Appendix 33. ( Effective April 2, 1982 ). SECTION 3375-C. Expanded Yellow Corn Production Assistance Program (EYCPAP) SUBSECTION 3375-C.1 The Implementing Guidelines Governing the Participation of Banks under the Expanded Yellow Corn Production Assistance Program (EYCPAP) may be found in Appendix 36 (Effective Sept. 2, 1984). LLpr SUBSECTION 3375-C.2 The Eligibility Requirements for the Participation of Rural Banks in the Expanded Corn Program (ECP) of the government may be found in Appendix 39 (Effective April 24, 1985). SECTION 3375-D. Intensified Rice Production Program (IRPP) SUBSECTION 3375-D.1 The Implementing Guidelines Governing the Participation of Banks Under the Intensified Rice Production Program (IRPP) may be found in Appendix 39 ( Effective Dec . 26, 1984 ) SUBSECTION 3375-D.2 The Eligibility Requirements for the Participation of Rural Banks in the Intensified Rice Production Program (IRPP) of the government may be found in Appendix 39 ( Effective April 24, 1985 ) SECTION 3375-E. Philippine Aquaculture Development Project SUBSECTION 3375-E.1 The Rules and Regulations Governing the Implementation of the Philippine Aquaculture Development Project may be found in Appendix 37 ( Effective Sept . 19, 1984 ). SUBSECTION 3375-E.2 The Eligibility Requirements for the Participation of Rural Banks in the Philippine Aquaculture Development Project may be found in Appendix 39. ( Effective April 24, 1985 ). SECTION 3375-F. Participation of Banks in Financing Post-Harvest Facilities . SUBSECTION 3375-F.1 Implementing Guidelines Governing the Participation of Banks in Financing Post-harvest Facilities may be found in Appendix 40. ( Effective April 29, 1985 ) SUBSECTION 3375-F.2 The Eligibility Requirements for the Participation of Rural Banks in Financing Post-Harvest Facilities may be found in Appendix 39 ( Effective April 24, 1985 ) SECTION 3375-G. Participation of Banks in Financing the Soybean Production Program (NSPP ) SUBSECTION 3375-G.1 Implementing Guidelines Governing the Participation of Banks in Financing the National Soybean Production Program (NSPP) may be found in Appendix 41. ( Effective April 29, 1985 ) SUBSECTION 3375-G.2 The Eligibility Requirements for the Participation of Rural Banks in Financing the National Soybean Production Program (NSPP) may be found in Appendix 39 (Effective April 24, 1985 ) SECTION 3375-H. Participation of Banks in Financing the National Rootcrops for Feeds Program (NRFP ) SUBSECTION 3375-H.1 Implementing Guidelines Governing the Participation of Banks in Financing the National Rootcrops for Feed Program (NRFP) may be found in Appendix 42 ( Effective April 29, 1985 ) SUBSECTION 3375-H.2 The Eligibility Requirements for the Participation of Rural Banks in Financing the National Rootcrops for Food Program (NRFP) may be found in Appendix 39 ( Effective April 24, 1985 ) G. EQUITY INVESTMENTS SECTION 3376. Scope of Authority . Rural banks may invest in the equities of financial and non-financial allied undertakings. SECTION 3377. Financial Allied Undertakings . Rural banks may invest in the equities of other banks as financial allied undertakings. Prior approval of the Monetary Board shall be required in any investment by a rural bank of the equity of another bank. SECTION 3378. Limits on Investments in Allied Undertakings . Except as may be authorized by the Monetary Board the total equity investments in and outstanding loans to any single enterprise shall not at any time exceed fifteen per cent (15%) of the net worth of the investing bank. SECTION 3379. Non-financial Allied Undertakings . The following are declared as non-financial allied undertakings of a rural bank: a. Warehousing companies; b. Companies providing processing facilities for agricultural crops such as rice and corn; c. Companies providing drying facilities for agricultural crops such as rice and corn; d. Storage companies; e. Insurance agencies. Provided , That no director, officer or stockholder of the bank and their related interests hold/own more than twenty per cent (20%) of the subscribed capital stock or equity of the insurance company of which the affiliate insurance agency acts as agent; and f. Safe deposit companies: Provided , That any such undertaking is the primary purpose for which a particular enterprise was established and the volume of its business indicates that it is principally engaged in such undertaking; g. Companies engaged exclusively in facilitating the marketing of existing agricultural products (as distinguished from mere growing and standing crops ) such as palay, rice, corn, vegetables, sugar and other essential basic agricultural commodities like aquamarine products. Rural banks may own up to one hundred per cent (100%) of the equity of any of the non-financial allied undertakings: Provided , That if the investment is in excess of forty per cent (40%) of the voting stock or forty per cent (40%) of the total subscribed capital stock of such allied undertaking, prior approval of the Monetary Board is required. SECTION 3380. Investment in Philippine Farmers Marketing System, Inc . and Other Marketing Corporations . Rural banks may invest in the equity of the Philippine Farmers Marketing Systems, Inc. and in other marketing corporations engaged in similar undertakings, subject to the following conditions: a. The primary activity of such marketing corporations shall be that of facilitating sales or acting as agents/brokers in the marketing of existing farm products, and they shall not engage in direct buying and selling activities; and b. Such marketing corporations shall not perform functions/activities not related to their primary purpose, like management consultancy services, performance of project feasibility studies and training of bank managers. SECTION 3381. Limitations and Restrictions . The following limitations and restrictions shall apply to allied undertakings of rural banks. SUBSECTION 3381.1 Investments in and loans to a single enterprise . The total equity investments of a bank in any single enterprise shall not at any time exceed fifteen percent (15%) of the net worth of the investing bank. ( Effective March 7, 1984 ) SUBSECTION 3381.2 Investments in all enterprises The total amount of investment in equities made by a bank in all enterprises, whether financial or non-financial allied undertaking shall not exceed twenty-five per cent (25%) of its net worth. SUBSECTION 3381.3 Conditions precluding investment in equities . A rural bank shall not invest in the equity of any enterprise whether financial or non-financial allied undertaking, if the interesting bank is in any of the following situations: a. Its capital is impaired, whether by actual losses or unbooked valuation reserves required by the Central Bank; b. Its lending operations had been suspended on account of reserve or capital deficiency, until such suspension shall have been lifted format least one (1) year and sufficient reserves or capital shall have been maintained; c. It incurred losses from its operations during the preceding year; d. It has not fully booked the valuation reserves and other capital adjustments required by the Central Bank; e. It has exceeded the individual and aggregate ceilings as well as the ceiling on unsecured credit accommodations to directors, officers and stockholders, and their related interests; and f. Its ratio of past due loans to total loan portfolio exceeds twenty per cent (20%): Provided , That rural banks with past due ratio not exceeding twenty five per cent (25%) of the total loan portfolio are authorized to invest in the equity of companies referred to in Sec. 3379g. cdt SECTIONS 3382-3390. ( Reserved ) H. OTHER OPERATIONS SECTION 3391. Purchase of Receivables and Other Obligations . Rural banks may make investments or placements in the money market desks of financial intermediaries performing quasi-banking functions in accordance with the following rules. SUBSECTION 3391.1 Definition of terms . As used in this section, the following terms shall have the following meanings: a. Money market placements shall include investments in debt instruments, including purchase of receivables with recourse to the selling institution, except purchase of government securities on an outright basis. b. Government securities shall include evidences of indebtedness of the Republic of the Philippines, the Central Bank of the Philippines and other evidences of indebtedness or obligations of government entities and servicing and repayment of which are fully guaranteed by the Republic of the Philippines. c. Persistent violation shall mean the violation of any of the provisions hereof by the director or officer concerned for four (4) or more times within a twelve (12) month period from the date the first offense was committed. SUBSECTION 3391.2 Pre-conditions on placements Rural banks are hereby prohibited from making investments or placements in the money market desks of financial intermediaries performing quasi-banking functions if such rural banks have overdue special time deposits under special financing programs and or have any past due obligations with the Central Bank or other government financial entities. Rural banks not covered by the preceding prohibitions may make money market placements, except purchase of receivables without recourse, subject to the following conditions: a. That they present a certification under oath stating (1) that they have no overdue special time deposits under special financing programs, (2) that they have no past due obligations with the Central Bank or other government financial entities, (3) the amount of their current obligations, if any, with said government entities, (4) the amount of their total outstanding money market placements; b. That total money market placements of a rural bank at any one time shall not exceed the rural bank's combined unimpaired capital accounts or net worth less current obligations with the Central Bank or other government financial entities; c. That the maturity of the money market placements shall not exceed sixty (60) days; d. That placements shall be evidenced in all cases by promissory notes of accepting entities/repurchase agreements and/or certificates of participation/assignment with recourse and that underlying instruments shall be Central Bank Certificates of Indebtedness or other government securities the servicing and repayment of which are guaranteed by the Republic of the Philippines. SUBSECTION 3391.3 Transitory provisions . Outstanding placements of rural banks covered by the prohibition as of July 28, 1977 may be retained up to maturity but shall not be subsequently renewed. All rural banks covered by the prohibition shall, within fifteen (15) days from July 28, 1977 submit a certification of the outstanding amounts of placements as of July 28, 1977 in accordance with the prescribed form. Thereafter, within five (5) days from the end of each month starting July 1977, rural banks making money market placements subject to the conditions of this section shall report all placements made during the preceding month in accordance with the prescribed form. SUBSECTION 3391.4 Sanctions . Violation of the provisions of this section shall be a ground for the suspension or after due hearing, removal from office of the directors/officers of rural banks responsible therefor, without prejudice to the imposition of the other sanctions provided in Sections 34 and 34-A of Republic Act No. 265, as amended. For purposes of this section, the penalty of suspension or removal from office shall be imposed as follows: a. 1st offense suspension between one to three months b. 2nd offense suspension between four to eight months c. 3rd offense suspension between nine to twelve months d. Persistent violation removal from office SECTIONS 3392-3398. ( Reserved ) SECTION 3399. General Provision on Sanctions . Any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. * Copied verbatim from documents obtained directly from the Bangko Sentral ng Pilipinas Footnotes 1. This can be determined by dividing twelve, the number of months in a year, by the number or fraction of months between installment payments. * Now Ministry. * Contingencies equivalent to 2% of cost of feeds, additives and veterinary medicine and biologics. ** Contingencies equivalent to 2% of cost of feeds, additives and veterinary medicine and biologics. 1. 55 has owned by 69 fishpen operators with less than 1 ha. area each and 1,830 has owned by 733 fishpen operators with 1-5 ha. each. 2. Production is 4 tons per hectare. 3. Production is 6.9 tons per hectare. * The guidelines in Appendix 26 shall govern the restructuring of CB:IBRD loans granted under the 1st and 2nd Rural Credit Projects. NOTE: PART IV & V, EMPTY IN ORIGINAL PART FOUR Trust and Other Fiduciary Functions PART FIVE Foreign Exchange Operations PART SIX Miscellaneous SECTION 3601. Sale of Government Securities SUBSECTION 3601.1 Premyo savings bonds operations . The following procedures for the payment of prize claims in the form of cash to service agency holders of winning premyo savings bonds "Biglang Bahay" bonds shall be observed: a. The service agency shall prepare the usual prize claim for premyo savings bonds. b. The prize claim shall be forwarded to the Human Settlements Development Corporation (HSDC) with the request that payment be made in the form of cash. c. On the basis of the above prize claim, the service agency bank shall debit the account "Due to CB-PSBs" (20% retention). LLphil d. The Securities Servicing Department shall respond to the above debit only upon receipt of the prize claim, payment of which in the form of cash, has been approved by the HSDC. SECTIONS 3602-3603. (Reserved) SECTION 3604. Miscellaneous Operations SUBSECTION 3604.1 Investment in bonds and other debt securities . Rural banks may invest in the following: a. Readily marketable bonds and other debt securities which are of such use or demand as to make them the subject of constant dealings in securities markets, with such frequent quotations of price as to make the price easily and definitely ascertainable, and the security easy to realize upon by sale at any time: Provided , That the bonds and other debt securities shall have been approved by the Central Bank and shall have complied with the rules on registration of commercial papers issued by the Securities and Exchange Commission. It shall be the responsibility of the management of the investing bank to undertake the necessary investigation to satisfy itself with regard to the particular security. b. Evidences of indebtedness of the Republic of the Philippines, or of the Central Bank, and any other evidences of indebtedness or obligations the servicing and repayment of which are guaranteed by the Republic of the Philippines. SUBSECTION 3604.2 Acceptance of "lipstick" checks . Rural banks may accept United States Treasury Warrants with red typewritten letters on the upper portion of the face thereof ("lipstick" checks), without the prior approval of the Department of Rural Banks and Savings and Loan Associations, subject to the following conditions: a. A rural bank may accept "lipstick" checks only from the payee thereof and only for deposit and/or repayment of the loan; b. The rural bank must establish the identity of the payee, preferably through an officer or responsible employee of the rural bank or by acceptable documentary evidence; c. The rural bank shall maintain a deposit account with a commercial bank through which these items may be cleared; d. The peso equivalent of the "lipstick" check shall be credited to the account of the depositor or borrower based on the current buying rate for US dollars of the rural bank's depository bank mentioned in "c" above; e. No withdrawal shall be allowed on deposit balances representing uncleared checks; f. In case of receipt of such checks in payment of a loan, the obligation shall not be deemed extinguished until such checks had been cleared and credited to the account of the rural bank; and g. The rural bank shall maintain a separate register for the "lipstick" checks indicating the following: (1) date of receipt of checks, (2) name of payee and drawer, (3) check number, (4) dollar amount and peso equivalent, (5) commission collected, (6) net amount credited to payee, and (7) date the check was cleared. SUBSECTION 3604.3 Sale of Philippine National Bank money orders a. Requirements . A rural bank may sell Philippine National Bank money orders under the following arrangement: (1) The PNB agrees to deliver and entrust to rural banks, acting as consignees, PNB bank money orders (BMO); and (2) The Department of Rural Banks and Savings and Loan Associations shall determine which of the rural banks may be designated as consignees, and the rural banks concerned agree to sell and dispose of said BMOs under the following terms and conditions: (a) That the consignee will collect fees from purchases of BMO as follows: Denomination Fees P300 P1.25 200 1.00 100 .50 50 .25 20 .25 15 .25 10 .25 (b) That the total fees collected will be divided as follows: 50% to the PNB 50% to the consignee (c) That the consignee will remit every Monday proceeds of the sale of BMO for the past week together with the corresponding share of the fees collected. (d) That the consignee will maintain either a savings or current account with PNB from which PNB may reimburse itself of any amount due from the consignee. (e) That the consignee may encash or accept for deposit or payment BMO in their custody. b. Application for authority . A rural bank which desires to avail of the arrangement mentioned above shall pass a board resolution to apply for the said arrangement. The resolution shall contain the name of the rural bank's officer who will sign the agreement. Thereafter, a request to be authorized to act as consignee of PNB bank money orders shall be filed with the Department of Rural Banks and Savings and Loan Associations. A copy of the board resolution together with the rural bank's latest statement of financial conditions shall be attached to the letter/request of the rural bank. c. Qualification requirements . Before a rural bank may qualify as a consignee of PNB bank money orders, it shall satisfy the following requirements: (1) Its operations shall show adherence to banking laws and the rules and regulations issued by the Central Bank; (2) Its percentage of past due items to total loan portfolio shall not be unreasonably high; (3) Its credit standing with the Central Bank shall be satisfactory; and (4) It is authorized to accept savings deposits. The prior approval of the Department of Rural Banks and Savings and Loan Associations shall be sent to the PNB (main office) and a copy thereof furnished the rural bank concerned. With this approval, the agreement between the PNB and the authorized rural bank may be executed. SUBSECTION 3604.4 Foreign exchange dealership . The following rules and regulations shall be observed by rural banks in connection with the grant of authority to act as foreign exchange dealers of the Central Bank: a. Thrift banks (private development banks, savings and mortgage banks, and savings and loan associations) and rural banks shall, upon prior application, be designated as authorized foreign exchange dealers of the Central Bank. As such, they may purchase for pesos foreign currencies from foreign tourists, other non-residents including balikbayans, and residents, subject to the following terms and conditions: (1) The foreign currencies which may be purchased shall be limited to those which are acceptable to the Central Bank. At present, these are: (a) U.S. Dollar (b) Canadian Dollar (c) Australian Dollar (d) Singapore dollar (e) Hongkong Dollar (f) Malaysian Dollar (g) Swiss Franc (h) French Franc (i) Belgian Franc (j) Pound Sterling (l) Japanese Yen (m) Netherlands Guilder (n) Italian Lira (o) Austrian Schilling (p) Saudi Arabian Rial (q) Kuwait Dinar (r) Bahrain Dinar (2) Such foreign currencies shall be purchased at rates not lower than the minimum buying rates prescribed by the Central Bank as indicated in the "Bulletin on CB Buying Rates For Acceptable Currencies" issued daily by the International Treasury Office, Foreign Exchange Department, Central Bank; (3) Central Bank official receipts shall be issued for all purchases of foreign currencies; (4) All such foreign currencies purchased from the persons named in the first paragraph hereof shall be sold for pesos either to Authorized Agent Banks or directly to the Central Bank within three (3) business days from the date of acquisition: Provided , That the sale of checks shall always be to Authorized Agent Banks; (5) A quarterly report of all such purchases and sale of foreign currencies shall be submitted to the Foreign Exchange Department of the Central Bank not later than fifteen (15) days following the end of every quarterly period, together with the following supporting documents: (a) Duplicate copies of the CB official receipts issued covering purchases of foreign currencies; (b) Copies of credit advices or receipts issued by Authorized Agent Banks or the Central Bank to which the foreign currencies were eventually sold; and (c) Such other schedules which may be required to be submitted to the Foreign Exchange Department of the Central Bank; (6) All purchases of foreign currencies from the aforementioned persons shall be recorded daily, and sales made to Authorized Agent Banks and to the Central Bank shall likewise be recorded. Such records shall be made available for verification by authorized representatives of the Central Bank, whenever required; and (7) In addition to the foregoing terms and conditions, such other regulations and conditions which may hereafter be issued or imposed by the Foreign Exchange Department of the Central Bank in implementation thereof shall be strictly complied with. All thrift banks and rural banks already authorized by the Central Bank to act as authorized foreign exchange dealers of the Central Bank shall be governed by the provisions of Item "c" of this subsection. SUBSECTION 3604.5 Posting of statement of condition of rural banks . Rural banks are required to post their financial statement in three (3) conspicuous public places in the municipality/city where the rural bank is located in accordance with the following rules and regulations: a. Forms . The statement of condition required herein to be posted shall be prepared as of the end of every quarter in the condensed form prescribed for the purpose and printed on a 12" x 18" white paper, preferably white buff paper (cartolina). b. Place . The printed statement of condition of a rural bank shall be posted in the following places: (1) At the front door of the rural bank building; (2) At the front door or bulletin board, if there is any, of the municipal building; and (3) At the main gate of the public market; if there is none, at a conspicuous place in the public market. c. Time . The posting shall be made within twenty (20) days from the end of every quarter and for a period of thirty (30) successive days. d. Proof . As proof of such posting, two (2) affidavits separately executed by (1) the rural bank president or, in his absence, the vice-president or manager, and (2) the city/municipal treasurer, shall be submitted to the Department of Rural Banks and Savings and Loan Associations not later than sixty (60) days after the end of the quarter. e. Penalty . Without prejudice to the curtailment of financial assistance and/or other privileges usually enjoyed by normally operating rural banks, failure to comply with this requirement shall subject the rural bank to the rules and penalties prescribed in Subsec. 3161.2b for willful delay in the posting and/or submission of required affidavits of publications. All rural banks shall post at all times in a conspicuous place on the premises of its head office and other banking offices a list of acquired assets together with the corresponding lowest price at which the bank is willing to sell such property. However, this requirement shall not relieve the banks from the requirement under Sections 25 and 34 of Republic Act No. 337, as amended, to dispose of such acquired assets. SECTIONS 3605-3606. (Reserved) SECTION 3607. Bank Advertisements . The following prohibitions on bank advertisements shall apply to rural banks: a. No bank shall publish, issue or distribute in any form, any advertisement that shall degrade, deprecate or otherwise prejudice other banking and financial institutions; b. No bank shall publish, issue or distribute in any form of advertisement (in newspapers, magazines, television, radio, billboards, brochures, prospectuses, or any other medium) or allow itself to be used/mentioned in any form of advertisement related to services, such as the acquisition sale, resale or lease of real estate, insurance privileges, and other non-banking activities/services which are not directly related to the business of banking or in pursuance of regular banking business; c. No bank shall place or cause to be placed any advertisement tending to mislead a depositor into believing that he will get more in benefits than what the bank is legally authorized to give. No bank advertisement shall contain any false claim or exaggerated representation as to its liquidity, solvency, resources, deposits and banking services; cdpr d. No bank advertisement shall give the impression that the bank is engaged in a business other than banking; e. Banks shall inform their depositors and other clients by advertisement or publication of the termination of benefits previously advertised or publicized; f. Banks shall discontinue any advertisement whenever the same is deemed unethical/unwarranted or violative of the provisions hereof and are directed to do so by the appropriate supervising and examining department of the Central Bank in the exercise of its administrative authority. Towards this end, the client banks and/or their advertising agencies shall incorporate in any contract/agreement for time and space with media the condition that such contract/agreement for time and space can be cancelled/terminated immediately whenever the client bank is directed by the Central Bank to desist or discontinue the particular advertisement in question. Responsibility for compliance with the above rules and regulations rests with the bank officers or directors who paused the approval or placement of such advertisement. SECTION 3608. Assessment Fees on Banks . Every rural bank shall contribute to the Central Bank an annual fee to help defray the cost of maintaining the Department of Rural Banks and Savings and Loan Associations in accordance with the following guidelines: SUBSECTION 3608.1 Annual fee a. Assessment . The fee shall be assessed at the rate of one-twentieth of one per cent (1/20 of 1%) of the average total assets during the preceding year, as shown on the end-of-month balance sheets of each rural bank, minus cash on hand and amounts due from banks including the Central Bank. Contingent accounts, should there be any, except instruments received by rural banks on consignment like PNB bank money orders and Central Bank certificates of indebtedness, shall be included in the total assessable assets of rural banks. The assessment shall cover all rural banks regardless of the dates when they were organized, except in the case of rural banks under liquidation or receivership to which actual liquidation or receivership expenses incurred by the Central Bank shall be charged. b. Manner of collection . Where the rural bank maintains a deposit account with the Central Bank, its deposit account shall be debited by the Central Bank Accounting Department upon receipt of assessment from the Department of Rural Banks and Savings and Loan Associations. The rural bank shall be advised accordingly. Where the rural bank does not maintain a posit account with the Central Bank, or where its deposit is insufficient to cover the assessment fee, the Accounting Department of the Central Bank shall bill said bank for the full amounts of the fee or for the balance thereof not covered by its deposit account, as the case may be. Within thirty (30) days from receipt of the bill, the rural bank shall make the corresponding remittance to the Central Bank Accounting Department. Failure today the bill within the prescribed period shall subject the rural bank to administrative sanction. SECTION 3609. Reproduction and Use of Facsimiles of Government Securities, Currency Notes and Coins SUBSECTION 3609.1 Facsimiles of government securities a. Required authority . No person or entity shall design, engrave, print, make or execute in any other manner, or issue, distribute, circulate or use any handbill, advertisement, placard, circular, card or object whatsoever bearing; the likeness or similitude of any government securities issued by and/or through the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior written authority therefor having been secured from the Governor of the Central Bank. b. Purpose of reproduction and use . The reproduction and use of facsimiles of government securities referred to in Item a above may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy, or other purposes which do not tend in any way to defeat the objectives underlay the promulgation of this rules: Provided, however , That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1-) times in size of the government securities being illustrated. c. Procedure for reproduction (1) All applications/requests for authority to reproduce and use facsimiles of government securities issued by and/or through the Central Bank shall be submitted to the Office of the governor through the Securities Marketing Department. To provide sufficient time for the processing thereof, applications/requests must be submitted at least thirty (30) days before the scheduled date of reproduction of the facsimile of the pertinent government security/ies. (2) The application/request must contain, among other things, the following: (a) Name of person or entity (b) Address (c) Purpose/intended use (d) Name of printer and address (e) Undertaking that applicant shall furnish within five (5) days from the date of reproduction of the facsimile of the corresponding government security/ies, the Securities Marketing Department, Central Bank of the Philippines, for record purposes, with a copy of the facsimile thereof. (3) The Securities Marketing Department shall advise as soon as possible the applicant of the action taken thereon by the Governor. SUBSECTION 3609.2 Facsimiles of Philippine legal tender and commemorative coins a. Required authority . No person or entity shall design, engrave, make or execute in any other manner, or use, issue or distribute any object whatsoever bearing the likeness or similitude as to design, color or the inscription thereon of any of Philippine legal tender and commemorative coins or any part thereof, in metal form, irrespective of size and metallic composition, without prior authority from the Governor of the Central Bank. b. Purpose of reproduction and use . The reproduction and use of facsimiles of Philippine coins referred to in Item "a" above may be authorized by the Governor of the Central Bank for printed illustrations in articles, books, journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend to defeat the objectives underlying the probation of this rules. SUBSECTION 3609.3 Facsimiles of Central Bank notes a. Required authority . No person or entity shall design, engrave, print, make or execute in any other manner, or utter, issue, distribute, circulate or use any handbill, advertisement, placard, circular, card or any object whatsoever bearing the likeness or similitude of any currency note issued by the Central Bank of the Philippines, or any part thereof, whether in black and white or any color or combination of colors, without prior authority therefor having been secured from the Governor of the Central Bank. b. Purpose of reproduction and use . The reproduction and use of facsimiles of Central Bank notes referred to in Item a above may be authorized by the Governor of the Central Bank for printed illustrations in articles, books journals, newspapers, or other similar materials, and for numismatic, educational, historical, newsworthy or other purposes which do not tend in any way to defeat the objectives underlying the promulgation of this regulation: Provided, however, That any such illustration shall be in black and white, and of a size less than three-fifths (3/5) or more than one and one-half (1-) times in size of the currency note being illustrated. SECTION 3610. Clean Note Policy . To effect an expeditious withdrawal from circulation of unfit currency notes in order that the Central Bank could maintain a clean note policy, all banks including their provincial branches shall observe the guidelines and procedures as provided under App. 27, 28 and 29. SECTION 3611-3698. (Reserved) SECTION 3699. Sanctions in General . Any violation of the provisions of this Part shall be subject to the provisions of Sections 34 and 34-A of Republic Act No. 265, as amended. LLcd APPENDIX 1 REPORTS REQUIRED TO BE SUBMITTED BY RURAL BANKS TO THE DEPARTMENT OF RURAL BANKS AND SAVINGS AND LOAN ASSOCIATIONS (Appendix to Sec. 3161) Form No. Subject of Report Frequency Deadline CBP-7-19-01 A Weekly Report on Required and Weekly 4th banking day following reference Available Reserves against Deposit week Liabilities CBP-7-19-01 A.1 Average Required Reserves against Quarterly 6th banking day after reference quarter Deposit Liabilities in the form of Deposit Balance CBP-7-19-04 A Statement of Condition Monthly 10th day after end of reference month CBP-7-19-04 A.1 Quarterly Schedule of Savings and Time Quarterly 10th day after end of reference quarter Certificate of Deposits CBP-7-19-04 A.2 Schedule of Agricultural and Industrial Monthly 10th day after end of reference month Loans Outstanding by Crops and Industry CBP-7-19-04 A.3 Schedule of Agricultural and Industrial Monthly 10th day after end of reference month Loans Outstanding by Term and Program CBP-7-19-05 A Statement of Income and Expenses Semestral 10th day after end of every semester CBP-7-19-06 A Summary Report of Loans Granted Monthly 10th day after end of reference month (Non-Supervised Credit) CBP-&-19-06 A.1 Summary Report of Loans Granted Monthly 10th day after end of reference month (Supervised Credit) CBP-7-19-06 A.2 Monthly Report on Masagana 99 Monthly 5th day after end of reference month Rice Production Program * CBP-7-19-06 A.2.1 (a) Monthly Report on Past Due Accounts Monthly 10th day following end of M-99 Rice Production Phased I Monthly reference month Program under CBP-7-19-06 A.2.1 (b) Phase II Monthly 10th day following end of reference month CBP-7-19-06 A.2.1 (c) Phase III Monthly 10th day following end of reference month CBP-7-19-06 A.2.1 (d) Phase IV Monthly 10th day following end of reference month CBP-7-19-06 A.3 (a) Monthly Report on White Corn Monthly 5th day after end of reference month Masaganang Maisan * CBP-7-19-06 A.3 (b) Monthly Report on Yellow Corn Monthly 5th day after end of reference month Masaganang Maisan * CBP-7-19-06 A.3 (c) Monthly Report on Sorghum Monthly 5th day after end of reference month Masaganang Maisan * CBP-7-19-06 A.3 (d) Monthly Report on Soy bean Monthly 5th day after end of reference month Masaganang Maisan * CBP-7-19-06 A.6 Monthly Report on Vegetables and Fruits Monthly 10th day after end of reference Production Program Month CBP-7-19-06 A.7 Monthly Report on Poultry and Livestock Monthly 10th day after end of reference Financing Program Month * To be submitted directly to the reporting centers designated by the Central Bank Agricultural Credit Supervisor having jurisdiction over the areas within 5 days after end of reference month CBP-7-19-06 A.8 Monthly Progress Report on Cotton Monthly 10th day after end of Financing Program reference month CBP-7-19-08 A Condensed Statement of Condition Quarterly 60th day after end of reference (attachment to CBP-7-19-44 A) quarter CBP-7-19-09 A Consolidated Report on the Utilization of Monthly 12 banking days from end of reference loanable Funds Generated which were Set month Aside for Agrarian Reform Credit/ Agricultural Credit CBP-7-19-09 A.1 Consolidated Report on Existing Eligible Monthly 12 banking days from end of reference Government Securities Held for month Temporary Investments * Report on Change in Composition of As change Government Securities Held for Agrarian occurs Reform Purposes CBP-7-19-10 A.2 Report on Beneficiaries Loan (Sub-Loan Quarterly 10th day after end of reference quarter Applications CBP-7-19-10 A.3 Loan (Sub-Loan) Portfolio Quarterly 10th day after end of reference quarter CBP-7-19-10 A.4 Loan (Sub-Loan) Portfolio by Size Quarterly 10th day after end of reference quarter CBP-7-19-10 A.5 Recoveries and Maturity Extensions Quarterly 10th day after end of reference quarter CBP-7-19-10 A.6 Quarter-end Status of Overdue Loan Quarterly 10th day after end of reference quarter Principal and Interests CBP-7-19-10 A.7.1 Monthly Report of Arrearages on Medium Monthly 10 banking days after end of and Long-Term Loans reference month CBP-7-19-11 A Report on Loans/Credits to Builders/ Monthly 5 banking days after end of month Purchasers of Units/Shares of Condominium Projects/Country Clubs, Sport Clubs and Other Real Property Developments CBP-7-19-15 A Report on Financing Plan for Officers Semestral 15 banking days after end of reference semester CBP-7-19-15 A.1 Report on Financing Plan for Employees Semestral 15 banking days after end of reference semester CBP-7-19-41 A Plantilla of Organization Annually and January 31 of each year and 10 days every time after any change in the composition change occurs of plantilla CBP-7-19-42 RB Bio-data of Officers/Directors Annually Within 25 banking days after end of calendar year CBP-7-1943 A Report on Change in Schedule of As change 7th day before intended change except Banking Hours occurs in case of emergency where a 24-hour notice suffices CBP-7-19-44 A Affidavit of Rural Bank President or Quarterly 60th day after end of reference quarter Manager of the Posting of Quarterly Statement of Condition * In compliance with the 10% Agrarian Reform Credit under Subsec. 3341.3 CBP-7-19-44 A 1 Affidavit of city/municipal Quarterly 60th day after end of reference quarter Treasurer of the Posting of Quarterly reference quarter Statement of Condition CBP-7-19-45 A Application for availment of the privilege Every time an Not later than the banking day to use CBCI and other government application is immediately following the day when securities with remaining maturities of made the bank incurred a reserve deficiency less than 2 years, not otherwise eligible as reserve against deposit liabilities CBP-7-19-45 A 1 Investment in Securities (attachment to Every time an Not later than the banking day CBP-7-19-45 A) application is immediately following the day when made the bank incurred a reserve deficiency CBP-7-19-46 A Sworn Statement on Real Estate Every time a 10 days after approval of transaction Transaction transaction is approved CBP-7-19-50 A Report on Crimes/Losses Every time a Within 48 hours from knowledge of crime/incident of crime/incident occurs Notification of Transfer/Stolen/Destroyed Every time a Within 5 days from the time transfer/ Loss of Stock Certificates transfer/loss loss is reported occurs Annual Report of Management to Annually Stockholders Covering Results of Operation for the Previous Year Audited Financial Statement for the Annually Previous Year Prepared by the External Auditor Report on Dividends Declared Every dividend Within 10 banking days from date of declaration approval by bank's board of directors Certification on Security Program Annually Within 14 months from April 27, 1977; last business day of December thereafter Money Market Placements Monthly 5 banking days after end of reference month Report on Loans Granted under the Quarterly 10th day after end of reference quarter CB-MEC Supervised experience Education Program To facilitate updating of Central Bank Every time an Within ten (10) days from election/ Records on Bank directors election of assumption of office. (Effective Oct. 1, directors is held 1984) Categories of Reports: A-1 CBP 7-19-08A (Condensed Statement of Condition-Published) A-2 CBP 7-19 04 A (Statement of Condition) B All other reports APPENDIX 1-a FORMAT OF RESOLUTION FOR SIGNATORIES CATEGORY A-1 REPORTS OF RURAL BANKS (Appendix to Subsec. 3161.1) RESOLUTION NO. _________ Whereas, under Subsection 3161.1 the Central Bank of the Philippines requires Category A-1 reports to be signed by the institution's President, and by the Chief Finance Officer (i.e., Chief Accountant); LexLib Whereas, the same Circular-Letter requires that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we, the members of the Board of Directors of _ (Name of institution) are conscious that, in designating the officials who would sign said Category A-1 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and (Name of institution) in general; Whereas, this Board has full faith and confidence in the institution's President and its Chief Finance Officer (Chief Accountant) and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Officer Position Title Specimen Signature 1. Mr. _________________, President _____________________ 2. Mr. _________________, Chief Finance __________________ Officer (Chief Accountant) are hereby authorized to sign the Bank's published/condensed statement of condition of _____________________. (Name of Institution) Done in the City of ___________________, Philippines, this _____________ day of 19 _____. _________________________________ CHAIRMAN OF THE BOARD ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ATTESTED BY: __________________________ CORPORATE SECRETARY APPENDIX 1-b FORMAT OF RESOLUTION FOR SIGNATORIES CATEGORY A-2 REPORTS OF RURAL BANKS (Appendix to Subsec. 3161.1) RESOLUTION NO. ______ Whereas, under Subsection 3161.1 the Central Bank of the Philippines requires Category A-2 reports to be signed by the institution's President; Whereas, the same Circular-Letter requires that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; Whereas, we, the members of the Board of Directors of (Name of institution) , are conscious that, in designating the officials who would sign said Category A-2 reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and (Name of institution) in general; Whereas, this Board has full faith and confidence in the institution's President and, therefore, assume responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Specimen Position Name of Report Officer Signature Title Banking Office No. (For Consolidated Statement and H.O. Quarterly Statement of Condition) 1. Mr. ________________________ President (For reports of Banking Office/Unit other than Head Office) 2. ____________________________ Manager/Officer-in-Charge etc. are hereby authorized to sign Category A.2 reports, of ___________________. (Name of Institution) Done in the City of ____________________, Philippines, this ___________ day of ______________ 19 _____. _________________________________ CHAIRMAN OF THE BOARD ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ATTESTED BY: __________________________ CORPORATE SECRETARY APPENDIX 1-c FORMAT OF RESOLUTION FOR SIGNATORIES CATEGORY B REPORTS OF RURAL BANKS (Appendix to Subsec. 3161.1) RESOLUTION NO. ______ Whereas, under Subsection 3161.1 the Central Bank of the Philippines requires Category B reports to be signed by the institution's authorized signatory or alternate; Whereas, the same Circular-Letter requires that aforesaid officers of the institution be authorized under a resolution duly approved by the institution's Board of Directors; aisadc Whereas, we, the members of the Board of Directors of (Name of institution) are conscious that, in designating the officials who would sign said Category B reports, we are actually empowering and authorizing said officers to represent and act for or in behalf of the Board of Directors in particular and (Name of institution) in general; Whereas, this Board has full faith and confidence in the institution's authorized signatory or alternate/equivalent positions for specific types of non-bank financial intermediaries and, therefore, assumes responsibility for all the acts which may be performed by aforesaid officers under its delegated authority; Now, therefore, we, the members of the Board of Directors, resolve, as it is hereby resolved that: Name of Authorized Signatory/ Specimen Position Report Alternate Signature Title No. 1. Authorized (Alternate) 2. Authorized (Alternate) etc. are hereby authorized to sign the named reports. Done in the City of ______________, Philippines, this _________ day of ______________, 19 ____. _________________________________ CHAIRMAN OF THE BOARD ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ______________________ ______________________ DIRECTOR DIRECTOR ATTESTED BY: __________________________ CORPORATE SECRETARY APPENDIX 1-d Letter-format to be accomplished to Facilitate Updating of Central Bank Records on bank directors (Appendix to Subsec. 3144) _____________________ (Date) The Director SES Department Central Bank of the Philippines A. Mabini St., Manila Dear Sir: This is to inform your Office that during the annual/special meeting of the stockholders of (Name of Bank/NBQB) and pursuant to the Articles of Incorporation and By-Laws of (Name of Bank/NBQB) , the undersigned was duly elected to the position of Chairman/Vice-Chairman/Director of the Board of Directors. I officially assumed my duties as Chairman/Vice-Chairman/Director effective the business hours of (Date) . I was likewise elected/appointed as Chairman/Vice-Chairman/Member of the following Committee/s of (Name of Bank/NBQB) ; LibLex 1. _________________________________________ 2. _________________________________________ 3. _________________________________________ I further certify that I own ___________________________ ( )shares of the capital stock of (Name of Bank/NBQB) which share/s stand in my name on the books of (Name of Bank/NEQB) . Very truly yours, _____________________ ATTESTED BY: (Name and Signature) ___________________ ___________________ Corporate Secretary (Position/Designation) APPENDIX 2 CERTAIN INFORMATION REQUIRED FROM ALL BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Subsec. 3161.3) 1. Name of Institution 2. Address 3. P. O. Box Number 4. Cable address or cable code 5. Board of Directors including Corporate Secretary: a. Names of Chairman, Vice-Chairman and Directors b. Number of directors per By-Laws c. Number of vacancies in the Board d. Names of corporations where they serve as Chairman of the Board or as President and names of other business enterprises of which they are proprietors or partners aisadc e. For the Corporate Secretary, indicate if he is also a Director f. Date of annual election of directors per By-Laws 6. Executive officers including Auditor: a. Names and titles; b. Telephone Number of each officer (office); c. For the Executive Vice-President, state the names of corporations where he serves as Chairman of the Board and names of other business enterprises of which he is proprietor or partner; d. For Vice-Presidents and other officers with non-descriptive titles, indicate area of responsibility, e.g., Vice-President for Operations or Vice-President, International Department; e. For rural banks, stock savings and loan associations, non-stock savings and loan associations and building and loan associations, include from President to Accountant; 7. Branches, agencies and extension offices: a. Name of branch, agency or extension office, e.g., Quiapo Branch or Makati Agency b. Address c. Names and telephone numbers of: (1) Manager (2) Cashier (3) Accountant d. For agencies and extension offices, indicate name of mother branch. Henceforth, any changes in any of the foregoing should be reported to the appropriate supervising department immediately. APPENDIX 3 DOCUMENTS/INFORMATION ON ORGANIZATIONAL STRUCTURE AND OPERATIONAL POLICIES REQUIRED FROM BANKS AND NON-BANK FINANCIAL INTERMEDIARIES (Appendix to Subsec. 3161.3) 1. Chart of the firm's organizational structure or any substitute therefor; 2. Name of departments/units/offices with their respective functions and responsibilities; llcd 3. Designations of positions in each department/unit/office with the respective duties and responsibilities; 4. Manual of Instructions or the like embodying the operating policies/procedures of each department/unit/office, covering such areas as: a) Signing/delegated authority; b) Procedure/flow of paper work; and c) Other matters; 5. Memoranda-Circulars or the like issued covering organizational and operational policies; 6. Sample copies of each of the forms/reports used by each office/unit/department other than those submitted to the Central Bank; and 7. Such other documents/information which may be required from time to time by the supervisory/regulatory department concerned. cdll APPENDIX 4 PRO-FORMA ARTICLES OF INCORPORATION (Appendix to Subsec. 3175.5a) ARTICLES OF INCORPORATION OF THE RURAL BANK OF _________________ ( ___________________) INC. KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, all of whom are of legal age and resident of the Philippines, have this day voluntarily associated ourselves together for the purpose of forming a corporation under the laws of the Philippines. AND WE HEREBY CERTIFY FIRST. That the name of this corporation shall be: RURAL BANK OF ________________ ( ____________________), INC. SECOND. That the objects and purposes for which said corporation is formed are: To carry and engage in the business of extending rural credit to small farmers and tenants and to deserving rural industries or enterprises; to have and exercise all authority and powers; to do and perform all acts; and to transact all business which may legally be had or done by rural banks organized under and in accordance with the Rural Bank's Act, as it exists or may be amended; and to do all other things incident thereto and necessary and proper in connection with said purpose within such territory, as may be determined by the Monetary Board of the Central Bank of the Philippines. THIRD. That the principal office of the corporation is to be located at _____________, Philippines. FOURTH. That the term of existence of the corporation is fifty (50) years from and after the date of incorporation. FIFTH. That the names, residence, and citizenship of the incorporators of said corporation are as follows: NAME RESIDENCE CITIZENSHIP ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ SIXTH. That the number of directors of said corporation shall be _____ and that the names, citizenship, and addresses of the directors of the corporation who are to serve until their successors are elected and qualified as provided by the by-laws are as follows: NAME RESIDENCE CITIZENSHIP ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ SEVENTH. That the capital stock of the corporation is _______________ PESOS (P _________) Philippine currency, divided into __________ shares of Common Stock with voting rights, and shares of Preferred Stock, both at the par value of _____________ PESOS (P _______) each. (a) Preferred stock shall be issued only against government investment in the capital stock of the Bank. Preferred stock so issued shall have preference over common stock in the assets of the corporation in the event of liquidation, as provided hereunder. (b) Only one kind of common stock that is with voting rights shall be provided for by the Bank. Preferred stock shall be non-voting; but in case of sale by the government of its preferred stock to private shareholders, such stock automatically become common stock with voting rights, thereby reducing the number of outstanding preferred stock and increasing the number of outstanding common stock. cdtech Preferred stock shall share in dividend distribution at a rate not exceeding two per centum (2%) thereof without preference. The amount of any dividends payable to any holder of stock may be applied to the repayment of the stockholder's indebtedness to the Bank. As soon as the Bank has resources available for the purpose, the equity investment of the government, as evidenced by outstanding preferred stock, shall be reduced by retirement of such stock at its par value and its sale to private investors, in the manner provided for in Section 7 of Republic Act No. 720, as amended (Rural Banks Act), and implementing rules and regulations No retirement or purchase by the Bank of its shares subscribed by private shareholders shall be made unless an equal amount of preferred shares is retired or purchased so long as the government holds preferred shares in the Bank. In the event of liquidation, dissolution, receivership, bankruptcy, or winding up of the affairs of the Bank, voluntary or involuntary, the assets of the Bank remaining after payments have been made to the creditors, shall be distributed in the following order: First recipient shall be the holders of the preferred stock to the full par value of the preferred stock, or ratably, insofar as the assets of the Bank will permit; then, the holders of the common stock to the full par value of the common stock, or ratably, insofar as the assets of the Bank will permit; and thereafter any sums remaining shall be distributed equally to holders of common and preferred stocks alike. In the absence of preferred shares, common stockholders shall share in proportion to their respective holdings in the assets available for distribution. The above rights, preferences, and restrictions shall be printed on the back of the stock certificate to be issued by the Bank. EIGHTH. That within three (3) years after commencement of its operation, the Bank shall set up a sinking fund for retirement of government preferred shares of stock in the bank and that not later than (10) years from start of operation the bank shall have retired all such government shares or sold them to private investors. NINTH. That the amount of Common Stock which has been actually subscribed is ___________________ PESOS (P _______), and the following persons have subscribed for the number of shares and amount of common stock set out after their respective names. No. of Amount of Common Name Residence Citizenship Shares Stock Subscribed _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ _________ _________ ________ ______ _______________ TOTAL ===== P============== TENTH. That the following persons have paid on the share of Common Stock for which they have subscribed the amount set out after their respective names: cdta Amount Paid on Subscription Name to Common Stock _______________________ _________________________ _______________________ _________________________ _______________________ _________________________ _______________________ _________________________ _______________________ _________________________ _______________________ _________________________ _______________________ _________________________ _________________________ TOTAL P===================== ELEVENTH. That has been elected by the subscribers as Treasurer of the Corporation to act as such until his/her successor is duly elected and qualified in accordance with the by-laws, and that as such Treasurer, he/she has been authorized to receive for the Corporation and to receipt in its name for all subscriptions paid in by said subscribers. IN WITNESS WHEREOF, we have hereunto set our hands this ________ day of ____________ at ______________________ (Print name of incorporators under their respective signature) INCORPORATORS: _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ _____________________________________________ SIGNED IN THE PRESENCE OF: _______________________________ _______________________________ _______________________________ (N.B. Only incorporators shall sign this Articles of Incorporation) REPUBLIC OF THE PHILIPPINES ) PROVINCE OF ) S.S. MUNICIPALITY OF ) Before me, the undersigned, a Notary Public in and for the Province of ___________________ Philippines, personally appeared: Place & Date of Name Res. Cert No. Issue ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ ___________________ _______________________ _________________ known to me to be the same persons who executed the foregoing instrument and acknowledged to me that the same is their free and voluntary act and deed. IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my official seal this _________ day of ____________________, A. D. 19 ____ Notary Public ________________ Until December 31, 19 _______________ Doc. No. ________; Page No. ________; Book No. ________; Series of _________; Name Res. Cert No. Issue Incorporators/ Account Consent of Subscribers Number Husband 1. _________________ _______________________ _________________ 2. _________________ _______________________ _________________ 3. _________________ _______________________ _________________ 4. _________________ _______________________ _________________ 5. _________________ _______________________ _________________ 6. _________________ _______________________ _________________ 7. _________________ _______________________ _________________ 8. _________________ _______________________ _________________ 9. _________________ _______________________ _________________ 10. _________________ _______________________ _________________ 11. _________________ _______________________ _________________ 12. _________________ _______________________ _________________ 13. _________________ _______________________ _________________ 14. _________________ _______________________ _________________ 15. _________________ _______________________ _________________ TREASURER'S SWORN STATEMENT REPUBLIC OF THE PHILIPPINES ) PROVINCE OF ) S.S. MUNICIPALITY OF ) ____________________________________, being duly sworn, depose and says: That on the _____ day of ___________, 19 ____, he/she was duly elected by the incorporators named in the foregoing articles of incorporation as treasurer of the corporation, to act as such until his/her successor has been duly elected and qualified in accordance with the by-laws of the Corporation, and that as such treasurer he/she has been authorized by the incorporators to receive for the corporation all subscriptions paid in by them for the capital stock; that of the authorized number of shares, ______________ (____) shares of common stock worth __________ PESOS (P _________) have been subscribed and of said subscription PESOS (P _______) in cash has been actually paid to him/her for the benefit and to the credit of the corporation; and that at least twenty per centum (20%) of the capital stock has been subscribed and the amount actually paid to him/her as stated above is at least twenty-five per centum (25%) of said subscription. cdti And that he/she further certifies that one hundred per centum (100%)of the capital stock is owned by citizens of the Philippines and that all the members of the incorporating board of directors are citizens of the Philippines. __________________ Treasurer SUBSCRIBED AND SWORN TO before me this _________ day of ____________ 19 ___ at ________________; affiant exhibited to me his/her Residence Certificate No. A- ______________, issued at _______________ on ____________ 19 ____. NOTARY PUBLIC Until December 31, 19 ___ Doc. No. ________; Page No. ________; Book No. ________; Series of _________; APPENDIX 4 LIST OF PROPOSED PRINCIPAL OFFICERS Relation Name of with other Position Officer Residence officers President: _________________ ________________ ________________ Vice- President: _________________ ________________ ________________ Treasurer: _________________ ________________ ________________ Manager: _________________ ________________ ________________ Secretary: _________________ ________________ ________________ Accountant: _________________ ________________ ________________ Submitted by: _______________ President: _______________ Date Majority of the key executive officers of the rural bank must be actual residents of the locality where the rural bank is to be established. However, the President must always be an actual resident of that locality. Key executive officers off the rural bank such as the President, Vice-President, Manager, Treasurer, Cashier and Accountant must not be related to one another within the second degree of Consanguinity or affinity. LLjur APPENDIX 5 REVISED PROCEDURE IN ORGANIZING RURAL BANKS (Appendix to Subsec. 3175.9) A. The Application 1. Any Person or group of persons may inquire from this Department of Rural Banks, (now Department of Rural Banks and Savings and Loans Associations) Central Bank, by letter or in person as to how to apply for a permit to organize a rural bank. 2. Inquiries on how to apply for a permit to organize a rural bank shall be acted upon immediately and a responsible official of the Department of Rural Banks, (now Department of Rural Banks and Savings and Loans Associations) preferably an Assistant Director, shall attend to such inquiries. All parties making such inquiries shall be furnished with an Instruction Sheet of the basic applications requirements. LLphil 3. The following documents shall constitute the formal application for a permit to organize a rural bank: a) Articles of incorporation properly accomplished and duly notarized in five (5) copies in the prescribed form; b) Information sheets accomplished in the prescribed forms under oath and in triplicate by each of the incorporators and subscribers; and c) List in triplicate of proposed principal officers of the rural bank. B. Filing and Acceptance of Application 1. A municipality/city shall be informed by the Department of Rural Banks and Savings and Loan Associations of the opening of the area for applications for permit to organize a rural bank by telegram to the Municipal/City Treasurer concerned which shall also request said Treasurer to acknowledge it by telegram (collect) addressed to the Director, Department of Rural Banks and Savings and Loan Associations, Central Bank. The telegram to the Municipal/City Treasurer shall immediately be followed by the distribution of copies of a printed notice announcing the opening of the municipality/city to applications for permit to organize a rural bank. The telegram and the notice shall be given wide publicity by having copies thereof posted in bulletin boards of the municipality/city government and sent to the Provincial Governor and Municipal/City Mayor, the Secretary of the Provincial Board/Municipal/City Council, each barrio captain of the municipality/city, parish priests, presidents of civic, religious and parent teachers associations. 2. Applications shall be filed personally by the organizers or by their duly accredited representative, with the Department of Rural Banks and Savings and Loan Associations. Only applications personally filed with the Department of Rural Banks and Savings and Loan Associations within sixty (60) days after the date the acknowledgment telegram from the Municipal/City Treasurer is received in the Department of Rural Banks and Savings and Loan Associations, shall be registered and considered. However, if no applications have been filed with the Department of Rural Banks and Savings and Loan Associations personally by the organizers or by their representative, applications received through the mail by the Department of Rural Banks and Savings and Loan Associations within the sixty (60)-day period may, if they are properly accomplished and complete, be registered and considered. 3. Applications received by the Department of Rural Banks and Savings and Loan Associations prior to the issuance of notice of opening of the area for applications for permits to organize a rural bank shall be returned, if lacking required documents and such actions shall be duly recorded by the Department of Rural Banks and Savings and Loan Associations. If the application is complete and properly accomplished in accordance with these rules, the same shall be registered at 8:00 A.M. on the first working day immediately after the date of receipt by the Department of Rural Banks and Savings and Loan Associations of the acknowledgment telegram mentioned in Item B-1 hereof. 4. Upon receipt of an application at the Department of Rural Banks and Savings and Loan Associations, the applicant's copies of all the documents comprising the application shall be stamped indicating the date and time of receipt and signed by the receiving officer of the Department. Upon receipt of an application, whether filed personally by organizers or through the mail, a telegram and a registered letter from the Director, Department of Rural Banks and Savings and Loan Associations or his duly designated senior representative, formally acknowledging such receipt shall be sent by the Department of Rural Banks and Savings and Loan Associations to the applicant(s) within forty-eighth (48) hours after receipt of the application. 5. The Department of Rural Banks and Savings and Loan Associations shall maintain a Registry of Applications in which shall be recorded the date and time each formal complete application for permit to organize a rural bank has been received by the receiving officer who shall sign each entry. 6. If within the sixty (60)-day period no qualified application is filed with the Department of Rural Banks and Savings and Loan Associations, the first qualified application received thereafter may be considered. C. Processing and Investigation of Applications 1. Applications received by the Department of Rural Banks and Savings and Loan Associations shall be processed within forty-eight (48) hours from date of receipt. 2. Within thirty (30) days immediately after the sixty (60) day period in which applications for a municipality/city may be filed and registered, the Department of Rural Banks and Savings and Loan Association shall effect and complete the investigation (including submission of report) of the character, capacity and capital of each of the organizers indicated in qualified applications. 3. A team of at least two (2) investigators shall be assigned to each qualified application. One investigator shall investigate in the locality where the rural bank is to be established and the other investigator, in Manila or suburbs, to check with the National Bureau of Investigation or credit references mentioned by organizers in their application. 4. Investigation of qualified applications shall be done in accordance with the guidelines and check list which the Department of Rural Banks and Savings and Loan Associations shall prepare for the purpose. 5. Every memorandum to the Monetary Board/Governor from the Department of Rural Banks and Savings and Loan Associations recommending approval of an application for permit to organize a rural bank shall be accompanied by an action sheet in which are indicated the various actions taken on the application by personnel of the department and the dates and time of said actions. 6. The following are the basic requirements which shall be checked and verified in the processing/investigation of qualified applications: a) A rural bank must be organized in the form of a stock corporation with not less than five nor more than fifteen incorporators. In case there are more than fifteen persons initially interested in organizing and investing in the proposed rural bank, the others may be recorded among original subscribers. b) All the incorporators and subscribers must be Filipino citizens; must be of good moral character and integrity; must have financial capacity to meet their commitments in the proposed rural bank; must have good credit standing; and must not have been convicted of any crime involving moral turpitude. Incorporators and subscribers who are not actively engaged in partisan political activity shall be preferred. c) Majority, if not all, of the incorporators and subscribers must be actual residents of the place where the rural bank is to be sited and must own at least majority or controlling voting shares. cdti "Actual residents" shall be understood as those who have been actually living in the place where the rural bank is to be established for at least one year prior to the filing of the application. (See also Subsec. 3175.4) d) The proposed rural bank shall have an initial paid-up capital in accordance with existing regulations. e) The number of members of the board of directors of the proposed rural bank shall not be less than five nor more than eleven. f) Majority of the key executive officers of the rural bank must be actual residents of the locality where the rural bank is to be established. However, the president must always be an actual resident of the locality. Key officers of the rural bank such as president, manager, treasurer, cashier and accountant must not be related to one another within the second degree of consanguinity or affinity. g) No individual or family group (those related to one another within the third degree of consanguinity or affinity) shall own or control more than thirty five (35) per cent of the voting shares. h) No officer or director of an existing rural bank can be officer or director of the proposed rural bank. i) The articles of incorporation of the rural bank shall provide that within three (3) years after commencement of its operation, it shall set up a sinking fund for retirement of Government preferred shares of stock in the bank and that not later than ten (10) years from start of operation the bank shall have retired all such Government shares or sold them to private investors. D. Rules in Cases Where There Are Two or More Contending Applicant Groups . In cases where there are two or more applicant groups for a particular municipality/city, the selection of the applicant group to be given preferential consideration shall be made by process of elimination in the following order: 1. Where there are two or more applicant groups, the group wherein none of the incorporators and subscribers owns any shares of stock in any existing rural bank or none of them is an officer or director thereof shall be given preferential consideration. 2. Among applicant groups equal under (1) above, preference shall be given to the group in which owners of the greater majority shares of stock are actual residents of the area where the proposed rural bank is to be sited (province). If they are also equal in this respect, the group in which owners of the greater majority shares of stock are actually residing in the municipality/city where the rural bank is to be established shall be preferred. 3. Among applicant groups equal under (1) and (2) above, the group with the greater number of incorporators and subscribers who are actual residents of the municipality/city where the rural bank is to be established shall be given preferential consideration. 4. Among applicant groups equal in (1), (2), and (3) above, the group whose members among themselves are not related, or are less related, by consanguinity or affinity shall be given preferential consideration. 5. Among applicant groups equal in (1), (2), (3) and (4) above, the group with organizers having less equity holdings shall be preferred. 6. If two or more applicant groups are equal in (1), (2), (3), (4) and (5) above, the group whose formal application had been registered first shall be given preferential consideration. 7. The guidelines in these rules do not require or contemplate the use of any point system. E. Where No Application is Received . In the absence of any other application despite proper notice, the application of a group with majority of the members not residents of the place and/or already owning shares of stock in an existing rural bank may be considered: Provided , That no individual of family group shall own or control more than thirty five (35) per cent of the voting shares: and Provided, further , That in case members of an applicant group own shares of stock in an already existing rural bank, the province where the proposed rural bank will be established must be different from that where the existing rural bank operates. F. Development and Promotional Campaign 1. Where there is no application received for a locality, particularly idea remote area, the Department of Rural Bands and Savings and Loan Associations shall undertake promotional campaign to develop an application therein for the establishment of a plural bank the initial paid-up capital of which may be less than P100,000. The Department of Rural Banks and Savings and Loan Associations shall formulate the necessary guidelines for this promotional campaign. 2. The Development Program of the Department of Rural Banks and Savings and Loan Associations shall state: a) The municipalities/cities which will be opened for applications during the next year, including, if warranted, the organization of second rural banks; and b) The inclusive dates of development/acceptance of such applications for each municipality/city. G. Organization of Rural Banks 1. Within thirty (30) days from receipt of advice of approval by the Monetary Board of their application, the organizers shall deposit with the Central Bank or Philippine National Bank the initial paid-up capital of the rural bank and effect the registration of their articles of incorporation with the Securities and Exchange Commission. 2. Within thirty (30) days from the date of registration of the articles of incorporation, they shall register the corporation's by-laws. 3. Within eight ( 8) months from receipt of advice of approval by the Monetary Board of their application, the organizers shall: a) Complete construction and furnishing of the rural bank building which shall be equipped with necessary vault, facilities, furniture, forms and stationeries; b) Effect and complete the training of officers and employees of the rural bank; and c) Inaugurate and open the rural bank for business. 4. The permit to organize a rural bank shall be automatically cancelled and no extension of the period within which the bank shall be organized shall be granted, if the rural bank is not organized and opened for business within eight (8) months after receipt by the organizers of the notice of approval by the Monetary Board of their application. 5. When a permit to organize a rural bank is automatically cancelled for failure of organizers to organize and open the bank for business within the said 8-month period, the next qualified application for the area may be considered if the organizers are still interested; otherwise, the area shall again be open for application. 6. Before the certificate of authority to operate may be issued to a rural bank, all the incorporators and initial subscribers shall execute a certificate under oath to the effect that all the conditions imposed under the Monetary Board resolution approving their application for permit to organize the rural bank have been complied with or have not been violated. H. Scope of Revised Procedure . These rules shall be applicable to the following cases: 1. All applications filed and registered with the Department of Rural Banks and Savings and Loan Associations on or after the date of effectivity of these rules, including applications developed by the department before said date of effectivity but filed by organizers on or after these rules have been effective; 2. All applications for contested localities, i.e., localities where there are two or more contending applicant groups, filed with the Department of Rural Banks and Savings and Loan Associations before the date of approval by the Monetary Board of Resolution No. 1290 dated July 14, 1972 wherein neither the Monetary Board/Governor/Department of Rural Banks and Savings and Loan Associations has made any decision on which of the contending groups shall be favorably considered; 3. All applications for the establishment of rural banks in Lanao del Sur, investigation of which has been suspended pursuant to Monetary Board Resolution No. 722 dated May 11, 1972; 4. All applications filed before the date of effectivity of these rules which may be disapproved but which may be refiled by the applicants; 5. All applications for the establishment of second or additional rural bank in a municipality/city where the existing rural bank cannot meet the normal credit requirements of the community. prcd APPENDIX 5-a GUIDELINES FOR THE ORGANIZATION OF RURAL BANKS BY COOPERATIVES (Appendix to Subsec. 3175.9) Pursuant to Monetary Board Resolution No. 830 dated April 26, 1974, and in line with the provisions of Presidential Decree No. 175, the Rural Banks Act (Republic Act No. 720, as amended) and other related laws, the following rules and regulations governing the establishment of rural banks by cooperatives are hereby promulgated: SECTION 1. Cooperative Defined . Cooperatives shall mean only organizations composed primarily of small producers and of consumers who voluntarily join together to form business enterprises which they themselves own, control and patronize. A small producer shall mean a self-employed individual who, by himself or with his family, provides the primary labor requirements of his business enterprise or one who earns at least fifty per cent (50%) of his gross income from the payment, proceeds or income of the labor he provides. cdpr For purposes of these rules and regulations, the following shall be considered cooperatives: 1. All Kilusang bayan (cooperatives) as defined in Presidential Decree No. 175 and Letter of Implementation No. 23; and 2. All samahang nayon (barrio associations) and all other registered pre-cooperative organizations which enjoy the status of provisional cooperatives, as certified by the Bureau of Cooperatives Development. SECTION 2. Organization of Rural Banks by Cooperatives . Duly established cooperatives, i.e., registered or re-registered under Presidential Decree No. 175, including credit cooperatives registering as rural banks under Letter of Implementation No. 23, may organize rural banks in accordance with the provisions of these guidelines. SECTION 3. Organization Requirements . The requirements for the establishment of rural banks by cooperatives shall be the same as those prescribed in the Central Bank guidelines for the establishment of rural banks by natural persons, except as otherwise specified in these guidelines. SECTION 4. Applications to be Given Priority Consideration . Priority consideration shall be given to applications for permits to organize rural banks in municipalities where there are no existing rural banks and in areas where banking facilities are inadequate, as may be determined by the Central Bank. SECTION 5. Application Documents . In addition to the regular documents required under existing Central Bank rules and regulations, a cooperative-organizer shall submit the following documents to SES Department III: a. Resolution of the Board of Directors of the cooperative authorizing said cooperative to be an incorporator or subscriber of the proposed rural bank and indicating the name of the authorized representative of the cooperative in the proposed bank as well as the amount the cooperative will invest in the proposed rural bank; b. Proof of due registration of the cooperative with the Bureau of Cooperatives Development, Ministry of Agriculture; c. Certified statements of condition of the cooperative for one year immediately preceding the filing of the application to organize the plural bank: Provided, however , that in the case of a cooperative which has been in operation for less than one year, a statement of condition for the period covering its initial stage of operation shall be sufficient; d. A certificate of good standing of the cooperative-organizer from the Bureau of Cooperatives Development, Ministry of Agriculture; and e. Such other documents as SES Department III may deem necessary. SECTION 6. Limitation on Shareholdings of Cooperatives . Ownership of stock in a rural bank shall be as widely dispersed as possible. Pursuant to Section 12-B of the General Banking Act (Republic Act No. 337, as amended), no cooperative shall own or control more than thirty per cent (30%) of the voting shares of a rural bank. This limitation shall also apply to cooperatives purchasing government-held preferred shares which are converted into common stock. In the Case of credit cooperatives registering as rural banks, no member or group of members related to one another by consanguinity or affinity within the third degree shall own more than twenty per cent (20%) of the voting stock of the rural bank, except as provided for in Subsection 3131.3b of this Manual of Regulations. The Guidelines for the Organization of Rural Banks by Cooperatives is hereby included as Appendix 5a of the Manual Regulations, Book III. SECTION 7. Residence of Cooperative . For the purpose of determining the residence of a cooperative-organizer, the place of its principal office as indicated in its articles of incorporation shall be considered its place of residence. SECTION 8. Rules in Cases Where There are Two or More Applicant Groups Organizing a Rural Bank in the Same Locality . In cases where there are two or more groups applying for a permit to organize a rural bank in the same locality, the selection of the applicant group to be given priority shall be determined as follows: a. As between an existing credit cooperative registering as a rural bank and a cooperative applying for the organization of a rural bank in the same locality, preference shall be given to the former. In case there are two or more credit cooperatives located in the same locality applying for registration as rural banks, preference shall be based on the criteria prescribed in letters (d) and (e), below. b. Preference shall be given to the applicant group where one or some of the incorporators or subscribers are cooperatives duly registered or re-registered with the Bureau of Cooperatives Development, Ministry of Agriculture and with a total capital participation in the proposed rural bank of not less than twenty per cent (20%) of the bank's voting shares. c. If the applicant groups possess the same qualification as prescribed in item (b) above, preference shall be given to the group with the greater number of cooperatives as incorporators/subscribers. d. If the applicant groups equally possess the qualifications prescribed in items (b) and (c) above, the group which has a greater total capital participation of cooperative-organizers shall be preferred. e. If the applicant group to be given preference cannot be determined on the basis of item (d) above, preference shall be based on such point system as may be prescribed by the Central Bank in the determination of preferences in the case of natural persons applying for the organization of a rural bank. ( Effective Oct . 10, 1984 ) APPENDIX 6 TIPID MOVEMENT MANUAL (Appendix to Subsec. 3215.1) a. Concept . The TIPID Movement is a school savings project of the National Commission on Savings. The name of the movement is derived from the Tagalog word "Tipid" which means thrift. It is also an acronym for Thrift Incentives for Progress through the Industry and Discipline which sums up the philosophy behind the project. Thus the title suggests the training of school children in the habit of thrift and the mobilization of their small savings through the medium of banks. Savings may come from income derived through the children's labor and industry or through postponement of present spending in favor of satisfying more important future needs. The TIPID Movement, which is being implemented by the Department of Education and Culture, the banks and the Central Bank, is aimed towards instilling in students the benefits to be gained from the good habit of saving in banks for himself in particular, and for the nation in general. b. Purpose . Saving is a desirable habit and a form of discipline that ought to be developed in a person at an early age. The purpose of the TIPID Movement therefore is to inculcate in school children the habit of thrift and teach them the value and advantages of saving in banks. c. Savings club . The principal instrument of action of the TIPID Movement is the savings club which will be organized in all elementary and secondary schools, both private and public, in the entire country. It is, therefore, advisable that savings clubs be organized as early as possible. (1) Objectives of the club (a) To encourage the habit of thrift among school children and motivate them to save in banks; (b) To seek and develop sources of income for its members; and (c) To promote the role of the savings club as an effective savings vehicle for the students. (2) Club members . Every student in the elementary and secondary schools, both public and private, is eligible to be a member of the TIPID savings club organized in his class or grade level. (3) Club officers . The savings club is an organization of, by and for the school children. As such, its officers shall be chosen exclusively from among its members. (4) Responsibilities of officers . The primary responsibility of the club officers shall be to administer the affair of the club. They shall formulate and implement measures that will help in achieving the club's objectives. The savings club shall choose its depository bank. In the case of schools where there are more than one savings club (i.e. each class or grade has a savings club), a committee consisting of their respective presidents or representatives assembled for the purpose shall choose one depository bank for the entire school. The chosen depository bank shall be advised officially by the president of the club or, as the case may be, by the chairman of the committee, of its designation, the advice to be attested to by the head or principal of the school. LLpr (5) Club adviser . The teacher-in-charge of the class shall serve as adviser of the savings club and, as such, shall guide the officers of the club in the formulation and implementation of the programs and projects of the club. The moral influence of the teacher-adviser will play an important role in the accumulation of savings by the club members. Under the guidance of the teacher-adviser, the savings club shall set a savings goal on a daily, weekly or monthly basis for the club. The adviser may, when needed, set aside for the activities of the club, a class period such as the social studies period. To enable them to gain knowledge of banking, school children shall be encouraged under the TIPID Movement to transact directly with banks or the bank's solicitors in the schools. The teacher-adviser shall foster this objective of the Movement by refraining from taking custody of, or assuming responsibility for, the money of the children. d. Sources of savings . Under the TIPID Movement, savings, to be meaningful, should come primarily from come generated through the productive efforts of the students himself. Thus, an integral part of the TIPID Movement is the encouragement of students to engage productive endeavors such as: (1) raising a backyard garden (vegetables ornamental plants, flowering plants, etc.); (2) running errands and doing odd jobs; (3) making leather, wood, and other handicraft products; (4) buying and selling scrap paper, old newspapers, etc.; and (5) running other small scale or home industries. The assistance of government agencies, particularly barangay and civic organizations, may be sought in this regard. (e) Quarterly Report . To enable the Central Bank to monitor effectively the trend of savings deposits under the TIPID Movement, banks shall submit a quarterly report form duly accomplished not later than fifteen (15) banking days from the end of the quarter covered by the report. For purposes of the quarterly report, TIPID Movement accounts shall consist of all student deposit accounts in participating banks of elementary and secondary schools. f. Presidential Decree on deposits of minors Under Presidential Decree No. 734 dated June 25, 1975, minors who are at least seven (7) years of age, able to read and write, have sufficient discretion, and are not otherwise disqualified by any other incapacity, are given special capacity and power, in their own right and in their own names, to make savings or time deposits with and withdraw the same as well as receive interest thereon, from banking institutions without the assistance of their parents or guardians. Parents and guardians, however, may deposit for their minor children and wards, respectively. APPENDIX 6-a FORM LETTER OF MANIFESTATION (Appendix to Subsec. 3215.1a) The Secretariat Committee on Savings Rm. 210 5-Storey Building Central Bank of the Philippines Metro Manila 2801 Gentlemen : We are pleased to inform you of our decision to participate in the TIPID Movement. In this connection, we wish to report that our Bank has been chosen depository of the following schools [or of _____________________________________________]. (name of school) Thank you. Very truly yours, ____________________________ Bank CONFORME: ____________________________ (School) By: ____________________________ (Authorized Signature) APPENDIX 6-b REPORT OF DEPOSIT COLLECTION UNDER THE TIPID MOVEMENT (Appendix to Subsec. 3215.1a(2) __________________________ Name of Bank __________________________ Address REPORT OF DEPOSIT COLLECTIONS AND WITHDRAWALS __________________________ Name of School NUMBER AMOUNT Deposit Transactions _________________ P _________________ MINUS: Withdrawal Transactions _________________ P _________________ Net Collections P =============== Inclusive Nos. of used deposit slips: No. _____________ to No. _____________ CERTIFIED CORRECT: _________________________________ _________________________________ (Solicitor) Date ___________________________________________________________________ Received the above cash and checks in the amount of __________________________ ___________________________________________ (P _____________________) (Amount in words) ____________________________ Cashier NOTED: _______________________________ Authorized Officer APPENDIX 7 LIST OF POTENTIAL SMALL INDUSTRIES FOR IGLF FINANCING (Appendix to Subsec. 3354.2a(1) Food Products 1. Processed meat and seafoods including canned or packaged, dehydrated 2. Processed fruits and vegetables including juices, canned, dehydrated 3. Coffee, processed 4. Spices such as processed ginger, pepper, onion, garlic cdll 5. Cereal preparations 6. Starches 7. Processed seaweeds 8. Sauces and salad dressings 9. Processed cheese 10. Confectionery 11. Cocoa and cocoa preparation such as cocoa butter 12. Chocolate and chocolate preparations 13. Noodles 14. Catsup 15. Baking powder 16. Peanut butter 17. Coco products 18. Fruits and flower wine 19. Castor oil Wood Products 1. Parquet tiles 2. Mouldings 3. Doors and fixtures 4. Shelves and cabinets 5. Caskets 6. Carvings and lattice works 7. Pallets 8. Bamboo products 9. Sandals and shoes 10. Gun stocks 11. Furniture, complete or knocked down parts 12. Toys and sporting goods 13. Household utensils of wood Paper Productions 1. Boxes and packaging materials 2. Carbon paper including diazo paper, electrostatic copy papers 3. Pulp from indigenous raw materials Fiber Products 1. Coconut coir 2. Carpets and rugs 3. Cordage, twines, rope, fishing nets, abaca and synthetic Processed Rubber Products 1. Adhesives 2. Rubber latex 3. Crumb rubber 4. Camel back 5. Gums 6. Rubber tiles 7. Tubes and hoses 8. Rubber gloves 9. Rubber tires and inner tubes 10. Curing tube and sectional air bag 11. Rubber automotive parts such as vibration dampers, caps, weather strips, handles and pedals, carpet underlay made of rubber 12. Rubber toys and sporting goods 13. Rubber belts Chemicals and Chemical Products 1. Almaciga resin (processed) 2. Silica gel 3. Iron oxide 4. Enzymes (from substantially domestic sources) 5. Glazing putty 6. Ink 7. Cosmetics; perfumery 8. Wax and wax products 9. Glues 10. Photographic chemicals 11. Mosquito coils 12. Modified hard resins 13. Chemical solvents 14. Charcoal 15. Refined glycerine 16. Alcohol 17. Blowing agents free rubber and plastic compound 18. Essential oils 19. Disposable hypodermic needle and syringe 20. Fiber-tipped pens 21. Chemical gypsum 22. Organic fertilizer Pharmaceutical Products 1. Pharmaceuticals 2. Wadding, gauze, bandages, adhesives, similar articles 3. Dentures and fillings Textile Products 1. Fabrics of abaca, sinamay, burlap, jusi, pineapple and other bast fibers 2. Specialty garments such as laces, garters, band, towels 3. Embroideries 4. Non-woven fabrics and articles thereof 6. Garments (at least 70% of production must be exported) only for Mindanao aisadc 7. Tablecloths 8. Mosquito nets 9. Processed abaca fiber Non-Metallic Products 1. Marble slabs, tile chips and curios 2. Cement additives 3. Asphalt batching 4. Reinforced fiber glass products 5. Processed marble blocks 6. Cement floor tiles 7. Asbestos tiles 8. Pipes and tubes, asbestos cement 9. Roofing tiles and fire bricks 10. Clay products such as pottery roofing tiles and paste frits 11. Ceramic products sucks tiles (glazed, vitrified), sanitary ware sinks, bidets, etc., except dinnerware 12. Safety glass 13. Asbestos fibers 14. Coal, limestone, clay, marble 15. Silicon metal 16. Silicon carbide 17. Hollow blocks Metallic Products 1. Pyrite (roasted and unroasted) 2. Pyrite cinders or iron sulfite 3. Manganese concentrates 4. Silver concentrates and bars 5. Prefabricated and fabricated structural products made of iron and steel and cement and other materials (except ordinary hollow blocks) 6. Steel drums 7. Pails 8. Bolts and nuts 9. Household utensils made of metal including enamelled utensils 10. Kitchen appliances as tools hand-operated such as meat grinders, coconut graters 11. Cutlery such as scissors, blades, tailor's shears, shovels, spades, rakes, saws, knives 12. Razor blades 13. Building hardware such as hinges, door knobs, door bolts and window rotor-operators 14. Safes (e.g. record safes and tapeguards) 15. Strong boxes, armored and reinforced strong room doors and compartments and fittings (e.g. insulated filing cabinets) 16. Filing cabinets, racks, sorting boxes, paper trays, paper rests and similar office equipment of base metal 17. Gas lamps 18. Metallic closures and screw caps 19. Toys and sporting goods 20. Flatware 21. Locks 22. Buckles and metal plate accessories Machinery and Equipment and Parts 1. Parts of trucks, passenger trucks, automobiles and other commercial vehicles 2. Rice mill parts 3. Tractor parts 4. Bicycles and parts 5. Loom reeds 6. Grain dryers 7. Palay thresher (power operated) 8. Disc plows, disc harrows and roto tillers 9. Sewing machines and parts Electrical Machinery Equipment and Parts 1. Formed aluminum parts such as door shelves, food shelves and/or parts thereof 2. Welding electrodes 3. Motor control center 4. Hermetic compressors 5. Evaporators 6. Condensers and heat exchangers 7. Fire alarm systems 8. Fluorescent and mercury lamp ballasts 9. Storage batteries 10. Electrical and electronic machinery, equipment, apparatus, parts, components 11. Bus ducts 12. Light dimmers 13. Graphite electrodes 14. Magnetic starters 15. Flashlights 16. Ignition coils 17. Transceivers 18. Electrical tape 19. Film capacitors Transport Equipment and Parts 1. Motor vehicle transmission 2. Automotive propeller shafts 3. Automotive clutches 4. Camshafts for engines 5. Electric motors for automotive use 6. Motorcycle parts Other Products 1. Animal feeds (outside Metro Manila) 2. Garment hangers of wood, plastic or metal 3. Plastic products such as light diffusers, footwear, containers, sheets, raincoats, packaging materials, brushes, brooms, gloves, toothbrushes, toys and sporting goods, optical frames 4. Tanned leather 5. Leather products such as purses, wallets, belts, straps, gloves, footwear 6. Handicrafts such as lampshades, placemats, shellcraft, hats, household utensils, toys and sporting goods 7. Umbrellas 8. Jewelry (except precious stones) 9. Pins 10. Clasps, hooks, eyes, buckles, etc. of base metal 11. Musical instruments and parts 12. Buttons 13. Zippers 14. School and office supplies such as fasteners, pencils, folders, paper clips, pens and holders, bookbinders, rulers, desk pieces, etc. 15. Waste recycling 16. Threads of cotton or synthetic fiber 17. Cufflinks 18. Plaques and trophies APPENDIX 8 IMPLEMENTING GUIDELINES FOR COLLECTION OF BARRIO SAVINGS FUND (Appendix to Subsecs. 3218.1 and 3218.2) The Department of Agriculture and Natural Resources, the Department of Local Government and Community Development, and the Central Bank of the Philippines hereby issue the following guidelines for the proper collection of the Barrio Savings Fund of the Samahang Nayon pursuant to Letter of Implementation No. 23, Regulation 9 issued on July 9, 1973, as amended by Letter of Implementation No. 53 dated December 27, 1976. The following steps are to be followed the collection of Barrio Savings Fund (BSF) for the Second Crop of Masagana 99: 1. The Department of Local Government and Community Development thru its Bureau of Cooperatives Development will furnish all rural banks and PNB branches a list of registered samahang nayon and their bonafide farmer-members. The same listing will be furnished to the Chairman of the Provincial Action Committee of National Food and Agriculture Council (NFAC) for distribution to all farm management technicians. 2. The farm management technician will include in the loan the amount to be collected for the BSF which is three per cent (3%) of the total loan proceeds to be released if the farmer is a member of a registered samahang nayon . 3. The participating rural bank or PNB branch or agency, upon releasing an amount to the farmer-borrower, will deduct three per cent (3%) of this amount to be released and credit the amount deducted to the account of the samahang nayon . It is understood that the account of the particular samahang nayon must be deposited in the same financing institution where the farmer-borrower obtains his loan. In this case, a samahang nayon must have more than one financing institution as its depository because not all its members may borrow in the same financing institution. The procedure of deduction must be: a. If the farmer needs his cash portion say P465, then 3% of P465 is P13.95. So P13.95 goes to account of samahang nayon and the balance of P441.05 is released to the farmer. b. The same procedure will be followed in the succeeding releases. Procedure in the implementation of the barrio savings fund program The following procedure shall be observed regarding the three per cent (3%) deductions to be made by rural banks on every production loan granted to the samahang nayon member, under any of the supervised credit programs, representing his contribution to the barrio savings fund provided for under Letter of Implementation No. 23, as amended by Letter of Implementation No. 53 (implementing Presidential Decree No. 175): 1. A loan release sheet or discount slip shall be issued by the rural bank to the samahang nayon member indicating therein: a. The loan amount; b. The 3% deduction representing his contribution to the barrio savings fund; and c. The name of the samahang nayon to which his contribution is to be credited. A copy of the loan release sheet or discount slip shall be furnished each samahang nayon concerned when the rural bank renders its monthly report/statement required in No. 4 of these guidelines. 2. A savings ledger for each samahang nayon shall be maintained and the postings therein shall include the names of the samahang nayon members and their respective contributions to the barrio savings fund. A savings passbook shall be issued in the name of the samahang nayon . The samahang nayon , for purposes of facility and practicability, may entrust by way of a resolution of its board of directors, custody of the savings passbook to the depository rural bank: Provided , however , That in such case, said bank shall submit to the DRBSLA a copy of the monthly report/statement required under No. 4 of these guidelines. 3. A control account shall be set up in the general ledger which shall be called "Savings Deposits Barrio Savings Fund". The savings ledgers corresponding to this account shall be reconciled at least once a month. 4. A monthly report/statement shall be submitted by the rural bank to the President or authorized officer of the samahang nayon on the status of its barrio savings fund, together with copies of the loan release sheet or discount slip mentioned in No. 1 hereof. APPENDIX 9 GUIDELINES ON BARRIO SAVINGS FUND AND BARRIO GUARANTEE FUND (Appendix to Subsecs. 3218.1 and 3218.2) The following guidelines shall be observed on the barrio savings fund and the barrio guarantee fund provided for under Letter of Implementation No. 23, as amended by Letter of Implementation No. 53, implementing Presidential Decree No. 175: 1. The proceeds of the 3% deductions made by rural banks on every production loan granted to the samahang nayon members under any of the supervised credit programs, to be deducted upon release of the loan and shall be held in a deposit account to constitute a barrio savings fund in the name of the samahang nayon for the account of the member. Members who do not obtain production loans shall contribute a minimum deposit of five pesos (P5.00) per month to said fund; 2. Contributions of the samahang nayon member to the barrio guarantee fund shall be accepted by rural banks in the form of time deposit in the name of the samahang nayon with the President and the Treasurer of the samahang nayon as authorized signatories; 3. In both the aforementioned cases, the rural bank concerned shall require the submission by the samahang nayon of written proof of its juridical personality and a copy of the resolution of the board of directors required under the second paragraph of Subsec. 3262.1. 4. Any withdrawal against the barrio savings fund and the barrio guarantee fund shall be allowed only upon presentation of the passbook (Barrio savings fund) or surrender of the original copy of the certificate of time deposit (Barrio guarantee fund), together with the resolution of the board of directors of the samahang nayon authorizing such withdrawal duly approved by the Bureau of Cooperatives Development of the Department of Local Government and Community Development; 5. Barrio savings fund and barrio guarantee fund deposits shall earn interests in accordance with Subsec. 3243. APPENDIX 10 SEC PRESCRIBED FORMAT FOR CERTIFICATION ON DEPOSIT (Appendix to Subsec. 3262.8) ___________________ (Date) The Securities and Exchange Commission Greetings : This is to certify that there is on deposit with this bank the sum of ______________________________ (P ________________) in the name of ______________________________ Treasurer-in-trust for _______________________ which is in the process of incorporation. llcd The said deposit is clear and free from liens, restriction, condition or holdout and may be withdrawn in behalf of said company upon presentation of proof of due incorporation thereof. ___________________________ (Bank) By: ___________________________ (Designation) SUBSCRIBED AND SWORN to before me this _____________ day of _____________, 19 _____, at ___________________ affiant exhibiting to me his/her Residence Certificate No. A- ______________, issued at ______________________ on _____________________, 19____. cdll Notary Public Until December 31, 19 _______ PTR No. _________________ Issued at _________________ On _____________________ Doc. No. _______ Page No. _______ Book No. ______ Series of 19 _____ APPENDIX 11 MAXIMUM MATURITY OF LOANS FROM THE CENTRAL BANK TO INSTITUTIONAL BORROWERS (Appendix to Subsec. 3269.3) I. Farm Crops A. 150 days White Corn B. 180 days Sorghum Yellow corn Soybean C. 210 days Citrus * Rice *** Mango * D. 240 days Atis * Chico E. 270 days Cotton F. 360 days Abaca * Ginger Banana ** Papaya * Cassava Pineapple * Coconut * Sugar * Coffee * II. Poultry, fish and Livestock A. 90 days Poultry: Broiler B. 120 days Fish C. 180 days Poultry: Duck raising (Production, day old 4 mos.) Livestock: Goats E. 270 days Poultry: Duck raising (Duck egg Production, 4 mos. old stock) Livestock: Hog Raising Fattening (2 mos. old stock) cdlex F. 270 days Poultry: Egg production (ready to lay pullets) Livestock: Cara beef (yearling stock) Cattle Raising Cattle fattening 270-360 days (1-1/2 years old stock) III. Vegetables A. 90 days Mustard Pechay B. 130 days Sweet green corn C. 150 days Cabbage Giant Pepper Carrot Sweet potato Cauliflower D. 180 days Beans (red, Baguio, Bongo, Navy) Cowpea Okra Cucumber Peanut Garlic Peas Irish Potato Sitao Melon E. 210 days Ampalaya Tomato Eggplant F. 270 days Onion G. 300 days Lima (patani) Squash Seguidillas Upo H. 360 days Chayote * Financing starts on established and fruit-bearing age crop ** Financing starts six months after planting *** Maximum maturity of loans to finance non-high yielding, traditional varieties 270 days APPENDIX 12 PROCEDURES IN OBTAINING AND REPAYING A REDISCOUNT OR LOAN WITH THE CENTRAL BANK (Appendix to Subsec. 3269.5) A. Application to rediscount . All rural banks applying for a loan with the Central Bank shall submit to the Department of Loans and Credit, Central Bank, Manila, the following papers: casia (a) Board resolution . A copy of the resolution of the board of directors of the rural bank, authenticated in accordance with existing regulations, authorizing the rural bank to negotiate for a loan with the Central Bank and designating the officer(s) of the rural bank authorized to endorse promissory notes and sign all papers pertaining to the loan , in behalf of the rural bank. (b) Loan application form . Original and one copy, duly accomplished and signed by the authorized officer(s) of the rural bank. The rural bank may prepare one extra copy for its file. (c) Financial statement . A copy of the statement of condition of the rural bank as of the date of application supported by the corresponding statement of income and expenses. (d) Report on required and available reserves . A copy of the report on required and available reserves of the rural bank against its deposits liabilities for the week ending on the date of the application for rural banks authorized to accept deposits. (e) Promissory note in favor of the Central Bank . Original and two copies duly signed by the authorized officer(s) of the rural bank. One extra copy may be prepared by the rural bank for its file. If the rural bank is applying for two types of loan, two sets should be submitted one for the 360-day loan and one for the 180-day loan. (f) Rediscount schedule . For rural banks depositing collaterals with the Central Bank original and two copies. For rural books depositing collaterals with designated depository commercial banks original and one copy. This rediscount schedule should contain the acknowledgment and certification of the designated depository commercial bank duly signed by its representative in the prescribed format certification for the matter. (g) Certification by the rural bank technicians that the loans listed in the rediscount schedules were granted under the supervised credit scheme or were granted to beneficiaries of agrarian reform. (h) Report on average monthly savings and time deposits for the past four months immediately preceding the date of loan application, for rediscount ceiling purposes for non-supervised credits. (i) Farm plan and budget (for loans/advances under the supervised credit scheme) duly accomplished by an accredited technician knowledgeable in the project financed. B. Rediscount schedule . The rediscount schedule shall be prepared in quadruplicate distributed as follows: (a) If collateral promissory notes are deposited with the Central Bank: First three copies to Central Bank Fourth copy for rural bank file (b) If collateral promissory notes are deposited with the designated depository commercial bank: First two copies to Central Bank Third copy to designated depository commercial bank Fourth copy for rural bank file All promissory notes offered as collateral for rediscounting shall be listed in the rediscount schedule in alphabetical order and grouped as follows: One group for promissory notes covering agricultural and industrial loans (non-supervised); One group for promissory notes covering agricultural and industrial loans (supervised) and One group for promissory notes covering commercial loans. All promissory notes listed in the rediscount schedule shall be certified as eligible for rediscounting by the authorized officer(s) of the rural bank. C. Deposit/Release of collaterals . All rural banks applying for loans with the Central Bank shall endorse to the Central Bank and deposit immediately with the Central Bank or designated depository commercial bank all promissory notes (original) and supporting documents to be used as collateral for the loan applied for. The designated depository commercial bank representative shall acknowledge such deposit in the space provided therefor in the rediscount schedule. Promissory notes and supporting documents deposited as collateral for loans with the Central Bank shall be released only when the loan value of the note to be released has been paid, and the release is authorized in writing by the Department of Loans and Credit. D. Release of loans (a) Time . All loan releases shall be made by the Central Bank within the official banking hours (9:00 AM to 3:00 PM). (b) Manner of release . All loan releases are effected by credit advice. (c) Depository arrangements . To facilitate the dispersal of credit to the rural areas and to relieve rural banks of unnecessary inconvenience and expense resulting from the periodic trips of their representatives to Manila, rediscounting proceeds for rural banks situated outside a 50-kilometer radius from Manila shall be credited, for the account of the rural bank concerned, to the clearing account with the Central Bank of the depository commercial bank to be designated by the borrowing rural bank. Other rural banks including those outside the 50-kilometer radius, but are without the facilities of the branches/agencies of commercial banks in their areas may, however, continue to avail themselves of having their loan proceeds in checks until such time that commercial banks' branch/agency facilities become available and accessible to these rural banks. For this purpose and to ensure the effective and expeditious implementation of the modified system consistent with the desired objectives, all rural banks concerned shall arrange immediately a depositary relationship with commercial banks with branches/agencies at or nearest their respective areas of operations. The contemplated depositary relationship arrangement must be manifested to the Central Bank thru the submission by the rural banks of an authenticated copy of the letter of understanding between the rural bank and the commercial bank showing such depositary relationship which, among others, must indicate the following: aisadc (1) Authority of the rural bank to have its loan proceeds with the Central Bank credited, for its account, to the clearing account of its depositary commercial bank; (2) Authority of the rural bank in favor of its depositary commercial bank to debit the rural bank's current account for the value of maturing collaterals and/or loans with the Central Bank inclusive of accrued interest without prejudice, however, to the rural bank continuing with the present requirement of remitting direct to the Central Bank, within a period of one week, the collections received before maturity against its promissory notes pledged with the Central Bank, together with the authority of the commercial bank for the Central Bank to debit its clearing account for maturing loans of the rural bank when they mature. In the event that the rural bank's current account has a balance insufficient to meet the debit, then the Central Bank shall re-credit immediately the commercial bank's clearing account with the amount previously debited; and (3) The commercial banks shall, thru their branches or agencies, act as Central Bank custodian of documents securing the loans of the rural banks with the Central Bank for which acceptance of such function shall likewise be manifested in writing by the commercial banks. All charges incident to the transmission of funds to and from the Central Bank thru the depositary commercial bank shall be for the account of the rural bank. The following complementary procedures shall be adhered to: (1) The depositary commercial bank shall transmit, by telegraphic transfer, to the rural bank thru its branch or agency, the entire rediscounting proceeds credited to the former's clearing account for the account of the rural bank not later than the next business day following receipt of the corresponding credit advice from the Central Bank. The rural bank will be furnished a copy of the corresponding credit advice together with the usual letter outlining the terms and conditions of the loan granted. (2) The borrowing rural bank shall deposit with the branch or agency of its duly designated depository commercial bank the collaterals offered as security for the loan applied for, as listed in the covering rediscount schedule, copy of which shall be duly acknowledged by the authorized officer of the said commercial bank or agency concerned who shall retain a copy thereof. The original and two (2) copies thereof, duly acknowledged, shall be submitted to the Central Bank together with the rural bank's loan application. Collateral documents in the custody of the branch or agency shall be released to the rural banks concerned only upon presentation of a written authority from the Central Bank. It is understood that the clearing account of the depositary commercial banks shall be immediately debited for the loan value of collateral documents released without the prior written authority from the Central Bank. APPENDIX 13 INTEREST INCOME ON BANK DEPOSITS OF FOREIGN GOVERNMENTS (Appendix to Subsec. 3262.6) Being an interest income on bank deposits of foreign governments, the interest income on bank deposits of foreign diplomatic establishments are exempt from income tax under Section 29(b)(8)(A) of the National Internal Revenue Code, as amended, and consequently, from the 15% withholding tax prescribed by Section 53(e) of the same Code. Although under Article 34 of the Vienna Convention on Diplomatic Relations, diplomatic staff members are exempt from all types of taxes, except taxes on private income having its source in the receiving State, so that income earned by the diplomatic official in the performance of his duties are exempt from income tax, such exemption does not, however, extend to the interest earnings accruing to said income which are deposited in banks in the Philippines. Consequently, the interest income on bank deposits of diplomatic staff members are subject to income tax and therefore, to the 15% withholding tax. prcd Non-diplomatic staff members enjoy privileges and immunities of diplomatic officials if they are not nationals of or permanent residents in the receiving State. (Article 37, Vienna Convention supra ). Accordingly, if said non-diplomatic staff members Filipino citizens nor permanent run the Philippines, income earned by them in the performance of their duties are, Likewise, exempt from income tax. However, the interest income on their bank deposits in the Philippines are subject to income tax , and consequently, to the 15% withholding tax. APPENDIX 14 "GULAYAN SA KALUSUGAN" PROGRAM (Appendix to Sec. 3358) I. Program Tests Initially, the program seeks to increase the production of the following priority vegetable crops, beans (sitao, cowpeas, mungo, baguio bean, navy bean, red bean, sweet pea, etc.), peanuts, squash, tomato, cantaloupe, cabag, carrots, sweet corn, sweet potato, onions and garlic covering a total of 102,100 hectares which are located in the following provinces and city. llcd 1. Abra 2. Benguet 3. Ilocos Norte 4. Ilocos Sur 5. La Union 6. Pangasinan 7. Bataan 8. Bulacan 9. Nueva Ecija 10. Pampanga 11. Tarlac 12. Batangas 13. Laguna 14. Rizal 15. Cavite 16. Camarines Sur 17. Albay 18. Aklan 19. Iloilo 20. Negros Occidental 21. Cebu 22. Negros Oriental 23. Misamis Oriental 24. Bukidnon 25. Davao del Sur 26. Zamboanga City II. Objectives of the Program 1. Provide supervised credit and encourage the commercial production of selected vegetable and food crops in priority areas with a domestic and export market. 2. Increase the production of high protein and other nutritious vegetables or food crops. 3. Coordinate timing of planting, harvesting and marketing of such crops so as to lessen the effects of seasonality and fluctuations of supply and prices. 4. Encourage the growing of out-of-season crops and increase the income of farmers. 5. Develop an efficient marketing system and remove, insofar as practicable, the uncertainties of future prices by entering into contract purchasing arrangements for the future delivery of vegetables and food crops. cdtech 6. Coordinate this effort with the Green Revolution and the Nutrition Program. III. Lending Guidelines 1. The lending procedures shall be the same as in "Masagana 99" except that prior to the approval of loan applications under this program, a marketing agreement between the farmer-applicant, the creditor rural bank, and the Food Terminal Market, Inc. shall have been executed to ensure profitable marketing of produce and minimize uncertainties of prices at the time of harvests. (As amended by Section 3 of CBP Circular 1113 dated August 14, 1986) 2. The revised loan ceilings and loan maturities of the following 14 vegetable crops under the Gulayan sa Kalusugan (GSK) Program shall be as follows: Minimum Maximum Loan Loaning Rate/ Loaning Rate/ Team Crop Ha. (P) Ha. (P) (days) 1. Tomato 6,000 9,500 150 2. Onion (bulb) - 14,000 150 Multiplier 9,300 150 3. Garlic - 14,000 150 4. Mungbean 1,000 1,900 190 5. Peanut - 5,200 150 6. Sweet Corn - 3,500 90 7. White beans - 10,700 90 8. Water melon - 6,15 150 9. Melon/Musk melon - 6,150 150 10. Squash 6,100 150 11. Cowpea - 6,000 120 12. Baguio beans - 10,000 150 13. Pole Sitao - 12,620 120 14. Garden/Sweet Pea - 14,000 150 The lending rates and loan maturities of the following vegetable crops included in the GSK Program shall be as follows: Minimum Maximum Loan Loaning Rate/ Loaning Rate/ Team Crop Ha . (P) Ha . (P) (days) 1. Eggplant 8,155 9,100 150 2. Sweet pepper 7,200 8,200 150 3. Cucumber - 10,000 120 4. White potato - 19,200 120 5. Yambeans - 3,100 120 (Effective Jan. 8, 1985) However, if a farmer-borrower does not have a sprayer, he may be allowed a may a maximum of P500 for the purchase of a Knap Sack sprayer or a compressed air sprayer as part of his production loan. The cash portion of the loan shall include the expenses for land preparation (including clearing), planting, mulching, watering, weeding and cultivation, seeds, trellises and packing materials based on the actual needs of the project. The inputs of fertilizers, pesticides, weedicides and other farm chemicals as well as the sprayers shall be purchased with the use of serial-numbered CHITS or Purchase Orders. 3. The maximum loan that may be granted per farmer-borrower at any one time shall in no case exceed P10,000; and the areas to be financed shall be from a minimum of one fourth (1/4) hectare to a maximum of six (6) hectares. (As amended by Section 4 of CBP Circular 1113 dated August 14, 1986) cdta APPENDIX 15 Pro-Forma Information Sheet for Incoming Voting Stockholders Appendix to Subsec. 3125.2c (4) (b) __________________________________ (Name of Bank/NBFI) BIOGRAPHICAL DATA __________________________ (Name of Stockholder) I hereby certify that the information contained in this document and its supporting schedules and its supporting schedules are true and correct. _______________ __________________ Date Signature of Affiant SUBSCRIBED AND SWORN TO BEFORE ME this ____ day of ______ 19 ___ at ____________ Philippines, affiant exhibiting to me his/her Residence Certificate No. _________ issued at ___________ on _______, 19___. cdti _________________________ NOTARY PUBLIC Until December 31, 19_____ PTR _______________ Doc. No. _____ Page No. _____ Book No. ____ Series of 19__ I. PERSONAL 1. Name:_________________________ 2. Tax Account No. _____ Surname Given Middle 3. Other names used:____________________________________ 4. Residence address and telephone no.:_______________________ ____________________________________________________ 5. Business address and telephone no.: _______________________ _____________________________________________________ 6. Civil Status: ________ 7. Sex:___ 8. Citizenship:_____ 9. Place of Birth:________________ 10. Date of Birth:___ II. BUSINESS AFFILIATIONS 11. Present employment/business affiliations (whether director, officer, stockholder. If stockholder, indicate % of ownership) Name of Office Designation Date Assumed _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ 12. Previous employment/business affiliations (DOS) Name of Office Designation Date (Year) From To _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ III. FAMILY RELATIONS 13. Maiden Name of Spouse:____________________________ 14. T.A.N._______ Surname Given Middle 15. First Degree Relatives (of legal age only) By consanguinity: parents and children; by affinity parents-in-law and children-in-law. Name Relationship Name Relationship ____________ _________ ______________ ____________ ____________ _________ ______________ ____________ ____________ _________ ______________ ____________ ____________ _________ _____________ _____________ 15. Second and Third Degree Relatives (of legal age only) By consanguinity; grandparents and grand-children, brothers and sisters, uncles and aunts, nephews and nieces; by affinity; grandparents-in-law, brothers and sisters-in-law, uncles/aunts-in-law, nephews/nieces-in-law. llcd 17. Is your spouse/any member of your immediate family (up to third degree of consanguinity or affinity) an officer, director, stockholder of banks and other financial intermediaries. [ ] Yes. [ ] No. If yes, give particulars. Name Name/Address of Bank/FI Designation _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ _________________ ____________________ __________________ 18. Have you ever convicted for violating any law, decree, ordinance or regulations by any court or tribunal, or judicially declared insolvent, spend-thrift, or incapacitated to contract? Have you ever been convicted for any breach or infraction by a military tribunal or authority, or found guilty of an administrative offense? [ ] Yes. [ ] No. If your answer is yes to any of the questions, give particulars. _________________________________________________________ _________________________________________________________ 19. Do you have any pending administrative/criminal case? If you have any, give particulars. _________________________________________________________ _________________________________________________________ 20. Have you been retired, dismissed, forced to resign from any employment for reason other than lack of funds, or dropped from the roll? [ ] Yes. [ ] No. If yes particulars. _________________________________________________________ _________________________________________________________ _________________________________________________________ 21. Other Information _________________________________________________________ _________________________________________________________ _________________________________________________________ APPENDIX 16 SAMPLE FORMAT OF CERTIFICATE OF COMPLIANCE (Appendix to Subsec. 3167.6) I hereby certify to the best of my knowledge and belief that the security program that this bank has developed and is administering equals or exceed the standards prescribed under Section 3167 of the Central Bank Manual of Regulations, that such security program has been reduced to writing approved by this Bank's Board of Directors in resolution No. _____ dated _______ and retained by this Bank in such form as will readily permit determination of its adequacy and effectiveness. I hereby further certify that the bank Security Officer has provided for the installation, maintenance and operation of appropriate security devices as prescribed by Section 3167. LLpr ___________________ President or Authorized Officer _____________________ Date APPENDIX 17 REDISCOUNTING PROCEDURES FOR RURAL BANKS WITH A RATING OF "A" OR "B" (Appendix to Subsec. 3269.5) The procedures to govern the rediscounting availments under Subsec. 3270.1a shall be as follows: (1) The proceeds of any rediscounting application of an eligible rural bank shall be credited, for its own account, to the demand deposit account of its designated depository commercial bank on the same date the application is filed with the CB-DLC or CB Regional Offices: Provided , That such application is received at or before 12:00 noon. prLL (2) If after due processing, any or all of the papers offered/rediscounted at, found ineligible/unacceptable as collateral for the loan the rural bank concerned shall be required immediately pay in full the loan value of the ineligible/unacceptable collaterals and the recurrence of such exceptions for three (3) consecutive times shall automatically subject the rural bank to the pre-examination of its applications for a period of six (6) months. The procedures to govern the rediscounting availments under Subsec. 3270.1b shall be as follows: (1) The proceeds of any rediscounting application of an eligible rural bank shall be credited, for its own account, to the demand deposit account of its designated depository commercial bank on the same date the application is filed with the Central Bank Regional Offices: Provided , That such application is received at or before 12:00 noon. (2) If after due processing, any or all of the papers offered/rediscounted are found ineligible/unacceptable as collateral for the loan, the rural bank concerned shall be required to immediately pay in full the loan value of the ineligible/unacceptable collaterals and the recurrence of such exceptions for three (3) consecutive times shall automatically subject the rural bank to the pre-examination of its applications for a period of six (6) months. (3) Non-traditional export papers shall be rediscounted at three per cent (3%) per annum and loan value of eighty per cent (80%) with maximum bank lending rate of twelve per cent (12%) per annum. App. 17-a contains a listing of Philippine exports. APPENDIX 17-a PHILIPPINE EXPORTS Traditional exports Coconut products Copra (221-02.00) Coconut oil (412-07) Desiccated coconut (052-01.05) Copra meal/cake (081-03.04) Sugar products (061) Centrifugal and refined (061-01-03) Molasses (061-03.00) Others (061 less 061-01.03 and 061-03.00) Mineral products (28) Copper concentrates (283-01.02) Iron ore (281-01.01) Iron concentrates (281-01-02) Chrome ore (283-08-01) Others (28 less 283-08.02, 281-01.01, 281-01.02 and 283-08.01) Forest products Logs (242) Lumber (243) Plywood (631-02.02) Others (631 less 631-02.02 and 631-09) Fruits and vegetables Pineapples, canned (053-01.05) Pineapple juice (053-04.05) Pineapple concentrates (053-04-11) Others (05 less 053, 052-01.05, 051-03 and 055) Gold and precious metals (671-01.03 and 671-01.12) Unmanufactured abaca fibers (265-05.08 to 265-05.99) prcd Tobacco unmanufactured (121) Petroleum products (313) Non-traditional manufactured exports 0 Food 01 Meat and meat preparations 02 Dairy products, eggs and honey 032 Fish and fish preparations, canned or not 04 Cereal and cereal preparations 053 Fruits preserved and fruit preparations excluding pineapple's, in syrup (053-01.05) pineapple juice (053-04.05) pineapple concentrates (053-04.11) 055 Vegetables preserved and vegetable preparations 062 Sugar confectionery and other sugar preparations 07 Coffee, tea, cocoa, spices and manufactures thereof excluding coffee, not roasted (071-01) 08 Feeding stuff for animals not including unmilled cereals excluding copra meal/cake (081-03.04) 09 Miscellaneous food preparations 1 Beverages and tobacco 11 Beverages 122 Tobacco manufactures 2 Crude materials, inedible, except fuel 214 Fuelwood and charcoal 25 Pulp and waste paper 266 Synthetic and artificial fibers 3 Mineral fuels, lubricants and related materials excluding petroleum products (313) 4 Animal and vegetable oil and fats excluding coconut oil (412-07) 5 Chemicals 51 Chemical elements and compounds 53 Dyeing, tanning and coloring materials 54 Medicinal and pharmaceutical products 55 Essential oils and perfume materials; toilet, polishing and cleansing preparations cdpr 56 Fertilizers, manufactured 59 Explosives and miscellaneous chemical materials and products 6 Manufactured goods classified chiefly by materials 61 Leather, leather manufactures, n.e.s. and dressed furs 62 Rubber manufactures, n.e.s. 63 Wood and cork manufactures excluding plywood (631) but includes artificial or reconstituted wood insheets, in blocks, in boards or the like (631-09) 64 Paper, paperboard and manufactures thereof 65 Textile yarn, fabrics, make-up articles and related products 66 Non-metallic manufactures, n.e.s. 67 Gold, silver, platinum, gems and jewelry excluding gold (671-01.03 and 671-01.12) 68 Base metals excluding nickel (638) 69 Manufactures of metals 7 Machinery and transport equipment 71 Machinery other than electric 72 Electrical machinery, apparatus and appliance 73 Transport equipment 8 Miscellaneous manufactured articles 81 Prefabricated buildings and their assembled panels and parts of all materials 82 Furniture and fixtures 83 Travel goods, handbags and similar articles 84 Clothing 85 Footwear 86 Professional, scientific and controlling instruments; photographic and optical goods, watches and clocks 89 Miscellaneous manufactures articles, n.e.s. 9 Miscellaneous transactions and commodities, N . E . S . 931-03 Finished products from materials imported on consignment basis 931-03.01 Brassieres 931-03.02 Gloves and mittens 931-03.03 Handkerchiefs, handrolled and/or embroidered 931-03.04 Slips 931-03.05 Children's, ladies' and men's wear 931-03.06 Infant's wear 931-03.07 Other embroideries 931-03.14 931-03.08 Medicinal and pharmaceutical products 931-03.11 Jewelry of pearls, precious and semi-precious stones set on precious metal 931-03.12 Electrical machineries and equipment parts 931-03.19 Other manufactured products, n.e.s. Non-traditional unmanufactured exports 0 Food 00 Live animals, chiefly for food 031 Fish, fresh or simply preserved 051-03 Bananas 071-01 Coffee not roasted 2 Crude materials, inedible, except fuel 21 Hide 22 Oil excluding copra (221-02) 23 Crude rubber 26 Textile fibers excluding abaca hemp and synthetic and artificial fibers (266 and 2650508 to 2650599) 27 Crude fertilizers 29 Animal and vegetable crude materials, inedible, n.e.s. 638 Nickel prcd APPENDIX 18 LENDING POLICIES AND IMPLEMENTING GUIDELINES FOR BAKAHANG BARANGAY (COW CALF) PROGRAM OF THE MINISTRY OF AGRICULTURE AND THE CENTRAL BANK OF THE PHILIPPINES (Appendix to Subsec. 3361.1c) I. Introduction A. Rationale 1. Short supply of feeder stocks . The ten-year beef/carabeef development program, 1976-1985, has witnessed a very successful supervised credit program for backyard cattle fattening, popularly known as bakahang barangay . In less than three years, the bakahang barangay program has solved the problem of market for feeders, yearling and culls. Before this program was launched, the prices of cattle and beef were not only depressed but also there were market gluts. However, three years after bakahang barangay was launched, the problem had shifted from market outlets to shortage of feeder stock. Feeder stock is now the big problem facing the 894 rural banks and savings and loan associations accredited to the program. LexLib The national cattle herd as of January 1, 1979 is placed at 1.8 million head. From this small number, it is quite hard to generate enough supply of feeder stock for backyard cattle fattening. Meanwhile, the hill beef cattle ranchers have slowed down their production during the last decade. According to the ranchers, this has been caused by the mounting problem of squatters in cattle ranches. This is coupled with the problem of pasture lease tenure, and the low credit availment for cattle production. The deteriorating peace and order condition in isolated areas of the country has contributed to the retarded growth of the cattle industry in the commercial beef production sector. If increased supply of feeder stock for the backyard fattening program is desired, it is important and desirable to introduce an intensified cow-calf production program under supervised credit in the backyard sector, where roughly eighty per cent of the cattle population are in the hands of backyard cattle raisers. 2. Technology improvement . Moreover , an intensified cow-calf production as a backyard linkage to cattle fattening will bring about technological improvement to the backyard cattle sector, which presently relies heavily on antiquated techniques, feeding and nutrition, animal health care, and management are just some of the improvements to be gained in cow-calf operations at the backyard sector. 3. Credit consciousness . Furthermore, an intensified program on cow-calf production under supervised credit will bring about credit consciousness and availment among small farmers, who have no access to credit resource from government financing institutions for lack of acceptable collaterals and equity contributions. If the small farmers are to integrate livestock into their present cropping system, additional credit resource will be required to finance livestock production. This credit resource will enable them to generate additional income and therefore better their social standing and economic posture. In addition, this process will encourage farmers' participation in government programs and enable them to appreciate the importance of credit and financing. B. Supply and Demand Situation 1. Beef and milk programs . The current milk collection scheme of the Bureau of Animal Industry is putting great pressure on hill beef ranchers to set up their production of breeder stock, which could be channelled to the dairy program. This problem becomes even more acute in the context of the current shortage of feeder stock for backyard cattle fattening. 2. Ban on carabao slaughter . The partial ban on carabao slaughter, which has raised the age of carabaos eligible for slaughter from three years to seven years for males and to eleven years for females, will most likely affect the cattle industry. As the ban rules out the inter-provincial movement of carabaos, and raises the slaughter age, the ban will put pressure on the supply of pork, chicken and beef. Thus, it is imperative that intensified cow-calf production be promoted both in the backyard and commercial cattle sectors. C. Employment and Income Generation 1. Employment generation . There is a growing tendency among the rural populace to move into the urban areas in search for and pursue employment. This movement has resulted in the over-crowding of people in metropolis and a corresponding rise in unemployment and underemployment. Livestock production such as bakahang barangay will surely help generate year-round jobs for the members of farm families that will engage in cattle raising. 2. Income generation . The average per capita income in the country was put at a little over $500 in 1978. This figure is certainly much higher than that in the agriculture, fishery and forestry sector. Per capita GNP in such countries as Hongkong and Singapore is well over $3,000. Even Malaysia's per capital income is very much higher than that of the Philippines'. Diversification and integration of other projects such as cow-calf production into the current farming systems, will most likely generate additional income for farm families. II. Objectives of the Program A. General Objectives. The general and long-term objectives of the bakahang barangay (cow-calf) program are to, 1) increase the cattle breeder base, 2) improve the genetic make-up of the local stock through artificial insemination and/or natural breeding, and 3) increase the dressed weight and dressing percentage of slaughtered cattle by finishing them before slaughter. B. Specific Objectives . The specific objectives of the program are as specified hereunder to wit: 1. To generate opportunities for year round employment and additional income for small farmers. 2. To encourage the participation and support of the barangay in cattle breeding. 3. To increase the supply of feeder stock for fattening and dairy animals for milk production; 4. To conserve and increase the cattle breeder base; and 5. To improve the animal protein supply and raise the levels of nutrition in the rural areas; III. Target Clientele and Program Areas A. Target Clientele . The target clientele of this program are those successful project borrowers under the bakahang barangay (backyard cattle fattening), and those who are experienced in backyard cattle raising. B. Program Areas . The initial target areas considered suitable for this program are those falling under the following categories: 1. Areas close to livestock markets, stock farms, dairy farms, breeding stations, artificial breeding centers, and animal health centers; 2. Areas with adequate feeds and feedstuffs and drinking water; 3. Areas where the project-borrowers and bank staff are willing to undergo training and accreditation to program and engage in cattle breeding; 4. Areas which are relatively free from infectious and communicable animal diseases; and 5. Areas where banks are actively financing livestock production. C. Targets for Financing . The targets of this program in terms of number of cows/ready-to-breed and/or bred heifers to be financed under supervised credit scheme are set forth, as follows; In Thousand Head Breeder 2 Cows Heifers Total 1981 15 10 25 1982 20 15 35 1983 25 20 45 1984 30 25 55 1985 35 30 65 Total 125 100 225 ==== ==== ==== D. Breeder Bull Components 3 and Value 4 1981 500 P2.5M 1982 700 3.5M 1983 900 4.5M 1984 1,100 5.5M 1985 1,300 6.5M Total 4,500 P22.5M ===== ====== Financing should be by clusters of barangays for ease in distribution of breeder bulls, and breeding receptive females. IV. Production and Technical Aspects A. Breed and Description . The cattle recommended for cow-calf production are those of dual-purpose type, such as Brahmans, Sta. Gertrudes, their crosses and other acceptable grades. Preference is given to those that are already tamed, good in disposition, quiet in temperament, good udder size and shape and free from physical defects and deformities. B. Prequalification of Program Implementors 1. Program implementors . Program implementors shall include rural banks/SLAs and other financing institutions, Bureau of Animal Industry; Bureau of Cooperatives Development, and those involved in program monitoring on a barangay, municipal, provincial and regional levels. 2. Identification training, and accreditation of rural banks/SLAs . The Central Bank Department of Rural Banks and Savings and Loan Associations, shall identify and screen rural banks interested to join in the program. The Central Bank Supervision and Examination Institute in coordination with the support from technical, research and other institutions, such as Bureau of Animal Industry, UP College of Veterinary Medicine, UP Los Baos, PCARR and others, shall conduct training of program implementors. 3. Identification, training and accreditation of project borrowers a. Training of project borrowers . Project borrowers shall be trained on a barangay level, both in theory and skills. The training site shall be certified by the Bakahang Barangay Management Committee (BBMC) as to availability of facilities such as feedstuffs, animals, milking facilities etc. and qualified staff where project borrowers can have experimental learning. b. Pasture gardens duly certified . For cattle to fully develop and beget its kind, adequate feeds should be supplied. Feeds consisting of 90% or more of grass-legume mixture and 10% or less of concentrate can supply the nutrients necessary for maintenance, growth, reproduction and milk production. Desirous as we are for additional nutrition in the form of concentrates such as rice or corn bran, copra meal or otherwise, the amount that may be supplied should be 10% or less, depending on availability and cost. Ruminants are born eat grasses. They can develop and multiply purely on grasses. They can digest fibrous materials of plant origin, especially when it is supplied at the right stage. Napier and guinea are the two most high yielding grasses in the country. They are generally reproduced by cuttings and root-stocks, respectively. When these grasses are fed in combination with such proteinaceous plants as ipil-ipil, centrosema, siratro, stylo and others, they provide a well balanced feed for cattle. Planting materials in the form of seeds cuttings, rootstocks or seedlings are supplied free by the Bureau of Animal Industry. Considering the volume of grasses cattle eat (10 to 30 kilos per day), it is a good practice to prepare forage gardens which will be given the care cereal crops and vegetables often receive. Grasses given adequate fertilizer and irrigation can grow four inches a day. Improved nutrition decreases mortality, improves conception rate, calving rate and market weight. Under ordinary conditions a lead time of three to six months for land preparation, planting and plant development is needed before the plants are ready for feeding. Before cow-calf project borrowers obtain their loan, they should show existing forage garden with a minimum of one legume and one grass species of reasonable area and/or number of plants. The project technician shall determine such reasonable needs of the borrower, together with his other sources of feeds like rice straw, sugarcane and others with the objective of insuring sufficient feeds thru the dry season. The forage garden of the borrower is subject for inspection and certification by technician before a loan is released. C. Cattle Shed . To provide protection against inclement weather, the breeder cattle should be provided with a modest shed with feeding trough or feeder made of local materials. The floor space should be adequate, even at calving time. The shed is subject to inspection and certification by technician before the loan is released to a project borrower. D. Compost Pit . It is recommended that a manure pile be fully utilized to fertilize the pasture garden or home garden. Two ways of doing this are to throw away fresh manure into the garden daily or to build a compost pile near the cattle shed. Throwing away the fresh manure daily by mulching it over the grass or ipil-ipil rows will discourage flies from breeding and result in optimum use of manure nutrients. To make compost, a slightly elevated place is desired, alternating weeds, left-over green feeds, manure and soil. In the dry season, the compost should be watered regularly to keep it moist. Four to five months are needed to make a good compost. Sources of Breeder Stocks A. Ac credited Livestock Markets . Accredited and active livestock markets are sources of feeder stocks, heifers and cows for breeding purposes. The project borrower and the livestock technician may visit these places, where they can select and negotiate for the price of breeder cattle to be paid by the concerned rural bank/SLAs. B. Recognized Breeders . Recognized breeders in the barangays, provinces or elsewhere could also be tapped as sources of breeder stock. These sources of breeders should be certified disease free by accredited personnel of MA-BAI. With assistance from the local MA-BAI offices, these sources could easily be identified, where the project borrower and livestock technician can visit, select the stock and negotiate for the price to be paid by the bank concerned. C. Abattoirs . In a study made several years ago, it was shown that some 25% of the slaughter cattle reaching the abattoirs are pregnant. Part of the breeder conservation scheme adopted by the BAI is to purchase those potential breeders confirmed pregnant thru rectal palpation. They are quarantined, fed and cared for in BAI stock farm or station where project borrowers may purchase them at cost. Transport cost from the source to destination is shouldered by the buyer. As a component of the bakahang barangay (cow-calf) program, this breeder conservation scheme will be expanded, particularly in areas where the barangays and rural bankers/SLs are actively participating. Government and Industry Support The program shall make available a pooled government and industry support to the farmer-borrowers and the financing institutions in the following areas, namely: A. Breeding Services . Cow-calf production demands breeding services, either thru natural breeding or artificial insemination. 1. Breeder bull . To provide natural breeding services, a bull of breeding age shall be dispersed to a barangay, to cover a radius of about three kilometers, where heifers/cows other than those financed under the program could also be served. A recipient of the bull, shall be a project borrower who is willing and able to maintain and care for the animal. For services rendered, he can charge a breeding fee of P15-25, for the first three consecutive services per female. Before the fourth try, an artificial breeding technician or veterinarian should be consulted, and if breeding fee will be charged. As an added incentive to the bull caretaker or recipient, he is entitled to receive from the government a yearling heifer for every 50 off-spring of the bull. He may charge higher breeding fee for servicing cows/heifers outside the program. The bull is subject to recall and/or exchange thru the project on its third year in order to prevent in breeding. The breeding fee to be paid is part of the loan which will be released by the rural bank/SLA concerned to the recipient of the bull, upon notification by the project borrower using the approved form. 2. Detail of an artificial breeding technician . To augment the natural breeding services, an artificial breeding technician shall be detailed in the barangay where project borrowers are concentrated and when the concerned rural banks(s) determine the need for doing so in consultation with BAI technician. Existing artificial breeding technicians nearest to the rural bank or barangays concerned will be involved first. He will train project borrowers on heat detection and perform heat synchronization using hormone supplied free by the Bureau of Animal Industry, and pregnancy diagnosis before and after insemination services. They shall be supplied with a motorcycle, artificial insemination paraphernalia, liquid nitrogen tank, and others, including incentives/honoraria consisted with existing regulations. Cattle that failed to conceive after two consecutive natural breeding services or three consecutive artificial insemination services, shall be sold and replaced with another female breeder. Because of the time element involved in such a situation, it very essential that the breeder female to be purchased be carefully selected. The uterus should be carefully examined and must be well developed in relation to the physical condition of the animal. 3. Heat synchronization and artificial insemination . The normal, inexpensive way of synchronizing estrus of cows with sucklings is weaning (separation) of the young from the dam (mother), which is generally from six to seven months after birth. The cows will come in heat three days to one week after weaning their calves. When signs of estrus are exhibited, the cows may be bred or inseminated. Another synchronization method involves the use of hormone, either the powdered form or the injectable form. Hormones are expensive. When it is intended for heat synchronization, extra care and caution should be observed. The animal should be of breeding age. Administration of hormone should be in accordance with the manufacturer's recommendation. Breeder heifers are confined, fed and watered. This is also the procedure used during the taming process. When in group, and the powdered form of hormone is used, their feeders should have partitions so that they will not compete with one another when concentrates containing the hormone for heat synchronization is fed. This will also ensure that the cattle will receive the right quantity of hormone. When hormone in injectable form is used, their feeders need not be partitioned, because they can receive the prescribed quantity by injection. The injectable form is relatively more expensive than the powdered form which is normally mixed with rice bran, corn bran or other concentrates and fed for two weeks. When the hormone is withdrawn from the feeds, there will be estrogen surge three to seven days after withdrawal and the female will exhibit signs of estrus, indicating that they are ready for breeding. Conception rate during the first heat cycle is generally lower than what can be obtained on the second heat cycle, which is already the normal cycle. A conception rate of 30% and 70% for the first and second heat cycles, respectively, are generally obtained. The second heat or normal cycle is the recommended time to breed the animal. In accordance with the revised BAI Administrative Order # artificial breeding services is given free to livestock farmers having 10 head or less, when locally processed frozen semen is used. 4. Pregnancy diagnosis . Post breeding pregnancy diagnosis thru rectal palpation is suggested to be done not later than 2-3 months after service to confirm pregnancy. A technician experienced in pregnancy diagnosis has little difficulty of detecting pregnancy one month from breeding onwards. For practical purposes, 2-3 months after breeding is the recommended time to perform pregnancy diagnosis, within which time the fetus of a pregnant cattle is already big which the technician could not mistake for some-else. This diagnosis is done by rectal palpation. 5. Feed resource development . The viability, stability and progress of the cattle industry start with grass production. Ruminants (cattle, carabao, goats, sheep) are grass-eating animals. They are born to eat grasses, and can thrive, multiply and be raised economically purely on grasses. a. Legume seedstock dispersal. As a commodity support to the program, the government shall disperse legume seeds and grass seedstocks to project borrowers. Proteinaceous plants such as ipil-ipil, kadios, centrosema, siratro and stylo will be supplied to project borrowers by the Ministry of Agriculture thru the Bureau of Animal Industry. These seeds, which are payable in kind, are usually available during summer months, from January to April, to be ready for planting when the rainy season comes. Planting materials for napier, guinea grass, para grass, and others, shall likewise be supplied to project borrowers. These are available throughout the year. 6. Manpower and technical assistance . As a support to accredited rural banks/SLAs participating with the bakahang barangay (cow-calf) production, a government technician is detailed with the bank to assist in the preparation of farm plan and budget for approval by the bank manager, in setting up targets (number and value of cattle to be financed for a given period), in training farmer-borrowers on forage production, nutrition, feed formulations breeder stock selection, animal health and other improved management practices, institute programmed visits and supervision, assist in the marketing of cattle, facilitate prompt collection of loans and prepare and submit the required reports. 7. Animal health protection . Animal health protection is service function in support to the bakahang barangay (cow-calf) program. This includes among others, de-ticking the cattle within 24 hours after giving the animal adequate rest, deworming it with recommended anthelmintics three days to one week after and immunizing it against infectious and contagious diseases by accredited personnel of the Ministry of Agriculture, three days to one week after deworming. It is presumed that deworming is done when the animal is confirmed or highly suspicious to be positive of worm's. This is usually repeated 2-3 weeks after to eliminate the remaining parasites. Space, Feed and Water Requirements A. Space Requirements. To provide comfort and normal development, the breeder/fattener cattle should have adequate space, feed, water and the necessary care. The suggested floor space, feeding space, etc. for fatteners is 5 square meters. It could however, be modified by the project-borrower as it suits his situation. Breeder females, usually require more space that include provision during calving time. The floor space could be increased to 8 to 10 square meters for breeder heifers or cows. B. Feed Requirement . The forage recommended for cow-calf production is grass legume mixture consisting of one or a combination of the following: Grasses Legumes Napier Ipil-ipil soilage (fresh leaves) Guinea (hamil or Centrosema soilage common (fresh leaves) Para Stylo soilage (fresh leaves) Kennedy Ruzi Kadios soilage (fresh leaves) Sugar cane (milling Other soilage (kakawate, acacia, kamatsile) varieties) A mixture of one grass and one legume is adequate for cattle nutrition. Half rice straw or corn stovers free of molds when fed in combination with half ipil-ipil and other legume soilage (fresh leaves) are good sources of feeds during summer. Grass harvested young (knee high for guinea, para, kennedy ruzi and belt high for sugarcane and napier) when fed in combination with legumes are considered forage of high quality. As a feed, it could be given as much as 90% or more to cattle. Concentrates such as rice bran, corn bran, copra meal and the like, could be given when available at a reasonable price at the rate of 10% or less. Such 10% represents about one kilo or more of the concentrate mixture. Prices of feedstuffs influence profit. Since cow-calf production is intended as source of supplemental income for the farmer, it should be treated as a small business enterprise. Mature cattle normally consume 2 to 2.5% of body weight in terms of dry matter (what is left after moisture is removed). Given fresh or "as is" basis, they could consume anywhere between 10 to 30 kilos or more fresh fodder (grasses and/or legumes) daily. It should be remembered that feeds consisting of grass-legume mixture when supplied in adequate amount could provide the energy and nutrient needed for maintenance growth, development and production. Supplemental feedings in terms of concentrate is advisable to cattle for milking purposes. Depending on their weight and performance, they may be given supplemental feeds of 1 to 3 kilos of contrates daily. Active bulls may also be given supplemental feeding at the same rate daily. Molasses, when available at reasonable price may be a cheap source of energy. It also improves palpability when sprinkled on such feedstuffs as rice straw and corn stovers. Breeder cows consume from 30 to 40 grams daily , or at present prices about P25.00 to P35.00 per cow per year. Salt and bone meal when given in liberal amount (2-3 table-spoonfuls twice or thrice a week or ad lib) improves appetite, increases average daily gain in weight and increase resistance against diseases. Considered as white gold in livestock feeding, salt provides the essential minerals, sodium and chloride. Bone meal provides calcium and phosphorus and some micro-nutrients. Ad libitum (ad lib) feeding means the mixture is always available in a box or can, protected from rain. C. Water Requirement . As most of those in the animal kingdom are composed of 80% water, this; inexpensive and often neglected item is essential for survival and should be made available to cattle at all times. Water serves a number of purposes, among which are: a. dissipation of heat b. ionic balance c. excretion of metabolism waste products d. carrier or medium of nutrients, blood cells, etc. During the hot season, cattle consume more water for body maintenance than during the cooler months. A matured cattle can consume as much as ten gallons (2 kerosene cans) of water daily. Some Reproductive Phenomena or Practices A. Breeding Age . The breeding age of cattle is usually between 16 to 24 months and is dependent upon their physical condition or development. Those whose constitution are well built, well fleshed and their reproductive organs well developed as a result of good nutrition and management attain sexual maturity earlier than otherwise. They should weigh about 250 to 300 kilos. Bulls are ready for breedings when they are two years old. At this age, they could breed twice a week. As the bull reaches three years old or over, their service could be increased to three times or more a week, provided adequate feed is supplied. For controlled breeding, the bull's service may be restricted to 60 to 90 days, after which it should be rested and conditioned for one to two months, to be ready for next service. B. Heat Cycles and Duration . Normally, the periodic heat cycle of cattle ranges from 18 to 24 days or an average of 21 days (3 weeks). The duration of their heat or estrus is between 18 to 24 hours. Because of the short duration of the heat period, it is necessary to observe the cattle carefully for external signs. C. External Signs of Estrus . External signs exhibited by heifers/cows in heat are as follows: 1. Nervousness/listlessness 2. Bellowing 3. Decrease in milk production 4. Mounting others, or allows herself to be mounted 5. Frequent urination 6. Moist and swollen vulva 7. Mucous discharge in the reproductive organ D. Ovulation and Timing of Breeding . Ovulation or shedding of the eggs occurs 10 hours after the onset of heat. This is the time when the female has a better chance of getting pregnant when serviced; Cattle are observed to start coming in heat either early in the morning or late in the afternoon. It is therefore essential that the watcher possess keen observation on heat detection. Those observed to be in heat should be immediately bred. Follow-up service could be done 12 hours later, provided the female is still in heat. Breed cows at least 60 days after calving. E. Gestation Period . Gestation period or from breeding to birth (calving) takes 270 to 290 days, or about 9- months. llcd F. Natural Breeding The Barangay Way Breeder females are brought to a communal area or corral selected or constructed by the project borrowers in the barangay. The area should be fenced and secured to prevent the animals from getting astray. The females, together with the bull are confined, fed and watered in the same place. Care, feeding and watering may be done jointly or individually by the project borrowers or their selected representatives. Because the bull has to do a lot of servicing, supplemental feeding should be given. Females that come in heat and bred by the bull, are recorded on a prescribed form by the watcher chosen by the project borrowers, after which it should be taken away from the group. When all the females are bred, the bull may be used to service other females in the locality. Priority to be bred are breeder females financed by the bidding sector. The bull could be replaced after three years, to prevent breeding its own offspring, or returned to the BAI when no longer needed in the barangay. V . Credit and Financing for Bakahang Barangay (Cow-Calf) Production The following credit guidelines will be used in providing credit resource and financing cow-calf production, to wit: A. Eligibility Requirements : 1. Rural banks/SLAs a. Must be operating in accordance with laws and regulations, instructions and directives issued by the Central Bank of the Philippines; b. Must have no internal dissension which may jeopardize the government investments and financing assistance; c. Must be eligible to rediscount with the Central Bank; d. Must have been authorized by the Central Bank to accept and service savings and time deposits; e. Must have competent management to handle the program; f. Must have sound liquidity and investment position; g. All banks regardless of performance in the previous livestock programs should obtain the accreditation from CB-DRBSLA before they would be allowed to implement and/or continue their financing under this program; h. The bank must have its own qualified livestocks technician(s) to supervise the project. Preference shall be given to agriculture graduates, major in animal husbandry or graduates of veterinary medicine. However, other agriculture graduates (college or secondary ) who have adequate training or experience in livestock management, nutrition, breeding and disease control may also qualify. In every exceptional cases and upon justification and recommendation of the CB-ACS, said bank(s) may be allowed to participate in the program without employing its own livestock technician(s), Provided , That: (1) Its financial position does not warrant the hiring of technician, and (2) The volume of exposure to livestock loans is so limited to justify the employment of one If the above conditions exist, a qualified MA-BAI livestock technician(s) will be detailed to the bank to assist in the program implementation. The Ministry of Agriculture livestock technician shall not be pulled out during the entire period of the project financed. In case of transfer, promotion, etc., the incoming technician should be oriented by the former technician as to names of borrowers and locations of the projects. i. The bank shall be required to hire additional livestock technician(s) if so warranted, in proportion to the number of farmers-borrowers being technically assisted as determined by and upon recommendation of the ACS covering said RB/SLA. j. The bank must purchase the necessary veterinary equipment and instrument(s) for the use of its livestock technician(s). 2. Borrowers a. A prospective borrower must have ample experience and competence to operate the project with a minimum of external supervision and technical guidance. b. He must be willing to able by the technical recommendation of the MA or RB/SLA livestock technician(s) as well as keeping of records and to follow repayment schedules. c. He must have the necessary watering and housing facilities and is willing to shoulder the labor and cost of putting-up of such necessary facilities for the project, such as pen, shed and fence. d. He must not have past due accounts in any lending institutions. e. He must have an adequate area for forage production, preferably more than enough to sustain the needs of the animals, especially during the dry months. 3. Projects a. The animal(s) to be purchased/acquired should come from a disease-free area and acquired from established and reputable breeders. b. Whenever necessary and practicable, a marketing contract will be entered into among the producer, buyer and the bank. c. No loan should be released unless all the project requirements are satisfied. B. Lending Policies 1. Purpose of the loan a. The loan proceeds shall be used to finance the purchase of feeder stock (for fattening purposes), breeder stock of breeding age, pregnant animals, concentrate feeds, minerals, veterinary supplies and medicines, breeding fee and other incidental expenses and contingencies related to the procurement and production of the animals to be financed. 2. Loan basis a. The loan amount shall be based on the actual but reasonable cost of the essential items enumerated above. b. The maximum number of animals or size of the project per farmer-borrower may depend on the individual qualifications, i.e., paying capacity, collateral, availability of stock, farm labor, adequacy of forage supplies, training and experiences of the proponent and availability of farm facilities. 3. Loan releases a. If the initial fund will be coming from CB-DRBSLA in the form of STDs, the loan to the borrower will be released in lump sum and will be subsequently deposited under the special savings deposit (SSD) in the name of borrower and thereafter will be withdrawn staggeredly in accordance with the approved farm plan and budget. b. If the initial fund comes from its bank resources, SSD shall not be maintained, hence, there will be one promissory note for every loan release as specified in the approved farm plan and budget. c. In both instances, as much as possible, all loans shall be released in kind or in the form of purchase orders, unless it is extremely unavoidable and upon the recommendations of the CB-ACS assigned in the area. LibLex 4. Size of loans a. Notwithstanding the loan basis (Lending Policy No. 2), the size of the loan shall depend on the production credit requirements of the following project combinations wherein the borrower has the option to select: (1) Model I One (1) breeder ready to be bred 1 (2) Model II One (1) breeder and one (1) fatteners 1 (3) Model III One (1) breeder and two (2) fatteners 2 (4) Model IV One (1) breeder and three (3) fatteners The selection of any of the above models by the farmer-borrowers will be guided by the RB/BAI technician(s), taking into account the availability of forage and stock as well as the technical feasibility of the project. b. Any deviation and/or increase on the number of animals, per model so stated will require a justification from the technicians and endorsement by the ACS covering the area. 5. Loan term . The loan shall have a maturity of three (3) years, taking into consideration the feasibility of the project and repayment schedule. 6. Interest rate . The loan to the borrower shall bear an interest rate prescribed under the CB rules and regulations as approved by the Monetary Board. 7. Security requirements . The loan under this financing program shall be secured by any or a combination of the following: a. Real estate mortgage; b. Chattel mortgage of the animals to be financed including offspring produced; c. Co-maker/s acceptable to the bank; d. Selda system. C. Rediscounting procedures . Immediately after the release of the loan to the borrower, the promissory note executed by the borrower will be rediscounted with the Central Bank (DLC) as medium-term, payable within three (3) years and amortized on a yearly basis. The term of the loan of the borrower is co-terminus with that of the DLC. D. Repayment of Loan (Borrower to RB/SLA ) Repayment of the loan to RB/SLA will be on a yearly basis, based on simple declining balance of amortization. Example: Loan Amount 15,000 Term of Loan 3 years Interest Rate 12% p.a. inclusive of 2% bank charges Repayment Schedule Year 1 2 3 Total Principal P5,000 P5,000 P5,000 P15,000 Interest 1,500 1,000 500 3,000 Bank Charges 300 300 100 600 Amortization 6,800 6,200 5,600 P18,600 Loan Balance P10,000 P5,000 ====== ====== ===== ===== E. Incentive Allowance . Production technicians from the MA on full or part time detail with the lending institution shall be given incentive allowance of one peso (P1.00) per farmer-cooperator per month but not to exceed the maximum number of cooperators to be supervised in a given period. The maximum number of farmer-borrowers to be supervised by each livestock production technician shall be as follows: 1. One hundred fifty (150) farmers whose farms are contiguously located: Provided , That the technician is equipped with a motor vehicle and where borrowers have ample experience in supervised credit. 2. If the vehicle is not provided, then the above number shall be reduced to one hundred (100) borrowers. 3. Fifty (50) farmers for a technician who is hired on probation or as casual and has no previous experience in supervised credit. VI. Marketing Services for Calves, Feeders, Breeders and Culls In order to Insure a good market for calves, feeders, breeders and culls produced under the program, marketing assistance will be provided for the program cooperators in the following manner: A. Contract Growing Arrangements . The project borrowers under this program will receive the support of government in supplying the Bureau of Animal Industry with breeder cattle (in excess of their project-borrowers own requirement) for use in the dispersal program of the government and at prevailing market prices. B. Grading and Pricing . In order to encourage the production of quality cattle for breeding purposes, the program will assign production technicians who will undertake grading of animals intended for breeding, for sale, for work, or for slaughter. For this purpose, a grading system will be developed and prescribed for the guidance of all concerned. In addition to grading, the program will also provide price information to cover the animals produced under the program, similar to what is now being done for slaughter cattle and carabaos sold in the existing livestock auction markets. C. Health Services . In order to insure the good health of the animals covered by the program, health testing, disease prevention and treatment will be performed for such animals as part of the technical assistance to be provided by the government. D. Milk Collection Services . In areas where the program is undertaken and where the farmer-cooperators are producing milk in excess of their family requirements, government will set up a milk collection scheme purchase such excess milk for processing and for sale to the public as well as for use in the BAI milk feeding scheme in support to the national nutrition program for pre-school and school children in depressed areas where high incidence of malnutrition occurs. VII. Responsibilities of Program Participants The responsibilities of the agencies participating in this program are defined hereunder, to wit: A. MA Bureau of Animal Industry Lead Agency 1. Bull lease/dispersed project 2. Artificial insemination services free local semen 3. Routinary disease prevention with the use of vaccine and biologics, including the treatment of liverfluke free. 4. Engage in pasture development promotion and free planting materials. 5. In the implementation of the project, the production technician should be given the responsibility of technical stock selection, assistance and supervision. 6. Assist in the marketing of the animals thru the livestock auction market and other outlets. 7. Support and coordination with concerned agencies. The Ministry of Agriculture Regional Office should initiate the implementation of the barangay pilot project thru BAI which is identified as the lead agency. B. Office of the Provincial Veterinarian 1. Act as coordinator among the identified agencies participating in the project; LLphil 2. Convince the governor to provide the same amount of support for a separate training program for the farmer/cooperators under the bakahang barangay (cow-calf); and 3. Encourage the borrowers to pay their loans or obligations on time. C. Bureau of Forest Development Supply the planting materials (ipil-ipil and others) needed for future pasture development. D. Office of the Provincial Governor 1. Province support to the project; and 2. Encourage the borrowers to pay their loans or obligations on time. E. Office of the Town Mayor 1. Provide support to the project; and 2. Encourage the borrowers to pay their loans or obligations on time. F. Bureau of Cooperatives Development 1. Identify the eligible cooperators under this project; and 2. Conduct information drive/dialogue with farmer-cooperators to get the latter's support under this project. G. Lending Institutions 1. Provide financing for farmers under the project; and 2. Credit supervision. H. Federation of cattle raisers of the Philippines Ranchers Associations 1. Support the project by giving preference to small farmers involved in the project; and 2. Possibly make the animals available at reasonable prices. VIII. Strategy of Program Implementation In order to insure the success of the program, the following strategy is adopted as guide in the implementation of the program. A. Organization of Program Management Committee . In order to provide an organization to over-see this program, a management committee at the national, regional, provincial/city, municipal and barangay levels shall be formed, as follows: 1. National Management Committee . The present Bakahang Barangay Management Committee, as constituted, shall serve as the national management committee for this program, provided that additional staff and consultants may be added in view of the expansion of the original bakahang barangay program, including kambingang barangay, kalabaw ng barangay, gatasang barangay, babuyang barangay, manukang barangay, itikang barangay and biogas ng barangay . 2. Regional Management Committee . A regional management committee to be headed by the MA Assistant Regional Director for Livestock, as chairman, with members coming from RBAP, FCRAP, CB, PC, and a secretary to be designated by the chairman. MA Asst. Regional Director for Livestock Chairman RBAP Representative Vice-Chairman FCRAP Representative Member CB Representative Member LBP Representative Member DBP Representative Member PC Representative Member NMIC Representative Member 3. Provincial Management Committee Member Provincial Governor Chairman Provincial Veterinarian Executive Vice-Chairman CB-DRBSLA ACS Member Participating Rural Banks Member PC Member LP Technician Secretary 4. Municipal Management Committee Municipal/City Mayor Chairman Livestock Production Officer Executive Vice-Chairman RB Manager/President/VP Member Chief of Police Member RB Technician Secretary B. Organization of Cow-Calf Producers Associations . The Municipal/City Management Committee shall organize in every barangay participating in the program a bakahang barangay cow-calf producers association, whose primary objective shall be to make every member productive and viable. The organization shall have such officers as president, vice-president for stock procurement, vice-president for credit resource, vice-president for technology resource, secretary, treasurer, public relations officer, and auditor. After the organization of cow-calf producers on the barangay level has been made, a federation on the provincial, regional, and the national level will follow. C. Training and Education of Program Implementors and Farmer-Cooperators . A one-week seminar will be given to all participating agencies' representatives, MA-BAI, CB-DRBSLA, CB-SEI, and rural banks. Training of farmer-borrowers will be conducted in suitable training sites where skills training on cattle breeding and fattening can be acquired. A syllabus for the two levels of training will be prescribed to insure uniformity and quality of training. D. Government and Industry Support . The program shall make available a pool of government and private industry support to farmer-borrowers and financing institutions in the following areas namely: 1. Breeding services will be provided by the MA-BAI a. bull dispersal/lease b. heat synchronization c. artificial insemination d. pregnancy diagnosis 2. Feed resource development a. legume seedstock dispersal/loan b. grass seedstock dispersal/loan 3. Training of project borrowers 4. Technical assistance 5. Marketing assistance on the stock and on surplus milk IX. Project Models The program recommends at least four models as basis for this lending scheme, as follows: Model 1 One breeder Model 2 One breeder and one fattener Model 3 One breeder and two fatteners Model 4 One breeder and three fatteners Based on the financial analysis of these models, the program for cow-calf production is a viable undertaking, the analysis of each of these models is presented below. For the details of the four models, please refer to Appendix 18-a. Project Model Summary The financial analysis of the four (4) project models are summarized as follows: Data Elements Model Model No . 1 No . 2 Number of Stock (Animals) Breeder 1 1 Fatteners (fattening turn-over of two times a year) 1 Amount of loan (P) 4,000 10,000 Complete loan repayment (No of years) 5 4 Income in 5 years (P) 3,880 11,330 Ave. yearly income (P) 776 2,266.40 Average ROI (%) 19.4 22.66 Cash payback to recoup investment (No. of years) 5 4.5 Total bank charges, 2% (P) 280 440 Total loan interest, 12% (P) 1,680 2,640 Estimated value of retained animals (P) 3,800 3,800 Data Elements Model Model No . 3 No . 4 Number of Stock (Animals) Breeder 1 1 Fatteners (fattening turn-over of two times a year) 2 3 Amount of loan (P) 16,000 22,000 Complete loan repayment (No of years) 3 3 Income in 5 years (P) 19,882 27,588 Ave. yearly income (P) 3,976.40 5,517.50 Average ROI (%) 24.85 25.08 Cash payback to recoup investment (No. of years) 4.5 4 Total bank charges, 2% (P) 560 800 Total loan interest, 12% (P) 3,360 4,800 Estimated value of retained animals (P) 3,800 3,800 Facts and assumptions 1. Facts Liveweight price per kilo of cattle at livestock market by type a. Heifer breeders P11.20 b. Fatteners 11.00 c. Work animals 11.25 d. Fattened cattle 11.35 2. Assumptions a. Amount of loan per animal P2,500.00-P4,000.00 b. Loan interest 12% c. Bank charges 2% d. Number of stock animals by model (1) Model No. 1 One breeder (2) Model No. 2 One breeder and one fattener (3) Model No. 3 One breeder and two fatteners (4) Model No. 4 One breeder and three fatteners e. Breeding purposes Grade cattle, pregnant or heifer ready for breeding f. Fattening purposes Beef cattle with an initial weight of about 200 kgs. LLjur g. Fattening turn-over-two times a year h. Final weight of finished cattle 300 kg. i. Drugs and medicines P40.00 per animal unit (AU) Note: Day old 1 year old 0.25 A.U. 1 year old but less than 2 years old 0.5 A.U. 2 years old and above 1.0 A.U. j. Salt and mineral supplements P16.00 per A.U. k. Labor will be provided by the family l. Animal shed is existing or should be provided by the farmer-borrowers m. Procurement/marketing cost P30.00/head n. System of feeding to be fed soilage in the barn. Farm wastes such as rice straw, corn stover, forage grasses and legumes, plus concentrate feeds amounting to P160.00 per head pre turn-over. Footnotes 1. Has given birth only once 2. Ready to be bred/or pregnant 3. One breeder bull, 2-3 years old for every 50 breeder cows/heifers 4. At P5,000 each 1. Optional to Banks, if farms will provide equity 2. Recommended for implementation APPENDIX 19 LIST OF ACCREDITED SCHOOLS/COLLEGES (Appendix to Subsec. 3368.4d(2) (b)) A. Luzon Region I 1. Mariano Marcos State University cdti 2. Ilocos Norte Agricultural College 3. Ilocos Sur Agricultural College 4. Lagangilang Agricultural College 5. Don Mariano Marcos Memorial State College 6. Speaker Eugenio Perez National Agricultural School 7. Eastern Pangasinan Agricultural College Region II 1. Sanchez Mira National Agricultural and Technical School 2. Bukig National Agricultural and Technical School 3. Gonzaga National Agricultural and Technical School 4. Cagayan Valley Agricultural College 5. Bibak National Agricultural College 6. Ifugao National Agricultural and Technical College 7. Jones Rural School 8. Roxas Memorial Agro-Industrial School 9. Quirino National Agricultural School Region III 1. Sabani Estate Agricultural College 2. Bulacan National Agricultural School 3. Philippine National Agricultural School 4. Bataan National Agricultural School 5. Western Luzon Agricultural College Region IV 1. Baybay National College of Agriculture and Technology 2. Mindoro National College of Agriculture and Technology 3. Rizal National Agricultural School 4. Quezon National Agricultural School 5. Romblon Agricultural College Region V 1. Camarines Norte National Agricultural School 2. Camarines Sur Agricultural College 3. Ragay Agricultural and Fishery School 4. Catanduanes Agro-Industrial College 5. Don Emilio B. Espinosa Sr. Memorial Agricultural College B. Visayas and Mindanao Region VI 1. Aklan Agricultural College 2 Mambusao Agricultural and Technical College 3. Capiz Agricultural and Fishery School 4. Leon National Agricultural School 5. Dingle Agricultural and Technical College 6. Calinog Agricultural and Technical College 7. Iloilo National Agricultural College 8. Barotac Viejo National Agricultural College 9. Negros Occidental Agricultural College 10. Antique Agricultural and Technical College Region VII 1. Sudlon Agricultural School 2. Southern Cebu Agro-Industrial School 3. Negros Oriental National Agricultural School 4. Bohol Agricultural College Region VIII 1. Arteche National Agricultural School 2. Can-Avid Junior Agricultural College 3. Eastern Samar National Agricultural School 4. Maydolong National Agricultural College 5. Southern Samar Agricultural College 6. Balangiga National Agricultural School 7. Pedro Rebadulla National Agricultural School 8. Northern Samar Junior Agricultural College 9. Biliran National Agricultural College 10. Alang-Alang Agro-Industrial School 11. Bontoc Agricultural and Fishery School 12. Leyte Agricultural College Region IX 1. Katipunan National Agricultural School 2. Sindangan National Agricultural School 3. Zamboanga del Norte Agricultural College 4. Zamboanga del Sur Agricultural School Region X 1. Northern Mindanao National Agricultural College 2. Southern Agusan National Agricultural College 3. Oroquieta Agro-Industrial School 4. Tangub Agro-Industrial School 5. Claveria National Rural School 6. Mainit National Agricultural School Region XI 1. Southern Mindanao State University 2. Davao National Agricultural College 3. Surigao National Agricultural School Region XII 1. Upi Agricultural School APPENDIX 20 FARM BUDGET * (One-Hectare Cotton Farm) (Appendix to Subsec. 3372.2) First Release (15-21 days before planting) Land Preparation (Cash) P400 Seeds 60 P460 Second Release (1-7 days before planting) Fertilizer 1 (Chit) 370 Chemicals 2 (Chit) 40 Irrigation fee/rental/gasoline 3 (Chit) 105 Labor 4 (Planting, fertilizing, irrigation) (Cash) 450 965 Third Release (7-14 days after emergence) Chemicals (Chit) 160 Labor (Spraying, spot weeding, off-bearing) (Cash) 100 260 Fourth Release (21-35 days after emergence) Fertilizer (Chit) 380 Chemicals (Chit) 270 Irrigation fee /rental/gasoline (Chit) 105 Labor (fertilizing, spraying, irrigating, spot weeding, hilling up) (Cash) 225 980 Fifth and Subsequent Releases (61-110 days after emergence) (Based on the actual needs of the farmer as certified by the cotton prod. technician) Chemicals 480 Irrigation fee/rental/ gasoline 100 Transportation 5 120 Labor (spraying, spot weeding, irrigating) 200 Harvesting 450 Others 6 125 Contingency 160 1,635 SUB-TOTAL 4,300 7 Less: Non-cash labor expense/contingency 1,300 TOTAL P3,000 8 ====== 1. Assuming a 15% increase in prevailing market prices. Fertilizer budget is computed for late planting using ammonium sulfate. For early planting and if urea is used, fertilizer is much much lower. 2. Assuming a 15% increase in prevailing market price. 3. Pump-irrigate 4. At P15 per day. Assuming 122 man-days. 5. At P0.10/kg. within a 30 km. radius assuming a 1.2 ton yield. 6. Include drying, storing, packaging, delivery. 7. Maximum amount for farmer cultivating more than two (2) hectares. 8. Maximum amount for farmer cultivating two (2) hectares or less * Based on Technical Recommendation for CY 1979-80. For farmers who may need to buy sprayers, a maximum amount of P700 will be provided in addition to the farm budget per hectare. Revised Farm Plan and Budget For CY '83-'84 Cotton Development Program FIRST RELEASE (5-21 DAYS BEFORE PLANTING Land Preparation P700 Seeds 60 P760 SECOND RELEASE (1-7 DAYS BEFORE PLANTING ) Fertilizer 1 14-14-14 660 Irrigation 150 Labor 280 1,090 THIRD RELEASE (1-10 DAYS AFTER EMERGENCE ) Chemicals 2 120 Irrigation 3 150 Labor 4 500 770 FOURTH RELEASE (21-30 DAYS AFTER EMERGENCE) Fertilizer Urea 340 Chemicals 540 Irrigation 300 Labor 640 1,820 FIFTH AND SUBSEQUENT RELEASES Chemicals 900 Labor 640 Harvesting 5 600 Transportation 6 375 2,515 SUB-TOTAL P6,955 LESS: Non-Cash Labor Expense 1,455 7 TOTAL P5,500 8 ====== ASSUMPTIONS USED : 1. Fertilizer budget is computed as follows: 14-14-14 4 bags x P165/bag Urea 2 bags x P170/bag 2. Budget for chemicals have been based on FPA approved retail prices, October 1983. 3. Irrigation is computed at: 20 liters x P6.70/liter 1 liter oil x P16.00/liter 4. Labor rate P30/day for man-days P35/day for man-animal days 5. Harvesting labor costs computed at P0.40/kg. assuming a 1.5MT yield. 6. At P250/MT 7. Assuming 43% farmers' equity, 57% hired labor 8. Maximum amount per hectare APPENDIX 21 IMPLEMENTING GUIDELINES FOR MEDIUM-TERM FINANCING UNDER THE SPECIAL COTTON FINANCING PROGRAM (Appendix to Sec. 3373) I. Introduction . The supervised credit medium-term financing under the special cotton financing program supports the program for the short-term cotton production loans of farmer/borrowers. The program provides financing for the acquisition of irrigation and farm equipment/facilities needed for cotton production. With this scheme, it is expected that production yields of cotton farmer will increase which will eventually improve and uplift the socio-economic condition of the farmers. II. Objective . To increase the production yield and farm income of farmers by providing them with the means of increasing and facilitating their productive capacities. III. Strategy of implementation A. Funding . The fund availment of financial institution from CB-DRBSLA in the form of special time deposits (STDs) shall depend on the criteria worked out by the bank. The STDs extended to financial institutions are subject to the existing rules being followed in the implementation of the cotton financing program. B. Policies and procedures 1. Loan purpose . The following types of financing may be obtained under the medium-term program; a. Acquisition of irrigation equipment/facilities; b. Acquisition of power sprayers; c. Other farm equipment/facilities needed for cotton production. 2. Eligible borrowers . These are farmers identified by Phil Cotton as eligible under the Rural Banks Act/Savings and Loan Associations Act, as the case may be. 3. Amount of loan . The amount of the loan shall be based on the actual cost of the object of financing as shown in the project plan and the feasibility study. 4. Loan release . Loan releases will be based on the project plan, subject to the recommendations of the PhilCotton technicians and as validated by the bank management. 5. Security of the loan a. Real estate mortgages; b. Chattel mortgage of the project or related properties; c. Two co-makers acceptable to the bank; d. Seldas / Damayans jointly and severally liable. 6. Maturity of the loan . Loan maturity shall be based on the economic life span of the project to be financed. In all cases, loans shall have a maximum maturity period of not more than five (5) years. 7. Interest and other charges . Loans granted under the program shall bear an interest of 12% per annum or at such rate as may be prescribed by the CB and shall not be deducted in advance. Service and other charges shall not exceed 2% for agrarian reform beneficiaries and 3% for non-agrarian reform beneficiaries. 8. Loan repayment . Repayment shall be scheduled in approximately equal installments of principal and interest annually, semi-annually or of a shorter period, except in cases where deferred plan of payments have been granted, so arranged as it falls due on the approximate periods of highest borrower's income or when the principal income of the borrower is normally available. IV. Loan availments A. Loan paper requirements . The farmer together with the PhilCotton technician accomplishes the prescribed form on the technical and economic feasibility study of the project. After determining the fixed capital requirements of the project, the PhilCotton technician assists the farmer in filling up the prescribed loan application form. Evidence of ownership of security being offered as collateral and other important documents/paper such as certification of identity, tax account number (TAN), residence certificate A and guarantee agreement are attached to the application form. B. Loan processing . The bank summarizes the total credit needed by the farmer-borrowers and applies for the corresponding STD with CB-DRBSLA by accomplishing the application for medium term loans and applications for special time deposit. LexLib APPENDIX 22 FORMAT OF DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (Appendix to Subsec. 3305.4) ______________________________________ (Business Name of Creditor) DISCLOSURE STATEMENT ON LOAN/CREDIT TRANSACTION (As Required under RA. 3765, Truth in Lending Act) NAME OF BORROWER _____________________________________________ ADDRESS _________________________________________________________ 1. LOAN GRANTED (Amount to be financed) P _______ (A) 2. FINANCE CHARGES: Not Deducted Deducted From From Proceeds of Loan a. Interest _____% p.a. from _____ to ______ P ______ P _____ ( ) Simple ( ) Monthly ( ) Compound ( ) Quarterly ( ) Semi-Annual ( ) Annual b. Non-interest charges _________ ________ c. Commitment fee _________ _________ d. Guarantee fee _________ _________ e. Other charges incidental to the extension of credit (Specify): ___________________ ___________ __________ ___________________ ___________ __________ Total finance charges P========== P======== 4. TOTAL DEDUCTIONS FROM PROCEEDS OF LOAN (B plus C) P ______ (D) 5. NET PROCEEDS OF LOAN (A less D) P========= 6. PERCENTAGE OF FINANCE CHARGES TO TOTAL AMOUNT FINANCED (Computed in accordance with Subsec. 3305 4) _________% 7. EFFECTIVE INTEREST RATE _________% (Method of computation attached) 8. SCHEDULE OF PAYMENT a. Single payment due on _______ P======= (date) b. Total installment payments payable in _____________ months/year (no. of payments) at P ________ each installment. 9. COLLATERAL This loan is wholly/partly secured by (check) real estate chattels government securities UNSECURED 10. ADDITIONAL CHARGES IN CASE CERTAIN STIPULATIONS ARE NOT MET BY THE BORROWER Nature Amount ____________________________ __________________ ____________________________ __________________ ____________________________ __________________ CERTIFIED CORRECT: __________________________ (Signature of Creditor/Authorized Representative Over Printed Name __________ (Position) I ACKNOWLEDGE RECEIPT OF A COPY OF THIS STATEMENT PRIOR TO THE CONSUMMATION OF THE CREDIT TRANSACTION AND THAT I UNDERSTAND AND FULLY AGREE TO THE TERMS AND CONDITIONS THEREOF. ________________________ (Signature of Borrower over Printed Name) DATE ________ NOTICE TO BORROWER: YOU ARE ENTITLED TO A COPY OF THIS PAPER WHICH YOU SHALL SIGN. APPENDIX 23 FORMAT OF ABSTRACT OF "TRUTH IN LENDING ACT" (Appendix to Subsec. 3305.6) SECTION 1. This Act shall be known as the "Truth in Lending Act." SECTION 2. Declaration of Policy . It is hereby declared to be the policy of the State to protect its citizens from a lack of awareness of the true cost of credit to the user by assuring a full disclosure of such cost with a view of preventing the uninformed use of credit to the detriment of the national economy. xxx xxx xxx SECTION 3. As used in this Act, the term xxx xxx xxx (3) "Finance charge" includes interest, fees, service charges, discounts, and such other charges incident to the extension of credit as the Board may by regulation prescribe. xxx xxx xxx SECTION 4. Any creditor shall furnish to each person to whom credit is extended, prior to the consummation of the transaction, a clear statement in writing setting forth, to the extent applicable and in accordance with rules and regulations prescribed by the Board, the following information: (1) the cash price or delivered price of the property or service to be acquired; (2) the amounts, if any, to be credited as down payment and/or trade-in; (3) the difference between the amounts set forth under clauses (1) and (2); (4) the charges, individually itemized, which are paid or to be paid by such person in connection with the transaction but which are not incident to the extension of credit; (5) the total amount to be financed; (6) the finance charge expressed in terms of pesos and centavos; and (7) the percentage that the finance charge bears to the total amount to be financed expressed as a simple annual rate on the outstanding unpaid balance of the obligation. prcd xxx xxx xxx SECTION 6. (a) Any creditor who in connection with any credit transaction fails to disclose to any person any information in violation of this Act or any regulation issued thereunder shall be liable to such person in the amount of P100 or in an amount equal to twice the finance charge required by such creditor in connection with such transaction, whichever is the greater, except that such liability shall not exceed P2,000 on any credit transaction. . . xxx xxx xxx (c) Any person who willfully violates any provision of this Act or any regulation issued thereunder shall be fined by not less than P1,000 nor more than P5,000 or imprisonment for not less than 6 months, nor more than one year or both. xxx xxx xxx (e) Any final judgment hereafter rendered in any criminal proceeding under this Act to the effect that a defendant has willfully violated this Act shall be prima facie evidence against such defendant in an action or proceeding brought by any other party against such defendant under this Act as to all matters respecting which said judgment would be an estoppel as between the parties thereto. SECTION 7. This Act shall become effective upon approval. APPENDIX 24 LIST OF RURAL BANKS FOR PURPOSES OF SPECIAL RESTRUCTURING OF PAST DUE COCONUT LOANS (Appendix to Subsec. 3358.9) Albay Negros Oriental Palawan Lanao del Sur Aurora Negros Occidental Pangasinan Maguindanao Batangas Northern Leyte Quezon Misamis Oriental Cagayan Southern Leyte Romblon Misamis Occidental Camarines Norte Siquijor Sorsogon North Cotabato Camarines Sur Agusan del Norte Aklan South Cotabato Catanduanes Agusan del Sur Antique Sultan Kudarat Cavite Iloilo Bohol Sulu La Union Basilan Capiz Surigao del Norte Laguna Camiguin Cebu Surigao del Sur Marinduque Davao del Norte Eastern Samar Zamboanga del Norte Masbate Davao del Sur Northern Samar Zamboanga del Sur Occidental Mindoro Davao Oriental Western Samar Oriental Mindoro Lanao del Norte APPENDIX 25 ILLUSTRATIVE CASE ON THE STEPS TO BE TAKEN BY THE RB/SLA IN THE RESTRUCTURING OF CB: IBRD LOANS UNDER THE 3RD & 4TH RURAL CREDIT PROJECTS (Appendix to Subsec. 3371.21) Case A loan of P180,000 was granted on September 5, 1975 for the purchase of a 4-wheel tractor and attachments to mature in 7 years. AMORTIZATION SCHEDULE Principal Interest Total Balance Due Date P P P P180,000.00 17,851.24 21,600.00 39,451.24 162,148.76 9-5-76 19,993.39 19,457.85 39,451.24 142,155.37 9-5-77 22,392.60 17,058.64 39,451.24 119,762.77 9-5-78 25,079.71 14,371.53 39,451.24 94,683.06 9-5-79 28,089.28 11,361.96 39,451.24 66,593.78 9-5-80 31,459.99 7,991.25 39,451.24 35,133.79 9-5-81 35,133.79 4,317.45 39,451.24 - 9-5-82 P180,000.00 ========= 1. Payment made was for the 1st amortization and none for the 2nd and 3rd amortizations due to force majeure and conditions beyond the control of the borrower. cdt 2. The borrower requested for the restructuring of the loan and after the verification of the rural banks/SLA and confirmation by the CB representative, said loan is restructured effective September 6, 1979 for an additional of three years to the balance of term which is four years. Procedure Step 1 Compute the penalty due by multiplying the principal portion of the unpaid amortizations by 5% from the due date to effective date of restructuring. Penalty on the principal portion of 2nd amortization (P 1 ) 730 P 1 = P19,993.39 x .05 = P1,999.34 365 Penalty on the second principal portion of 3rd amortization (P 2 ) 365 P 2 = P22,392.60 x .05 x = P1,119.63 365 Total Penalty Due (P t ) P t = P 1 + P 2 = P1,999.34 + P1,119.63 = P3,118.97 Step 2 Compute the interest due by multiplying the outstanding loan balance by interest rate from date of last payment to effective date of restructuring. 730 Interest = P162,148.76 x 12% x = P38,915.70 365 Step 3 Compute total interest and penalty due by adding Step 1 and Step 2. Total Interest and Penalty Due (IPD) IPD = Pt + I = P3,118.97 + P38,915.70 = P45,034.67 Step 4 Get the total amount of the loan to be restructured by adding 50% of the interest and penalty due to the outstanding loan. Loan to be restructured: = (Pt + I) 50% + Balance of Principal = (IPD) 50% + P162,148.76 = (P42,034.67) 50% + P162,148.76 = P183,166.09 NEW AMORTIZATION SCHEDULE Principal Interest Total Balance Due Date P P P P183,166.09 22,570.83 21,979.93 44,550.76 160,596.26 9-6-80 25,279.33 19,271.43 44,550.76 135,315.93 9-6-81 28,312.85 16,237.91 44,550.76 107,003.08 9-6-82 31,710.39 12,840.37 44,550.76 75,292.69 9-6-83 35,515.64 9,035.12 44,550.76 39,777.05 9-6-84 30,777.05 4,773.71 44,550.76 - 9-6-85 P183,166.09 ========= APPENDIX 26 GUIDELINES ON THE RESTRUCTURING OF CB: IBRD LOANS (Appendix to Subsec. 3371.21) The following guidelines shall be observed in the restructuring of CB: IBRD loans in the 1st and 2nd Rural Credit Projects. 1. That both rural banks and end-user borrower shall be in sound financial condition to meet the resulting restructured obligations; 2. That the borrower (rural bank/end-user) has defaulted in at least one amortization payment; 3. That non-payment must be due to force majeure or causes beyond the control of the borrower as verified by the Rural Bank and confirmed by the Central Bank; 4. That restructuring of the notes may be allowed subject to the payment of at least 50% of all past due interest, penalties and other accrued charges due to the Rural Bank and Central Bank; Provided, however , That the period shall not exceed 50% of the original maturity of the loan; 5. That in restructuring promissory notes of the rural bank to the Central Bank the same shall be synchronized with the promissory note of the end-user borrower to the rural bank concerned; 6. That in case the restructured loans exceed the amount covered by the original mortgage, a provision shall be made in the note that such loan is covered by the existing mortgage. If, on the other hand, the restructured loan exceed the loan value of the mortgaged property, additional security shall be required; aisadc 7. That the promissory notes shall be prepared in quadruplicate, the original and duplicate copies of the rural bank and borrower's promissory notes shall be forwarded to the Central Bank. The rural bank shall see to it that the borrower is furnished with a copy of his restructured promissory note. File copies of the restructured notes shall be incorporated in the credit file of the borrower concerned together with the revised documents; 8. That loans restructured under MCRB No. 71-24 dated August 27, 1971 (App. 26-a) may be restructured subject to the provision of Item 4 above. 9. Loans that have fully matured may, in no instance, be subject to restructuring. MEMORANDUM CIRCULAR TO ALL RURAL BANKS NO. 71-24 (Annex to Appendix 26) ATTENTION: Rural Banks Authorized to Participate under the CB : IBRD Special Financing Program . In connection with the implementation of Memorandum Circular To All Rural Banks No. 71-4 on the restructuring, of CB:IBRD loans with past due amortizations, the following guidelines should be observed: 1. That both the rural bank and end-user borrower shall be in sound financial condition to meet the resulting restructured obligations; 2. That the borrower (rural bank/end-user) has not made any amortization payment for two consecutive periods; 3. That the non-payment must be due to force majeure or reasons beyond the control of the borrower as verified by the rural bank and confirmed by the Central Bank; 4. That restructuring of the notes may be allowed subject to the payment of all past due interest and penalties due the Central Bank and the rural bank; 5. That in restructuring promissory notes of the rural bank to the Central Bank the same should be synchronized with the promissory note of the end-user borrower to the rural bank concerned; 6. That in cases, however, where the installments on the note of the rural bank in favor of the Central Bank were paid out the rural bank's own fund, the restructuring of the end-user borrower's promissory note may only be allowed after payment of the interest and penalties due to the rural bank. The rural bank shall likewise prepare a restructured promissory note in favor of the Central Bank corresponding to this loan account; 7. That in the preparation of the restructured promissory notes, the original maturity dates and other essential items as amortization due should be maintained; 8. That the promissory notes should be prepared in triplicate, the original and the duplicate copy to be forwarded to the Central Bank and the triplicate to be retained by the rural bank. For the mechanics in the restructuring of these loans, the following illustrations are hereby presented: Illustration A loan of P20,850.70 was granted on March 1, 1967 to borrower "A" for purchase of a 4-wheel tractor to mature in 7 years. Amortization Schedule Principal Interest Total Due Date P2,978.68 P1,709.76 P4,688.44 3-1-68 2,978.67 1,465.51 4,444.18 3-1-69 2,978.67 1,221.25 4,199.92 3-1-70 2,978.67 977.00 3,955.67 3-1-71 2,978.67 732.75 3,711.42 3-1-72 2,978.67 488.50 3,467.17 3-1-73 2.978.67 244.25 3,222.92 3-1-74 Case 1 No payment was made on any amortization Assume that the borrower has not made any payment on amortization due and arranged to restructure his loan at the beginning of the 3rd amortization. Step 1 Compute the penalty due by multiplying the unpaid principal by 5% from due date of amortization to effective date of restructure. Example: Penalty 1st amortization P2,978.68 x .05 365 x 1,095 = P446.80 Penalty 2nd amortization P2,978.87 x .05 x 730 = P297.86 365 Penalty 3rd amortization P2,978.67 x .05 x 365 = P148.93 365 Total Penalty = P893.59 Step 2 Compute the interest due by multiplying the outstanding loan by the interest rate from date of loan to effective date of restructure. P20,850.70 x 12 x 1095 = P7,506.25 365 Step 3 Restructure the loan amount of P20,850.70 in 4 years beginning March 1, 1970 (Please refer to illustration table) Case 2 Full payment of an amortization Assume that the borrower paid in full the 1st amortization after due date on June 1, 1968. No payments were made for the next two consecutive amortizations and the borrower arranged to restructure his loan after due date of 3rd amortization on June 30, 1970. Step 1 Compute the penalty by multiplying the unpaid principal by 5% from due date of amortization (3-1-69) to the date the restructuring was arranged (June 30, 1970). P2,978.67 x .05 x 486 = P198.31 365 Step 2 Compute the interest by multiplying the outstanding loan by rate of interest from date of last payment (June 1, 1968) up to the effective date of restructure (March 1, 1970). Example: P17,872.02 x 12 x 638 = P3,748.72 365 Step 3 Restructure the outstanding loan of P17,872.02 in four (4) years beginning March 1, 1970. (Please refer to the illustration table). cdti This supersedes Circular No. 71-21. Please be guided accordingly. (SGD.) HONESTO O. FRANCISCO Director August 27, 1971 APPENDIX 27 CLEAN NOTE POLICY (Appendix to Sec. 3610) To effect an expeditious withdrawal from circulation of unfit currency notes in order that the Central Bank (CB) could maintain a clean note policy, all banks including their provincial branches shall observe the following guidelines and procedures: 1. Banks shall identify and sort their cash deposit into (a) clean or fit notes and (b) dirty/mutilated or unfit notes in accordance with the descriptive "Currency Guide for Bank Tellers, Money Counters and Cash Custodians". 2. Banks shall provide separate containers with padlocks duly sealed for the clean or fit notes and dirty/mutilated or unfit notes. A separate deposit slip shall be accomplished by the depositing bank for each category. The deposit slip for unfit currency notes shall be clearly labelled as "unfit". 3. Whenever there are different denominations to be deposited, bundles/packages of 100-, 50-, and 20-piso denominations may be placed in one container and 10-, 5- and 2- piso denominations in another container. 4. Only dirty/mutilated or unfit notes shall be shipped to the Central Bank. Provincial branches of the PNB authorized to maintain Cash-Held-In-Trust (CHIT) account may make direct shipments to the CB Cash Department or to the nearest CB Regional Offices, Sub-Regional Offices or Cash Units. Provincial branches of banks and other provincial branches of PNB may make direct deposits to the CB Regional Office, Sub-Regional Office or Cash Unit or PNB branch authorized to maintain CHIT account for the Central Bank. 5. The CB Cash Department, Regional Office, Sub-Regional Offices, Cash Units, and PNB branches authorized to maintain CHIT account for the Central Bank, may refuse acceptances of cash deposits not accomplished in accordance with these guidelines. APPENDIX 28 GUIDELINES AND PROCEDURES TO GOVERN SHIPMENT OF UNFIT/MUTILATED CURRENCY NOTES TO THE CENTRAL BANK, CASH DEPARTMENT, REGIONAL OFFICES AND CASH UNITS (Appendix to Sec. 3610) The following guidelines and procedures shall govern shipments of dirty/mutilated or unfit currency notes by provincial branches of banks and by provincial, city and municipal treasurers to the Central Bank Cash Department and CB Regional Offices, Sub-Regional Offices or Cash Units: aisadc 1. Unfit/mutilated currency notes shall refer to those notes described under App. 29. 2. Only dirty/mutilated or unfit currency notes shall be shipped to the Central Bank. Provincial branches of banks and provincial, city and municipal treasurers may make direct shipments of such currency to the Central Bank-Cash Department or to the nearest CB Regional Offices, Sub-Regional Offices, and Cash Units. 3. Preparation of currency shipment a. Currency notes of a single denomination must be arranged face and top up in packages of one hundred (100) pieces each, banded with paper strap/wrapper. The paper strap/wrapper of each package shall be plainly marked with: the denomination and amount of currency in the package; the date of verification; the initials of person(s) who performed the verification; and the name of the depositing bank, or remitting provincial, city or municipal treasurer. Pins, clips and staple wires, if any, must be removed from the notes prior to shipment in order to avoid possible injury to employees involved in the verification thereof and damage to equipment. Individual packages of 100 pieces each shall be bound in standard units of ten (10) packages each of the same denomination to make a bundle. Every bundle shall be well secured with twine or rubber bands. b. Under no circumstances shall notes of different denominations mixed in a single package or bundle, nor shall currency notes in loose pieces be forwarded to the Central Bank-Cash Department, Regional Offices, Sub-Regional Offices and Cash Units. Such loose notes shall be retained until additional pieces of the same denomination sufficient to complete a package have been accumulated. c. Fragments of currency torn notes which clearly represent and retain three-fifths (3/5) or more of its surface shall be carefully mended with transparent tape on the back (not on the face) in a manner which preserves as nearly as possible the original design and size of the note. 4. Packing a. Currency notes arranged in packages and bundles as herein provided shall be wrapped in thick Manila paper, properly sealed with wax and placed inside wooden (3/4" lumber) boxes measuring 26"L x 7"W x 16"H which shall be strongly fastened with nails, banded with steel wire strap and sealed with sealing wax. The seal must be embedded on the wood to cover the joints. The original packing list/invoice showing the total amount and the denominational breakdown of the currency, duly certified by the head of the branch of bank or the provincial, city or municipal treasurer making the shipment and the auditor thereof, shall be placed inside the box. b. Whenever there are different denominations to be shipped, bundles/packages of 100-, 50- and 20-piso denominations may be placed in one (1) box and the 10-, 5- and 2-piso denominations in a separate box, with corresponding packing lists. c. As a precautionary measure, no indication which would purportedly reveal the contents shall appear outside of the package/box except the addressee and sender. 5. The maximum amount of currency to be shipped shall not exceed Forty Million Pesos (P40,000,000.00) for any one shipment in any given day. 6. Shipments of currency notes shall be effected through the Philippine Air Lines (PAL), being the government flag carrier. In places where PAL plane service is not available, the currency may be shipped by boat or through armored car. 7. Method of shipment and security measures a. At least two (2) working days before anticipated or actual shipment of currency is made, the shipper-bank shall advise its head office and the Central Bank by coded telegram (using a set of codes previously agreed upon) of intended shipment, stating the amount, number of boxes, name of the carrier, flight number and the date of shipment. Upon receipt of advice, the Head Office shall immediately notify the Cash Department by telephone which shall be followed by a Confirmation letter. The Central Bank must be advised immediately through the fastest means of communications regarding any cancelled or delayed shipments. b. Currency shipment shall be delivered into the custody of the carrier (PAL), accompanied and witnessed by responsible personnel of the shipper and by armed escorts or guards. c. No shipment shall be made when its arrival at destination will be on a Saturday, Sunday or holiday, unless delay is due to circumstances beyond control, in which case the Central Bank should be duly informed thereof. 8. The Central Bank shall duly acknowledge by confirmation-letter receipt of the shipment, subject to verification. The corresponding credit advice shall be transmitted to the Head Office of the Bank concerned, copy furnished the shipper-branch or agency, subject to subsequent adjustments for any shortages, overages, no value, counterfeits and/or other discrepancies found upon verification of shipment. In case the shipper is a provincial, city or municipal treasurer, the Central Bank shall send the corresponding CB Expense Check as payment/redemption thereof. 9. Insurance coverage for every shipment of currency shall be arranged by the Central Bank through the CB Self-Insurance System upon receipt of advice from the shipper. The insurance coverage shall be against loss by theft, robbery or any cause whatsoever from the time the shipment leaves the premises of the shipper until the shipment shall have been delivered inside the Central Bank vaults. The Central Bank will not assume any risk of loss, damage or pilferage on any shipment not made in conformity with the provisions of this guidelines nor those caused by the infidelity, fraud or dishonesty of the personnel or security escorts of the shipper. 10. Only freight and insurance charges shall be for the account of the Central Bank and shall be payable at the Central Bank Head Office or its Regional Offices. Freight charges must be manifested in the corresponding air-way bill in case of shipment by plane or bill of lading if by boat, and must be arranged on a "CB-Charge Account" basis. 11. In case fit currency notes and coins are found in a shipment, freight and insurance charges and other related expenses thereof shall be for the account of the shipper. 12. Verification of shipments All currency shipped to the Central Bank shall be received subject to verification. Opening of the containers on scheduled date of verification shall be done by authorized representatives of shipper-bank's Head Office and actual piece-by-piece verification of the currency shall be made in only in the presence of said representative(s) of head office, in case the shipper is a bank, or in the presence of the Auditor of the Central Bank or its authorized representative(s), in case the shipper is a provincial, city or municipal treasurer. APPENDIX 29 GUIDELINES AND PROCEDURES TO GOVERN VERIFICATION OF CURRENCY NOTES DEPOSITED BY BANKS TO THEIR DEMAND DEPOSIT ACCOUNT WITH THE CENTRAL BANK (Appends to Sec. 3610) Clean currency notes still fit for circulation, deposited by banks to the Central Bank for credit to their demand deposit account will be accepted by the Central Bank Cash Department, after package and bundle count only has been made and shall no longer be subjected to piece-by-piece verification by the Central Bank before the same shall be reissued. For purposes of these guidelines, clean notes shall be referred to herein as "fit" currency notes. In order that "fit" currency notes accepted by the Central Bank can be immediately reissued to service cash withdrawals of banks, the following guidelines and procedures shall govern such deposits and withdrawals: 1. Banks shall sort their deposits of currency notes into "fit" and "unfit" notes. For purposes of identifying and segregating "fit" from "unfit" currency notes, the descriptive "Currency Guide for Tellers, Money Counters and Cash Custodians" shall be strictly followed. 2. Banks shall provide separate containers with padlocks duly sealed for the fit and unfit notes and a separate deposit slip shall be accomplished for each category. 3. Deposits of fit currency notes shall be verified, arranged, and placed in containers in the following manner: a. Notes of a single denomination must be arranged face and top up in packages of 100 pieces each; b. The wrapper of each package shall be plainly marked with: (1) the denomination and amount of currency in the package; (2) the date of verification; (3) the printed name(s) and signature(s) of the bank's employee(s) who performed the verification; (4) the name of the depositing bank. c. Pins, clips and staple wires, if any, must be removed prior to deposit in order to avoid possible injury to employees and damage to equipment, d. Individual packages of 100 notes each shall be bound in standard units as follows: Standard Unit Denomination No . of Packages Amount 100-piso 1 to 10 P10,000 to P100,000 50-piso 1 to 10 P5,000 to P50,000 20-piso 10 P20,000 10-piso 10 P10,000 5-piso 10 P5,000 2-piso 10 P2,000 e. Notes of different denominations should not be mixed in a single package/bundle. 4. Upon delivery of the currency notes to the Central Bank-Cash Department, the representative(s) of the depositing bank shall open the containers and, in his presence, package and bundle count shall be made by CB-Cash Department accountable officer concerned. If found in order, said officer(s) shall acknowledge receipt of the currency deposits. 5. The bundles of currency notes shall be returned to the containers, sealed and padlocked with the key retained and controlled by the representative of the depositing bank. 6. The Central Bank shall service cash withdrawals from the unverified fit currency note deposits previously made by the same bank. 7. Only authorized representative(s) of the depositor-bank can open the sealed container(s) corresponding to their unverified fit currency notes deposits from which the Central Bank shall draw to service cash withdrawal of same bank. It is understood that said representatives shall have with them all keys to the containers of their fit currency note deposits whenever they are assigned to CB-Cash Department to effect cash withdrawals. 8. Banks must notify the Central Bank at least one (1) day prior to their intended cash withdrawals. 9. Checks presented for withdrawal after 12:00 Noon shall be accepted by the CB-Cash Department for processing and the servicing thereof shall be effected the following day. 10. The authorized representatives(s) of the withdrawing bank shall conduct a bundle/package count of the cash withdrawn from their unverified fit currency note deposits before leaving the teller's counter/cash withdrawal area at the Cash Department, witnessed by authorized representative(s) of the Central Bank. Any shortage/overage found in the verification by package/bundle count of the cash withdrawn shall be brought to the attention of the Central Bank and shall be debited/credited accordingly to their demand deposit account. The Central Bank shall not honor any shortage/overage found after the authorized bank representative(s) have left the teller's counter/cash withdrawal area. 11. Receiving and releasing banks' deposits shall end at 3:00 P.M., the closing time for banking hour. 12. It is understood that there will be no changes in the existing procedures governing the deposits and verification by the Central Bank of unfit currency notes. LLpr 13. The Central Bank reserves the right to conduct piece-by-piece verification on the fit currency deposits whenever it deems necessary APPENDIX 30 REDISCOUNTING OF ELIGIBLE PAPERS OF RURAL BANKS IN SELECTED PROVINCES (Appendix to Subsec. 3271,6) 1. Rural banks in the provinces of Cagayan, Isabela, Misamis Oriental, Misamis Occidental, Zamboanga del Norte and Zamboanga del Sur may rediscount their eligible papers with the following designated branches of the PNB and LBP: A. Philippine National Bank (1) Zamboanga City Branch (Zamboanga del Sur) (2) Dipolog Branch (Zamboanga del Sur) (3) Pagadian Branch (Zamboanga del Norte) (4) Oroquieta Branch (Mis. Occ.) (5) Ozamis Branch (Mis. Occ.) (6) Gingoog Branch (Mis. Occ.) (7) Cagayan de Oro Branch (Mis. Or.) (8) Santiago Branch (Isabela) (9) Cauayan Branch (Isabela) (10) Ilagan Branch (Isabela) (11) Mallig Branch (Isabela) (12) Apari Branch (Cagayan) (13) Tuao Branch (Cagayan) (14) Tuguegarao Branch (Cagayan) B. Land Bank of the Philippines (1) Zamboanga City Branch (Zamboanga del Sur) (2) Cagayan de Oro Branch (Mis. Or.) (3) Cauayan Branch (Isabela) (4) Tuguegarao Branch (Cagayan) C. Amanah Bank Supplementary rules will be issued upon receipt of the list of branches. A rural bank may rediscount with only one of the branches indicated above. For this purpose, the rural bank concerned shall submit to the Department of Loans and Credit, Central Bank of the Philippines the name of the bank where it intends to rediscount its eligible papers. 2. This rediscounting privilege shall be governed by the rediscounting guidelines in Sec. 3271, particularly the following: a) The rural bank is not suspended by the Governor/Monetary/Board from receiving all forms of financial assistance from the Central Bank; b) It has not exceeded its credit limit which is the sum of three hundred per cent (300%) of its net worth plus three hundred per cent (300%) of average savings and time deposit liabilities for the last four (4) months immediately preceding the date of its application; c) Its capital accounts must not be less than ten per cent (10%) of its risk assets; d) Its investment in bank premises (building, lot and leasehold improvements) must not exceed thirty-five per cent (35%) of its net worth less preferred shares while for furniture; fixtures and equipment (including transportation equipment), total investments must not exceed fifteen per cent (15%); e) Its past due loans (including items in litigation) must not be more than twenty five per cent (25%) of its loan portfolio; f) It is not deficient in its available reserves against the required reserves on deposit liabilities: g) It has no past due loans or collateral deficiencies in the form of unremitted collections/matured notes; and such other regulations/policies which may be promulgated from time to time by the Monetary Board/Governor. 3. The loan values, rediscount rates and lending rates shall be in accordance with those prescribed under Subsecs. 3271.1 and 3271.2 4. The participating institutions (PNB, LBP and AB) may secure advances from the Central Bank against the rural banks' own promissory notes and the corresponding collateral promissory notes of rural banks' borrowers at one hundred per cent (100%) loan value of such outstanding obligations; 5. Advances that may be granted by the Central Bank to PNB, LBP and AB under this scheme shall be assessed interest at the rate of one per cent (1%) per annum and six per cent (6%) per annum for loans under the supervised credit and non-supervised credit schemes respectively, while PNB, LBP and AB shall accordingly charge the rural banks three per cent (3%) and eight per cent (8%), respectively; 6. The maturity of the advances shall not exceed 360 days; and 7. The demand deposit accounts of PNB, LBP and AB with the Central Bank shall be debited as their own promissory notes or the collateral promissory notes of rural banks mature. LLphil APPENDIX 34 GUIDELINES ON FOOD QUEDAN FINANCING PROGRAM FOR FOOD TERMINAL, INC. (FTI) DEPOSITS (Appendix to Subsec. 3363.8) Pursuant to Letters of instructions No. 696, 704, 1024 and 1139, the Food Quedan Financing Program for food deposits at the Food Terminal, Inc. bonded warehouse is hereby adopted and issued for the information and guidance of all concerned: I. Scope Food commodities in storage at the bonded warehouse of the Food Terminal Inc. II. Objectives of the Program 1. To augment the operating Capital of food traders and encourage their active participation in the loan procurement of the basic food commodities; 2. To increase the direct involvement of private commercial banks in agricultural credit in compliance with PD No. 717; 3. To establish and strengthen the integrity and acceptability of food quedans as collateral for loan availment; 4. To enhance further the stabilization of food supply and prices; 5. To support the food production program of the government. III. Legal bases 1. Letter of Instruction No. 704, dated June 9, 1978, establishing a Quedan Guarantee Fund and constituting the Quedan Guarantee Fund Board; 2. Letter of Instruction No. 1024, dated May 22, 1980, authorizing the Quedan Guarantee Fund Board created under Letter of Instruction No. 704 to include grains and other food commodities in its Quedan Financing Program. 3. Letter of Instruction No. 1139, dated May 25, 1981, directing the QGFB to implement the inclusion of other food commodities under the purview of the Quedan Financing Program; 4. Presidential Decree No. 4, dated September 26, 1972, as amended by PD Nos. 699, 1485 and 1770 creating the NFA and prescribing its functions, powers and authorities. IV. Terminology 1. Food trader (FT) a person/business entity in whose name the goods are deposited for storage at FTI's bonded warehouse as evidenced by a food quedan/chattel mortgage contract. 2. Lending bank (LB) any banking institution organized and existing under the laws of the Republic of the Philippines and who has agreed to participate in the Food Quedan Financing Program. 3. Food quedan a negotiable warehouse receipt by the terms of which the food deposit in the FTI bonded warehouse shall be delivered to the depositor upon his order, or to bearer or holder in due course for value of the said receipt. 4. Food deposits any goods/commodity received for storage in the bonded warehouse of the Food Terminal, Inc., such as, but not limited to: onions, garlic, potatoes, processed meat, smoked fish, broilers, pork, beef, beef trimmings, boneless beef, briskets, veal hinds, lamb legs, pork fats, assorted meat, processed fruits, cheese curd, frozen fish and marine products, fruit concentrates, shelled peanuts and such other food commodities as may be jointly be agreed upon by the Quedan Board and the Food Terminal, Inc. 5. Quedan Guarantee Fund Board simply known as Quedan Board, a government corporation attached to the National Food Authority duly authorized to administer the Guarantee Fund for the quedan financing of food commodities pursuant to LOI Nos. 704, 1024 and 1139. 6. Fund the Quedan Guarantee Fund established under LOI No. 704, as amended by LOIs No. 1024 and 1139, to guarantee the existence of grains/food deposits covered by quedan/chattel mortgage up to 80% of the outstanding loan. 7. Food Terminal, Inc . simply known as FTI, a government corporation which, among others, operates a bonded warehouse for food commodities belonging to third parties. V. Statement of policies A. Purpose of loan To finance food businessman in the procurement of food commodities and for other incidental expenses such as transporting, storage, processing and marketing. B. Eligibility requirements of loan applicants 1. Must be a depositor of the bonded warehouse of FTI; 2. Must be a holder in due course of a negotiable food quedan or the owner of food deposits covered under the program and subject of a chattel mortgage; and 3. Must be a depositor of locally produced commodities. C. Terms and conditions 1. Collateral Deed of pledge on the negotiable food quedan issued by FTI/chattel mortgage contract on food deposits 2. Loan ceiling The loan ceiling shall be as prescribed by the Central Bank of the Philippines. 3. Loan value There shall be two levels of loan value computed on the basis of the ceiling prices set for specific commodities, if any, or the average market price of the food commodities for the various quarter as may be determined by the Quedan Board. a. 80% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade A specifications. b. 50% of the face value of the food quedan/food deposits covered by chattel mortgage contract for commodities with Grade B specifications. 4. Types of terms of loan Loans may either be a straight loan or one year credit line made available in notes, both for a term not exceeding the number of days specified below for specific commodities; a. 60 days for onion YG, and potatoes b. 90 days for processed meat, smoked fish and Grade B broilers c. 120 days for frozen commodities: beef, pork, beef trimmings, boneless beef, briskets, veal hinds, lamb legs, pork fats, assorted meat, Grade A broilers processed fruits/dried apples, dried mangoes, cheese crud, onion RC, frozen fish, and marine products. d. 180 days for fruit concentrates, garlic and shelled peanuts. Term of loan for other food commodities not included herein shall be determined by the Quedan Guarantee Fund Board. 5. Maximum lending bank rates Interest rate of ten per cent (10%) per annum inclusive of service charge. 6. Rediscount rate, value and maturity Promissory notes generated under this credit program may be rediscounted with CB up to 100% of the loan at the rate of three (3%) per cent per annum with maturity not exceeding the same number of days as the term of the original loan. 7. Quedan Guarantee Fund The fund shall guarantee the existence of food deposits covered by quedan/chattel mortgage up to an amount equivalent to eighty percent (80%) of the outstanding loan, as provided for in the rules and regulations governing the guarantee coverage of food quedan. The QGFB shall collect from the LB a guarantee fee of one percent(1%) per annum based on the amount of loan which shall not be passed on to the borrower. 8. Purchase guaranty At the option of the lending bank, the National Food Authority shall undertake the purchase of food deposits equivalent to the outstanding loan covered by food quedan at talk prevailing government support price upon the maturity of the loan. VI. Responsibilities of participating agencies A. Central Bank (CB) 1. To disseminate the terms and conditions of the program to eligible lending banks. 2. Within the bank's existing ceilings extend rediscounting facility to all eligible papers under the Food Quedan Program. B. Lending banks (LB) 1. To disseminate the terms of loans as well as requirements to its branch offices. 2. To evaluate, process and extend loans under this program. C. Food Terminal, Incorporated (FTI) 1. To periodically inspect and monitor bonded stocks per existing inventory reporting system; 2. To supervise control and monitor Negotiable Bonded Warehouse Receipts (NBWRs) issued to FTI depositors; 3. To conduct joint inspection of stocks with authorized representatives of the lending banks; 4. To ensure that stocks covered by the Quedan Financing Program are not allowed to be withdrawn unless the depositor has settled all his obligations with the lending bank. D. National Food Authority (NFA) To purchase the food stocks equivalent to the outstanding loan covered by quedan at the option of the lending bank upon maturity of loan. E. Quedan Guarantee Fund Board (QGFB) 1. To administer the Food Quedan Guarantee Fund; 2. To execute a guarantee agreement with eligible LBs; 3. To pay legitimate claims by LBs against the Fund; and 4. To oversee the implementation of LOI 704 and its implementing rules and regulations. VII. Responsibility of participating borrowers 1. He should follow all the rules and regulations stated. 2. He is not allowed to move nor dispose of the food commodities covered by the program unless he has settled all his obligations with the bank concerned. 3. He should warrant that the goods covered under the program will be of good quality up to the time his loan matures. 4 In case he cannot meet his obligation in time, he should inform the bank before-hand. 5. He should only use the money borrowed in the operation of his food business. APPENDIX 35 GUIDELINES ON THE USE OF FOOD TRUST RECEIPTS UNDER THE FOOD QUEDAN FINANCING PROGRAM (Appendix to Subsec. 3363.9) Pursuant to P.D. 115 dated January 29, 1973 and Circular No. 011 dated January 20, 1983 of the Quedan Guarantee Fund Board (QGFB), the following guidelines shall apply to the use of food trust receipts (FTR): A food businessman-borrower who secured a loan from a participating lending bank under the quedan financing program may, if the bank so agrees, execute a food trust agreement with said bank to enable him to mill/process/sell his stocks covered by pledged quedan/chattel mortgage, subject to the following conditions: a. Coverage the food trust agreement shall be on a staggered basis such that at any one time, the stocks to be withdrawn shall not exceed twenty percent (20%) of the total quantity covered by the pledged quedan/chattel mortgage; Provided, however , that the lending bank may, in specific cases, allow a maximum of fifty percent (50%) stock withdrawal at any one time, subject to the submission of additional collateral and the approval of the FTR agreement by the QGFB; Provided, further , that subsequent withdrawals of stocks through food trust receipts shall be allowed only after payments have been made for the portion of loan corresponding to the stocks previously withdrawn. b. Co-Makers If the borrower is a third party depositor and not the franchised bonded warehouse operator himself, the lending bank shall in all cases require the franchised bonded warehouse operator in whose warehouse the stocks covered by the pledged quedans age deposited to be the borrower's co-maker. However, if the borrower is a chattel mortgagor, the lending bank shall require said borrower to have two (2) co-makers. c. Requirement for effectivity The food trust receipt agreement to be in full force and effect under the quedan financing program must substantially conform with the prescribed form and no further formality of execution or authentication shall be necessary for the validity of the same. d. Term The term of period of the food trust receipt agreement must not extend beyond the maturity date of the loan secured by pledged quedan/chattel mortgage. e. assurance coverage The fire insurance for foiled deposits required of the warehouse operator pursuant to the rules and regulations of the NFA shall be considered as sufficient compliance with the insurance requirement under PD 115, otherwise known as the Trust Receipt Law. f. Requirement for guarantee coverage Within fifteen (15) calendar days from the date of execution of the FTR agreement, the lending bank shall submit a copy of the same to the QGFB or to the nearest office of the NFA either through personal delivery or registered mail; Provided , that the date of acknowledgment by any authorized representative of the Board/NFA on the copy of the agreement submitted or the date of mailing as post-marked on the envelope/registry receipt shall considered as the date of submission. Failure to submit the copy of the FTR agreement within said period shall result to the automatic revocation of the guarantee coverage under the program. cdta g. Continuity of guarantee coverage and other privileges and incentives All credit transactions under the food quedan financing Program shall, even after having been covered by the FTR agreement in accordance with the guidelines as hereinabove provided, continue to enjoy the same guarantee coverage and other attendant privileges and incentives provided for under LOI No. 704, as amended, and their implementing rules and regulations. APPENDIX 36 Implementing Guidelines Governing the Participation of Banks Under the Expanded Yellow Corn Production Assistance Program (EYCPAP) (Appendix to Subsec. 3375.C) Pursuant to Executive Order No. 976 dated August 1, 1984 the following guidelines governing the participation of banks under the EYCPAP are hereby issued. A. The End-users/Suppliers Assistance Scheme Under this scheme an Agency Agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amounts from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Food (MAF) authorized institutional end-users/suppliers under the conditions herein indicated. For purposes of these guidelines, the term "institutional end-users" shall refer to enterprises which purchase yellow corn from farmers for the purpose of further physical processing or for packaging, such as for feed or for cornstarch production; however, traders and consumers shall not by themselves be considered institutional end-users, under this definition. The term "input supplier" shall refer to enterprises which sell inputs for the production of yellow corn to farmers, such as fertilizer, hybrid seeds, pesticides and other chemicals. 1. The amounts to be released by the agent bank shall be equal to the amounts released by the end-users/supplier to the farmer-cooperators for the latter's cost of production inputs and crop insurance premium, determined as valid for financing by the MAF/CB, as supported by the certificates of insurance cover, promissory notes, marketing contracts and delivery receipts on inputs duly signed by the farmer-cooperators and which amounts shall not exceed the ECYCPAP loan budget of P4,200 per hectare. The National Food and Agricultural Council of the Ministry of Agriculture and Food, in its meeting held on October 11, 1984, approved the increase in the EYCPAP loan ceiling per hectare to be financed from the Yellow Corn Fund to P4,800 under the following conditions: (a) The granting of loans to farmer-borrowers depends on the actual needs of the farmers provided that the amount of loan per hectare does not exceed the loan budget of P4,800, with the following breakdown: EYCPAP LOAN BUDGET PER HECTARE FOR HYBRID CORN PRODUCTION Quantity Amount Seed 20 kg. P600 Fertilizer (109.5 kg. N+42 kg. P 2 O 5 +42 kg. K 2 O) 2,220 Complete (14-14-14) 6 bags Urea (45-0) 3 bags Farm Chemicals 1,314 Insecticides: Granular 2 bags Sprayables 2 qts. Herbicides 2 qts. Liming 591 Crop Insurance Premium 75 TOTAL P4,800 Memorandum Circular No. 2 dated Feb. 11, 1985 issued the National Food & Agriculture Council (NFAC) amended Memorandum No. 1 dated Feb. 1, 1985 to include locally produced liquid fertilizer in the list of Recommended Fertilizers for National Productivity Program. ( Effective Feb . 26, 1985 ) (b) In areas where sods are acidic, an amount should be provided to defray the cost of lime and its delivery to the farm site. Seed, fertilizers and chemicals should not be extended to the farmers in these corrective measures have been instituted, as certified by the MAF production technician. (c) A cash portion to cover labor costs may be provided at the discretion of the lender. This amount may be extended from the fertilizer component within the loan budget, in areas where soil analysis have been conducted justifying the reduction in the level of fertilizer usage, as certified by MFA production technician. (d) If liming is not needed, based on soil analysis conducted by the MAF production technician, the amount allocated for liming may also be provided to the farmer. (c) Flexibility in the loan budget may be exercised by the lender as long as the basic requirements of the recommended 5-ton package of technology have been initially provided for ( Effective October 30, 1984 ) (f) National Food & Agriculture Council (NFAC) has authorized the extension of the maturity period for loans which include liming from the present term of 150 days to 180 days to farmers and 160 days to 190 days for lenders. However, the extension of maturity periods are only applicable in the 1st cropping period that the lime is applied, in view of its effectivity for three or four cropping seasons supported by actual soil analysis. In areas that do not need liming, NFAC has not authorized any extension of the present terms. The following provinces are identified as those that require liming application: Cagayan Iloilo Batangas Bukidnon Negros Occidental Misamis Oriental Negros Oriental South Cotabato (Effective May 31, 1985) 2. An interest rate or 6% p.a., inclusive of commissions and service fees, shall be charged by the agent bank on amounts released to the end-user/supplier. The interest rate of 6% p.a. shall be collected upon payment. The agent shall, upon collection of the loan, deduct for its own account a service fee of % p.a. on the principal amount released and a commission of 1% p.a. on the total amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. 3. The end-user/supplier must repay the principal and the prescribed interest thereon to the agent bank within the 160 days from the date that the agent bank credits the account of the end-use/supplier. The agent bank shall, within one (1) banking day from receipt of payment from the end-user/supplier, remit to CB such specified in Item 2 above. 4. The agent bank shall release the amount to the end-users/supplier within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to end-user/supplier 100% of the amount released by the CB for the particular transaction. Any unreleased portion thereof shall be returned to the CB within two (2) banking days after receipt of the credit advice. If the agent bank fails to return to CB the unreleased portion within the prescribed period, it shall pay a penalty fee of 36% p.a. on the unreleased portion in addition to the 6% p.a. interest until such unreleased portion is remitted in full to the CB. 5. Any misappropriation of funds not released to end-user/supplier and/or payments received from end-user/supplier shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 6. The agent bank shall not be held liable in case of non-payment/short-payment/late-payment by the end-user/supplier of the amount released by the former to the latter. 7. In the event of non-payment/short-payment/late-payment by the end-user/supplier, the agent bank shall institute collection measures/legal actions against the end-user/supplier. All expenses covering such measures/actions shall be for the account of the YCF. 8. The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB-SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 9. All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 10. Only agent banks that shall be cleared by the CB-SES Department concerned shall be eligible to participate under this scheme. B. The Banking System Assistance Scheme : CB will administer the Yellow Corn Fund (YCF) and shall release Special Time Deposits (STDS) to MAF/CB authorized banks for relending directly to qualified farmers. 1. Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the CB-SES Department III covering the credit needs of farmers, excluding seed production, equivalent to the cost of production inputs and farmer's share of the crop insurance premium. Such amounts shall not exceed the EYCPAP loan budget of P4,200 per hectare. 2. STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. All promissory notes arising from this program shall be stamped "NOT REDISCOUNTABLE" ( Effective Jan . 10, 1985 ) 3. CB-SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 4. The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear interest of 15% p.a. for a term of 150 days. Loan releases shall be in accordance with the approved farm plan and budget. 5. The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid within 160 days from date of receipt of credit advice. The depository banks through which the credit advice is released shall remit within 24 hours the proceeds of the STD to the participant bank. 6. Loans granted shall be fully covered by insurance in accordance with the existing rules of Philippine Crop Insurance Corporation (PCIC) 7. Cut-off dates for lending/planting, as approved by NFAC, shall be strictly adhered to in accordance with existing guidelines. 8. The participant bank shall release the STDs within 30 days from receipt thereof, and any unused portion shall be immediately returned to the CB-SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% p.a. interest until such amount is remitted in full to the CB. Similarly, any unauthorized use of the STD or non-payment thereof within two (2) days after the 160 day term of the STD shall subject the participant bank to a penalty of 39% per annum in addition to the 3% p.a. interest until the full amount is remitted to the CB, except those amounts which may be covered by indemnity payments by PCIC. 9. Any misappropriation of any STD received by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 10. The participant bank shall be held liable for non-payment/short-payment/late-payment by the farmers of the amount released by the former to the latter. 11. In the event of non-payment/short-payment/late-payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. 12. Rural Banks participating under this scheme should meet the following eligibility requirements: (1) There are no irregularities/serious exceptions in its operations; (2) Its risk asset ratio should not be less than 10% after taking into account the loans that will be granted under the EYCPAP; and (3) Its ratio of past due loans to total loan portfolio, excluding past due CB:IBRD loans which are covered by approved plans of payment that are duly complied with, should not exceed 25%. Commercial and thrift banks which may participate under this scheme shall secure prior clearance from CB-SES Department I and II, respectively. cdtech APPENDIX 37 RULES AND REGULATIONS GOVERNING THE IMPLEMENTATION OF THE PHILIPPINE AQUACULTURE DEVELOPMENT PROJECT (APPENDIX TO SUBSEC. 3375.E) Preliminary Statement 1. Loan funds for financing the development and expansion of aquaculture projects in the coastal areas of the provinces of Aklan, Capiz and Iloilo, all in the island of Panay will be provided utilizing loan funds from the ordinary capital resources of the Asian Development Bank (ADB) thru the facilities of qualified rural banks in the Project Area. 2. The following rules and regulations are hereby prescribed by the Monetary Board and will govern this credit program to be carried out through the lending facilities of qualified rural banks under the supervision of the Central Bank of the Philippines on aquaculture development. 3. Unless otherwise specified, the following terms have the following meaning whenever used in these rules and regulations: (a) "Act" means Republic Act No. 265 and/or Republic Act No. 720 of the Republic of the Philippines as amended from time to time; (b) "BFAR" means the Bureau of Fisheries and Aquatic Resources of the Philippines Ministry of Natural Resources; (c) "CBP" means Central Bank of the Philippines; (d) "MNR" means the Philippines Ministry of Natural Resources; (e) "Project Area" means areas suitable for shrimp and milkfish culture in the provinces of Aklan, Capiz and Iloilo on Panay Island to be developed under the Project; (f) "Region Six (6)" means the provinces of Aklan, Capiz, Iloilo, Antique and Negros Occidental in the territory of the Philippines; (g) "Project Executing Agency" for the purpose of, and within the meaning of, the Loan Regulations means CBP for Part A of the Project, and MNR for Part B of the Project; (h) "Project facilities" means the vehicles, equipment and material to be provided for Part B of the Project; (i) "Qualified Rural Bank" means a rural bank established, organized and operating under Republic Act No. 720 and approved by the Bank to participate in Part A of the Project; (As amended by Section 2 of CBP Circular 1108 dated June 20, 1986) (j) "Qualified Beneficiary" means a person or persons to whom a Qualified Rural Bank proposes to make or has made a sub-loan; (k) "Subloan" means a loan made, or proposed to be made, by a Qualified Rural Bank to a Qualified Beneficiary for the purposes of the Project; and (l) "Subsidiary Loan Agreement" means the agreement between the Borrower and CBP. I. Participating Rural Banks SECTION 1. Eligibility Requirements CBP shall select the Rural Banks through its Supervision and Examination Sector (SES) Department III, taking into account the following: (As amended by Section 3 of CBP Circular 1108 dated June 20, 1986) (a) Period of Operation : A Rural Bank must have been in operation for not less than one (1) year prior to making an application for a loan. (b) Liquidity Position : A Rural Bank must: (i) have sufficient working capital to meet its obligations to creditors and depositors, taking into account local conditions and past performances; and (ii) have sufficient available legal reserves against deposit liabilities; (iii) Amount of Arrearages: a. Past due loans of Rural Banks shall not exceed twenty-five per cent (25%) in relation to total loan portfolio or such other ratios that the Monetary Board may prescribe. b. If any Rural Bank shall exceed such applicable levels of arrears mentioned in the preceding paragraph, it shall not be eligible to participate in this credit program and CBP shall not extend any further loans until its collection performance shall have improved and reached such level. c. The Rural Bank shall submit to CBP evidence that it qualifies or continues to qualify under this paragraph. (iii). (c) Investment Position : (i) Soundness of loan investments as to viability of projects, sufficiency of collaterals, capacity to pay and character of borrowers. (ii) Adherence to the objectives of Rural Banks as to purpose of loans, actual credit requirements and eligibility of borrowers. (d) Credit Standing : (i) Its established credit reputation. (ii) Character, capacity, competence and integrity of its officers. (e) Networth : (i) Ratio of unimpaired capital and surplus to risk assets as prescribed by the Monetary Board. (f) Profitability : (i) Result of operation. (g) Management Competence to Handle the Program : (i) Qualifications, training and experience of members of the Board of Directors and its principal officers. (ii) Participated for at least one (1) year in any of the other supervised credit programs implemented by the CBP. (iii) Employed at least one bank-hired supervised credit technician to effectively supervise subloans released. (h) Compliance: Compliance with circulars and memoranda embodying or implementing pertinent and applicable laws, decrees, general orders, rules and regulations. SECTION 2. Other Eligibility Requirements : Whenever there are established in any law, decree, general order, rules, and regulations or other directive in force, standards or criteria by way of ratios, percentages, or otherwise, in relation to the factors enumerated in Section 1, such standards or criteria shall be deemed applicable for the purpose of conducting an evaluation of creditworthiness under said Section 1. II. Subloans Extended by Qualified Rural Banks SECTION 3. Purpose of Subloans Only viable aquaculture projects where the potential for increased production is clearly established, or where the potential for satisfying domestic demand or exportation of the excess over domestic consumption, will be eligible for financing. Aquaculture Projects eligible for financing include: a. Improvement or rehabilitation of milkfish ponds (monoculture); b. Improvement or rehabilitation of milkfish/shrimp ponds (polyculture); c. Improvement or rehabilitation of shrimp d. Establishment of shrimp hatcheries with a production capacity of about 10 million post-larvae and juveniles per annum; e. Establishment of shrimp hatcheries with a production capacity of about two million post-larvae and juveniles per annum; f. Production of milkfish fry and fingerlings, post-larvae and juvenile shrimps of different species found in the project area; g. Tools, machinery, and equipment required in the production, processing and storage of milkfish and shrimp; and h. Other brackishwater, pond culture components to be determined by PMQ/BFAR and the CBP upon recommendation of the Ministry of Natural Resources with prior concurrence of the Bank. For increased milkfish and shrimp productions, credit will be provided for: (1) purchase of milkfish fry and fingerlings and post-larvae/juvenile shrimps; (2) cost of side and top filling of dikes, levelling of pond bottoms, repair of seepage and leakage, repair of destroyed wooden and concrete gates, wages for maintenance, construction of small hut for equipment, supplies and materials of the fishpond and temporary shelter of caretaker, and other fishpond accessories. Projects involving the improvement, establishment, expansion or rehabilitation of aquaculture projects indicating the need for the grant of grace period on payment of subloan principal may be allowed to include the financing of accrued interests and service charges on the subloan during the prescribed grace period. Grace period shall mean the period for project establishment and the subsequent time allowed for the project to attain normal operation. Such accrued interests and service charges shall form part of the total project cost and may either be financed by the Bank or shouldered by the borrower as his equity in the project. SECTION 4. Eligible Borrowers/Qualified Beneficiaries (a) The criteria for subloans to qualified beneficiaries for pond improvement shall include: (1) Residence in the Project Area; (2) A bonafide fish farmer; (3) Ownership of the fishpond or operation under a valid fishpond lease agreement with a term of not less than ten (10) years of brackishwater fishponds with an area of not exceeding thirty (30) hectares; (As amended by Section 1 of CBP Circular 1098 dated April 11, 1986) (4) The capacity to provide, in cash or in kind, for a minimum of ten (10) per cent of the cost of the investment to be financed under the subloan; (5) Ability to provide reasonable security for the subloan; and (6) A satisfactory credit rating without any continuing default in payment under loans from financial institutions. (b) The criteria for subloans to qualified beneficiaries for the construction of shrimp hatcheries shall include: (1) The qualified beneficiaries shall be private individuals, either solely or in partnership; (2) The capacity to provide, in cash or in kind, for up to 30 per cent (30%) of the cost of the investment to be financed under the subloan; (3) The ability to provide reasonable security for the subloan; (4) Possess a satisfactory credit rating without any continuing default in payment under loans from financial institutions; and (5) Preferably the borrowers shall be residents of Region Six. SECTION 5. Subloan Limits (a) The amount of subloan shall depend upon the cost of the aquaculture development project plan to be financed inclusive of accrued interests and service charges, actual needs of the project, collateral offered, borrower's re-payment capacity and other factors bearing on the borrower's credit worthiness. For subloan with maturities exceeding one year, the criteria shall be made on the following: (1) Fishpond improvement or rehabilitation 90% of the total project cost, provided, however, that a participating financial institution with CB approval may extend a subloan of up to 100% of the total project cost if prospective borrowers having viable projects are not capable of putting up their equity participations. (2) Construction of shrimp hatcheries 70% of the total investment to be financed under the subloan. The prescribed ceilings on subloans may be reduced by participating Rural Banks in accordance with their lending policies and results of project appraisal. (b) The amount of subloan secured by a real estate mortgage shall not exceed 70% of the appraised value of the immovable property offered as security, if titled and shall not exceed 50% of such value, if the property is untitled. The prescribed ceilings on the loan values of real estate security offered may be reduced by participating Rural Banks in accordance with their respective lending policies and results of security appraisal. (c) The amount of subloan secured by a chattel mortgage shall not exceed 50% of the appraised value of the object offered as security, and where such object is new, 50% of the price in the bill of sale. The prescribed ceilings on the loan value of security to be covered by a chattel mortgage may be reduced by participating Rural Banks in accordance with their respective lending policies and results of security appraisal. (d) The amount of subloan secured by a pledge of government bonds and other securities issued by government agencies and instrumentalities guaranteed by the Republic of the Philippines, shall be governed by existing rules and regulations of the Central Bank of the Philippines. SECTION 6. Credit worthiness : Each rural bank shall decide on the credit-worthiness of borrowers applying for subloans. SECTION 7. Maturity of Subloans : Subloan maturities shall be based on the economic life of the object to be financed and the projected cash flow to be derived from the aquaculture project and in each case shall not exceed the following terms: Category Maximum Maturity (a) Purchase of milkfish fry and fingerlings, post-larvae/juveniles shrimps, fertilizers, pesticides, fuel for water pumps, labor costs and repair and maintenance cost 1 Year (b) Improvement or rehabilitation of milkfish ponds, shrimp ponds, milkfish and shrimp ponds 10 Years (c) Establishment of shrimp hatcheries for production of 10 million post-larvae and juveniles per year 10 Years (d) Establishment of shrimp hatcheries for production of 2 million post-larvae and juveniles per year 10 Years (e) Other projects to be determined by CBP. (f) The above maturities are just guidelines in determining the repayment period of the subloans. However, where the cash flows shows that subloans can be repaid/serviced for a period shorter than the above maturities, then the shorter period for repayment shall prevail. SECTION 8. Subloan Repayment : Repayment on medium and long-term sub-loan shall be scheduled in approximately equal installments of principal and interest, annually, semi-annually, or of a shorter period, except in cases where deferred payment plans have been granted so arranged as to fall due on the approximate periods of highest borrower's income or when the principal income of the borrower is normally available. SECTION 9. Interest Rates and Other Charges : Subloan shall accrue interest at the rate of fourteen per cent (14%) per annum for short-, medium and long-term on the principal amount outstanding from time to time, or such other rates as may be prescribed by the Monetary Board. An additional bank service charge of a maximum of 3 per cent (3%) for the above-mentioned subloan shall likewise be imposed on the outstanding subloan balance in accordance with CBP regulations. For existing projects to be financed during the period of releasing the proceeds of the loan, accrued interest on releases shall be due and payable quarterly counting from the date of first release, or on the date of subsequent release, whichever comes earlier, and shall be deducted from subsequent releases. Said accrued interest which remains unpaid after quarterly due date, as provided above, shall be subject to additional interest. Moreover, accrued interest on releases which remains unpaid after the final release shall the subject to additional interest and penalty charges of 8% per annum after the allowable grace period of 30 days. SECTION 10. Collateral : (a) Subloans may be secured by a first mortgage on titled or untitled immovable property and/or chattel mortgage on movable property. (b) Government bonds and other securities issued by its agencies and instrumentalities guaranteed by the Republic of the Philippines may be accepted as collateral. (c) Object of financing, such as expected fish and shrimp harvest shall be chattel mortgaged in favor of the financing institution. (d) In the absence of real estate mortgage, two (2) co-makers acceptable to the financing institution may be required in addition to the chattel mortgage. (e) The financing institution require the presentation of the yearly real estate tax receipts and insurance premium receipts, when required, as they fall due. (f) The financing institution may advance the property tax due on real estate and the insurance premium on the objects offered as collaterals, such advances to be charged to the account of the borrower subject to an interest rate of 16% per annum plus 2% service charge on the amount advanced. Such advances shall not be financed out of the proceeds of the loans and shall carry a penalty charge of 8% per annum for non-payment by the borrowers. (g) Insurance coverage of mortgaged assets shall be equivalent to the net replacement cost of the assets mortgaged to the financing institutions. Such insurance shall be placed by the financing institutions and assigned in its favor. Upon maturity of all existing insurance policies, such policies shall be replaced by new policies conforming to the new insurance requirement of the existing subloan provided that assets so covered shall be periodically reappraised for purposes of upgrading the policies as they are renewed, to reflect the current net replacement costs. Section 10 (h) (Additional provision as provided by CBP Circular 1098 dated April 11, 1986) SECTION 11. Subloan Application and Processing : (a) Applications for subloans shall be in the form prescribed by CBP and Financing Institution and shall be filed with the Financing Institution nearest either the residence of the borrower or the site of the subproject to be financed to ensure effective supervision and control. (b) Financing Institution may utilize the services of technical personnel of the BFAR in the preparation of detailed feasibility study/farm plan of project(s) to be undertaken by borrowers. (c) Financing Institutions employing a fisheries supervised credit technician may process subloan applications for medium and long-term loans in lieu of processing by a CBP Agricultural Credit Supervisor; provided, however, that said technician has completed training with CBP and; provided, further , that subloan applications shall be subject to the final approval of the CBP Loan Officer. (d) Financing Institutions which have developed sufficient capability to appraise subloan applications may be granted full authority by CBP to process, approve and thereafter supervise subloans falling within the limitations of the granted authority. The approval under the granted authority shall be issued and the corresponding checks covering loans to such Financing Institutions shall be issued after the submission of the required supporting documents to the CBP Loan Team; provided, however, that based on post-audit, the authority to approve subloan applications may be revoked by CBP if the required standard of appraisal work is not maintained and the Financing Institution fails to improve the quality of appraisal within a reasonable period prescribed by CBP. (e) A subloan application by the sub-borrower amounting to P200,000.00 will be processed by the rural banks together with the Loan Team and Agricultural Credit Supervisors of the Central Bank in Iloilo, Aklan and Capiz. Consideration will be in accordance with the Loan Sanction Power of the Central Bank Loan Team in Iloilo. A subloan amounting to more than P200,000.00 must be approved by the Central Bank in Metro Manila. SECTION 12. Release of Subloan Proceeds : Upon receipt of loan proceeds from CBP, the Financing Institution shall deposit the same in a special account with its depository bank or disburse forthwith to the borrower/dealer/contractor/supplier. Failure to disburse loan proceeds within 45 days upon receipt shall subject the Financing Institution to a penalty of 8% per annum until the same is disbursed or returned to the CBP. Borrowers shall avail of the first release of the loan within 30 days from the date mortgage documents have been executed and perfected. Subsequent subloan releases shall be programmed in accordance with the actual time of need indicated in the schedule of releases prepared for the project. For as long as the loan is outstanding, the borrower shall not, without the knowledge and prior approval by the Financing Institution: (a) undertake any change in the original project plans other than those approved by the Financing Institution; and (b) utilize loan proceeds for purposes other than those approved by the Financing Institution, otherwise, the Financing Institution may opt to declare the loan due and demandable. SECTION 13. Penalty for Non-Payment : For medium- and long-term loans, a maximum penalty rate of interest of 8% per annum shall accrue, over and above the interest rate specified in Section 9 hereof, on any part of the principal of any subloan amortization not paid at its due date, provided, however, that the prescribed penalty rate may be reduced by participating financing institution in accordance with their respective lending policies. SECTION 14. Extension Periods : (a) In cases of default on the service of subloans arising from fortuitous events or force majeure, or in other cases clearly justified in the opinion of CBP, the Financing Institution may grant the borrower a reasonable extension period subject to the approval of the CBP. In such cases, CBP, may, at its entire discretion, grant the Financing Institution the same extension period on the corresponding loan. (b) Matured special time deposit or loans made by CBP to Financing Institutions corresponding to past due subloans may be extended for a period not exceeding 3 years for short-term loans and 5 years for medium- and long-term loans, provided, however, that additional interest over and above the original rate shall be charged to the Financing Institution. For this purpose, the following rates shall be added to the rate of interest on special time deposits or advances: Years After Loan Additional Interest Maturity Charge, % p.a. 1 1 2 2 SECTION 15. Subloans in Litigation : In case of suit for collection on the unpaid balance of a subloan, there shall be collected from the borrower, in addition to the interest and penal interest on the subloan-imposed under Section 13 hereof, an attorney's fee equivalent to 10% of the unpaid balance and cost of the suit. In case of foreclosure, deficiency claim if any, shall be resorted to by financing institutions. SECTION 16. Procurement : Procurement of hatchery equipment, supply and machinery shall be limited to dealers who agree to provide the necessary training in the proper operation, care and upkeep of the machinery and equipment purchase, and who shall have immediately available spare parts and technical men and service shops at strategic places to repair and replenish destroyed parts. III. Loans by the Central Bank to Financing Institution SECTION 17. Accreditation of Financing Institution (Rural Banks) Rural Banks intending to participate under the program shall apply for accreditation prior to application for STD. For this purpose, they shall submit the following documents to CBP: (a) Board Resolution authorizing the Financing Institution to participate in the credit program, obtaining loans from CBP and making subloans. (b) Evidence of the powers and specimen signatures of the officers duly authorized to represent the Financing Institution in all matters related to loans. (c) Statement of Financial Condition and Statement of Income and Expenses. SECTION 18. Consortium of Financing Institutions (Rural Banks) : In order to cushion the impact of price increase in machinery, equipment and construction materials and to pave the way for the absorption of bigger subloans as envisioned under this program, two or more Financing Institutions preferably situated within the same region may be allowed to undertake the financing of a single project, in an amount not to exceed fifteen per cent (15%) of the total combined networth of such participating Financing Institutions, provided that the contribution to the subloan by each participating Financing Institution shall not exceed 15% of its networth. Under this agreement, the "CONSORTIUM shall designate a lead or "Managing Financing Institution which shall administer such loans, and in accordance with existing rules and regulations prescribed by the Central Bank of the Philippines. Privileges and responsibilities assigned in these and regulation to financing institutions shall be in the event of financing by a "CONSORTIUM" deemed as assigned to members of said "CONSORTIUM", or the lead Financing Institution of the "CONSORTIUM". SECTION 19. Loan or Special Time Deposits : The CBP shall extend loans or Special Time Deposits to Financing Institutions to finance subloans to be extended by them to borrowers in accordance with these Rules and Regulations. SECTION 20. Maturity The schedule of repayments of each loan shall approximately correspond to the schedule of repayments of the subloan to be financed by such loan including extension, if any, brought about by "Force Majeure". SECTION 21. Interest Rate Special Time Despots to finance short-, medium- and long-term subloans shall accrue interest at the rate of not less than 10.5% per annum. Such interest shall not be collected in advance. SECTION 22. Credit Risk The Financing Institution is fully liable for the service of any loan, whether or not the subloan financed by the corresponding loan is timely serviced or not. SECTION 23. Documentation The Financing Institution shall execute and deliver to CBP a promissory note in respect and in the amount of each loan extended. SECTION 24. Security As security of each loan, the Financing Institution shall endorse in favor of CBP, the promissory notes received from the corresponding borrower referred to in Section 4 hereof, covering the total amount of the sub-loan to be financed. SECTION 25. Processing of Loan Application (a) To finance short-term subloans, application for Special Time Deposit (STD) shall be submitted by the Financing Institution to CBSES Department III within a reasonable period of time before the scheduled date of subloan releases. (b) Applications for medium- and long-term loans shall be submitted to the Loan Officer of the SES Department III covering the particular area, for final approval or disapproval, with the exception of those Financing Institutions duly authorized by CBP to approve applications, which shall submit their approved subloans to the Loan Officer for the preparation of covering checks. (c) To facilitate processing application for STD or loan, it must be presented in the prescribed manner and supported by documentary evidence and other requirements that CBP shall determine from time to time and set forth in appropriate instructions which shall be furnished in advance to the lending institutions. SECTION 26. Release of Loan Proceeds Loan proceeds on special time deposits to financing institutions shall be immediately released by CB-SES Department III Loan Officer after submission of all required documents to perfect documentation of the loan and the subloan. SECTION 27. Prepayment of Loans The Financing Institutions shall, to the extent any subloan shall be prepaid, prepay the corresponding amount of the loan on STD obtained on account of such subloan within 10 days of receipt of such prepayment without any interest. SECTION 28. Penal Provisions (For Medium and Long-Term Loans only) A penal rate of interest of 5% per annum shall accrue, over and above the interest rate specified in Section 21 hereof or any part of the principal of any loan not paid at its maturity. SECTION 29. Loans in Litigation In case of suit for collection of the unpaid balance of a loan or STD, there shall be collected from the Financing Institution, in default, in addition to the interest and penal interest on the loan imposed under Section 21 and 28 hereof, an attorney's fee equivalent to 10% of the unpaid balance, which shall in no case be less than one hundred pesos (P100.00), and cost of the suit. IV. Audits and Reports from the Participating Financing Institution SECTION 30. Subloan Audit Subloan documents of Financing Institutions shall be subject to audit by designated staff of CBP for compliance on Rules and Regulations. SECTION 31. Audit CBP shall audit or cause to be audited, at least once a year, the accounts of the Financing Institutions which, for this purpose shall make available to the CBP representatives or auditors designated by CBP all relevant documents. SECTION 32. Monitoring The Financing Institutions shall furnish to CBP all reports and other information CBP may reasonably request regarding this credit program. APPENDIX 38 Implementing Guidelines Governing The Participation of Banks Under The Intensified Rice Production Program (IRPP) (Appendix to Subsec. 3375-D) The Monetary Board, in its Resolution No. 1563 dated December 21, 1984 approved the following Implementing Guidelines Governing the Participation of Banks Under the Intensified Rice Production Program in the provinces of Pangasinan, La Union, Ilocos Norte, Cagayan, Isabela, Nueva Vizcaya, Nueva Ecija, Pampanga, Bulacan, Mindoro Oriental and Occidental, Camarines Sur, Iloilo, Leyte, Zamboanga Sur, Bukidnon, South and North Cotabato, Davao Norte and Sultan Kudarat. aisadc A. A . The Trader-Miller/Input Supplier Assistance Scheme Under this scheme and Agency Agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amount from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Good (MAF) authorized institution trader-miller/input supplier (TM/IS) under the conditions herein indicated. For purposes of these guidelines, the term "trader-millers" shall refer to the rice trader-millers accredited by the Quedan Guarantee Fund Board (QGFB) who possess such primary facility as threshers, driers and mills and who supply and palay could be met through contract growing or forward selling agreement with farmers. On the other hand, the term "input supplier" shall refer to enterprises which sell inputs for the production of rice to farmers, much as fertilizers, recommended, seeds, pesticides and other chemicals. 1. The TM/IS shall submit his project proposal to MAF/NAFC for evaluation and approval. Upon approval of the proposal, the TM/IS shall advance the production inputs in the form of seeds, fertilizers and chemicals as well as the amount representing the insurance premiums for the project of the farmer-borrowers. A tie-up with an agricultural input supplier will insure timely and adequate provision of production inputs and provide the necessary technical assistance to complement the services of the MAF technician The TM/IS shall require farmers to sign contracts to deliver the specified volume of their produce at a mutually agreed price which shall not be lower than the governments support price. The TM/IS shall enter into a payment-in-kind" agreement with the NFA wherein the TM/IS shall deliver milled rice equivalent to the amount of loan he (TM/IS) availed of based on a mutually agreed price to a designated warehouse of the NFA. 2. The amounts to be released by the agent bank shall be equal to the amounts released by the TM/S to the farmer-borrowers for the latter's cost of production inputs and crop insurance premium, determined as valid for financing by the MAF/CB, as supported by the certificates of insurance cover, promissory notes, marketing contracts and delivery receipt on inputs duly signed by the farmer-borrowers and which amounts shall not exceed the IRPP Loan budget of P3,000 per hectare, broken down as follows: Seeds P400, Fertilizer P1,675, Chemicals P775 and Crop Insurance Premium P150. However, a TM/IS may, at his discretion, provide additional cash loans to cover labor costs but such additional outlay will not be eligible for financing. Memorandum Circular No. 2 dated Feb. 11, 1985 issued by the National Food & Agriculture Council (NFAC) amended Memorandum No. 1 dated Feb. 1, 1985 to include locally produced liquid fertilizers in the list of Recommended Fertilizers for National Productivity Program (Effective Feb. 26, 1985) 3. An interest rate of 6% p.a. inclusive of commission and service fees, shall be charged by the agent bank on amounts released to the TM/IS. The interest rate of 6% p.a. shall be collected upon payment by the TM/IS to the agent bank. The agent bank shall, upon collection of the loan deduct for its own account a service fee of 1% p.a. on the amount released and a commission of 2% p.a. on the amount collected excluding interest and other charges. The balance of the amount collected including interest after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. On the other hand, loans to farmer-borrowers shall bear an interest rate of 15% per annum, inclusive of service fee and other charges. 4. The TM/IS must repay the principal and the prescribed interest thereon to the agent bank within 250 days from the date that the agent bank credits the account of the TM/IS. Loans to farmer-borrowers, however, shall have a maturity period of 240 days. The agent bank shall, within one (1) banking day from receipt of payment from the TM/IS, remit to CB such payment as specified in Item 3 above. In case of check payments the agent bank shall remit to CB the payments of the TM/IS within one (1) banking day after clearing of such checks except those withdrawn against the agent bank's head office. 5. Loans granted to farmer-borrowers shall be fully-covered by insurance (2% of 125% of specified loan budget) in accordance with existing regulations of the Philippine Crop Insurance Corporation (PCIC). 6. Cut-off dates for lending/plantings (December 31, 1984) for the November December planting and March 31, 1985 for the February-March planting) shall be strictly adhered to in accordance with existing guidelines. 7. The agent bank shall release the amount to the TM/IS within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to TM/IS 100% of the amount released by the CB for the particular transaction. Any unreleased portion thereof shall be returned to the CB within two (2) banking days after receipt of the credit advice. If the agent bank fails to return to CB the unreleased portion within the prescribed period, it shall pay a penalty fee of 36% p.a. on the unreleased portion in addition to the 6% p.a. interest until such unreleased portion is remitted in full to the CB. 8. Any misappropriation of funds not released to TM/IS and/or payment received from TM/IS shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 9. The agent bank shall not be held liable in case of non-payment/short-payment/late payment by the TM/IS of the amount released by the former to the latter. 10. In the event of non-payment/short-payment/late-payment by the TM/IS, the agent bank shall institute collection measures/legal actions against the TM/IS. All expenses covering such measures/legal actions shall be for the account of the YCF. 11. The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB-SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 12. All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 13. Only agent bank s that shall be cleared by the CB-SES Department concerned shall be eligible to participate under this scheme. B. The Banking System Assistance Scheme CB as Administrator of the Yellow Corn Fund (YCF) shall release Special Time Deposits (STDs) to MAF/CB authorized banks for relending directly to qualified farmers. 1. Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the COSES Department III covering the credit needs of farmers, excluding seed producers, equivalent to the cost of production inputs and farmer's share of the crop insurance premium. Such amounts shall not exceed the loan budget of P3,000 per hectare. However, a farmer-borrower, upon the discretion of the lending institution, may avail of cash loan up to a maximum of P800 per hectare chargeable against the allocation for seed and fertilizer, provided, further that soil analysis and/or use of azolla has been duly certified by the supervising MAF technician. 2. With assistance from the lending bank, the farmer-borrower shall enter into a marketing contract with a QGFB accredited TM/quedan operator who shall collect for the lending bank the farmer-borrower's repayment-in-kind for production loans. 3. STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. All promissory notes arising from this program shall be stamped "NOT REDISCOUNTABLE" (Effective Jan. 10, 1985) 4. CB-SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 5. The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear an interest rate of 15% p.a. and shall be paid in two (2) installments within 240 days. The first installment equivalent to one third (1/3) of the principal loan plus interest shall be payable (in cash or in kind) after the first harvest of the first crop or within 120 days from date of loan availment. The balance plus interest shall be remitted upon maturity of the loan or within 240 days. 6. The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid in two (2) installments within 250 days from date of receipt of credit advice. The first installment equivalent to one third (1/3) of the principal loan granted plus interest shall be payable after the harvest of the first crop or within 130 days from date of STD availment. The balance plus corresponding interest shall be remitted upon maturity of the STD or within 250 days. 7. Loans granted to farmer-borrowers shall be fully covered by insurance (2% of 125% of specified loan budget) in accordance with the existing rules of Philippine Crop Insurance Corporation (PCIC). 8. Cut-off dates for lending/planting (December 31, 1984 for the November-December planting and March 31, 1985 for the February-March planting) shall be strictly adhered to in accordance with existing guidelines. The Intensified Rice Production Program (IRPP) shall continue to be implemented to cover the cropping periods May-October, 1985 and November-April, 1986. NFAC envisioned to consider as a policy stand the implementation of the IRPP mechanics and strategies on a regular basis for the succeeding droppings. (Effective April 26, 1985). 9. The participant bank shall release the STDs within 30 days from receipt thereof, and any unused portion shall be immediately returned to the CB-SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% p.a. interest until such amount is remitted in full to the CB. Similarly, any unauthorized use of the STD or non-payment/non-remittance of collections from farmer-borrowers after the 250-day term of the STD shall subject the participant bank to a penalty of 39% per annum fin addition to the 3% p.a. interest until the full amount is remitted to CB, except those amount which may be covered by indemnity payments by PCIC. 10. Any misappropriation of any STD received by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 11. The participant bank shall be held liable for non-payment/short-payment/late payment by the farmers of the amount released by the former to the latter. 12. In the event of non-payment/short-payment/late-payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. 13. Rural Banks participating under this scheme should meet the following eligibility requirements: a) There are no irregularities/serious exceptions in its operations; b) Its risk asset ratio should not be less than 10% after taking into account the loans that will be granted under the IRPP; c) Its ratio of past due loans to total loan portfolio excluding past due CB:IBRD loans should not exceed 50%; and d) Its past due obligations with CB, if any, should be covered by approved plans of payment that are duly complied with. Commercial and thrift banks which may participate under this scheme shall secure prior clearance from CB-SES Departments I and II, respectively. C. Lending Guidelines Farmers cultivating less than one (1) hectare of irrigated rice farm can participate in the Intensified Rice Production Program (IRPP) and avail of the financial assistance. However, before such farmers can become eligible, certain conditions must be satisfied as follows: 1. Farmers in a contiguous area being served by the same irrigation system must first group themselves in order that the area which can be financed may become larger and thereby qualify for financing. The maximum number of farmers or area may be set by the lender in coordination with the attending technician. 2. Each group shall be eligible for singular financing where all members signing as borrowers and therefore shall be jointly and severally liable for each others loan. 3. The amount of loan must be based on the requirement of each farm but in no case shall exceed the maximum loanable amount on a per hectare basis. This will imply that a .5 hectare farm is eligible only to a maximum of half of P3,000 which is the loan ceiling per hectare. (Effective Jan. 16, 1985) D. Policy Directions and Decisions Considered for Implementation of the Intensified Rice Production Program (IRPP) During this Second Season 1. IRPP shall be implemented, exclusively in only 30 rice provinces comprising 80% of the national rice hectarage. All the other provinces outside these 30 provinces shall implement the Masagana 99 Program. (refer to attached listing) 2. Financing conduits shall be operational only in the IRPP provinces. Such conduits/lenders are enjoined to coordinate closely with the PAO for target allocation and assignments. 3. Target-setting shall consider availability of water during growing period of rice, manpower support and relevant infrastructures. 4. All loan applications for this season shall cover 180 days maturity period at 15% interest per annum ( Effective May 23, 1 985 ) E. Amendments/Addenda to Guidelines/Policies Considered by NFAC for Implementation of IRPP Under the Regular Season . 1. IRPP shall be implemented exclusively in 30 rice provinces which comprise 80% of the national rice hectarage. All the other provinces shall implement the Masagana 99 Program. (Refer to attached listing) 2. Irrigated areas whether planted twice or thrice a year may be targeted under IRPP. 3. The loan package breakdown by components in the IRPP as well as in the Masagana 99 Program is as follows: Seeds P250 Fertilizers 1,675 Farm Chemicals 910 Crop Insurance 75 Barrio Savings Fund 90 P3,000 ===== Adjustments within the loan budget, except for farm chemicals, shall be allowed but should not in any way exceed the guideline rate of P3,000 per hectare. Cash not exceeding P800 may be provided from the seeds and fertilizers components and the Barrio Savings Fund, in case the farmer will not require the full amounts for said inputs and when the farmer opts not to pay his BSF Should the farmers opt to avail of lesser inputs, a certification from the attending production technician shall be required as to soil fertility and availability of the prescribed seeds. The provision of cash however shall be made at the discretion of the lender. In case a farmer chooses to pay the BSF, a written authority from him shall be required prior to its collection by the lending institution. 4. Organic fertilizers which are accredited by FPA and NFAC may be substituted for chemical fertilizers. Such usage, however, shall be at the option of the farmers. LLjur 5. All loan applications for this season shall cover 180 days maturity period at 15% interest per annum. 6. In areas where farm sizes are less than one hectare, farmers may participate subject however, to the discretion of the financing institution or lender and the Philippine Crop Insurance Corporation. 7. Supplemental financing shall not be allowed. 8. IR64 shall not be included as one of the recommended varieties under IRPP/Masagana 99. ( Effective June 13, 1985 ) IRPP GUIDELINE TARGET BY PROVINCE May-October, 1985 1. La Union 1,300 2. Ilocos Sur 1,000 3. Ilocos Norte 1,600 4. Pangasinan 6,000 5. Kalinga-Apayao 1,400 6. Cagayan 3,700 7. Isabela 14,500 8. Nueva Viscaya 1,000 9. Bulacan 2,600 10. Nueva Ecija 16,000 11. Pampanga 3,900 12. Tarlac 4,200 13. Laguna 2,100 14. Mindoro Oriental 1,600 15. Mindoro Occidental 1,300 16. Camarines Sur 3,100 17. Sorsogon 1,000 18. Camarines Norte 1,000 19. Albay 1,000 20. Iloilo 5,800 21. Capiz 1,600 22. Antique 1,900 23. Negros Occidental 1,900 24. Leyte 3,200 25. Zamboanga Sur 2,400 26. Bukidnon 2,400 27. Davao Norte 2,200 28. South Cotabato 2,300 29. North Cotabato 4,800 30 Sultan Kudarat 3,200 Total 100,000 ====== APPENDIX 39 Eligibility Requirements for the Participation of Rural Banks in the Agricultural Productivity Programs of the Government (Appendix to Secs. 3375-C, D, G & H) The Monetary Board, in its Resolution No. 425 dated April 19, 1985, approved the following eligibility requirements for the participation of rural banks in the Intensified Rice Production Program (IRPP), Expanded Corn Program (ECP), National Soybean Production Program (NSPP), National Root-crops for Food Program (NRFP) and other Agricultural Productivity Programs of the Government. 1. It shall be the responsibility of the participating rural bank to see to it that the Special Time Deposit (STD) will be lent to eligible farmers and will be used by them for the purpose for which the money is being made available. The Central Bank may, from time to time, assign an Agricultural Credit Supervisor and/or Bank Examiner to monitor the releases of the proceeds of the STDs for financing of the programs and to ensure that such proceeds shall be properly utilized in accordance with the objectives of the programs. 2. In order to be eligible to participate in any of the programs, the rural bank: a. Must not have committed any serious irregularities in its operations; b. Must have been operating substantially in accordance with law, rules and regulations; and c. There is no internal dissension which would jeopardize the Government's financial exposure to the bank. The determination of compliance with these criteria shall be the responsibility of the Central Bank thru its Supervision and Examination Sector Department III. 3. The rural bank should be strategically located and should cover contiguous target areas so as to effectively implement and facilitate supervision and monitoring of these programs. Such target area should be accessible to transportation facilities. 4. Only end-user borrowers with good repayment record, except in cases where the project financed had been adversely affected by natural calamity, should be allowed to participate in these programs. In the case of borrowers without any credit record, the participating rural bank with the assistance of the representative of the Ministry of Agriculture & Food (MAF) shall certify that such borrowers have lands to be cultivated and the farm plans and budget have been prepared. Such certification shall be attached to the application for STD. The credit standing of such borrowers should be subject to further rigid evaluation by the bank. 5. All loans granted under these programs shall be insured or guaranteed by the Philippine Crop Insurance Corporation (PCIC) as a protection against losses due to natural calamity. As an additional safeguard, the participating rural bank with the assistance of the MAF technician assigned to the bank shall see to it that the borrower is closely supervised during the harvest season. To ensure that the loans granted shall be repaid, it shall be the responsibility of the participating rural bank as assisted by the MAF technician to require the borrower to deliver his produce with a value of at least equal to the amount of loan plus interest to any accredited warehouse designated by the bank. Sales proceeds shall first be applied to interest and principal of the loan and the balance, if any, shall either be paid to the borrower or deposited in his savings account. 6. In the event that there are no accredited warehouses in the area, it shall also be the responsibility of the participating rural bank with the assistance of the MAF technician to see to it that the harvest of the borrower is properly disposed of so that collection of his loan can be effected. (Effective April 24, 1985) APPENDIX 40 Implementing Guidelines Governing the Participation of Banks in Financing Post Harvest Facilities for the Agricultural Productivity Programs of the Government. (Appendix to Sec. 3375-F) Under this financing arrangement, the role of the participant bank is to act as Agent. The prospective borrower, upon submission of his project proposal to the Ministry of Agriculture and Food (MAF)/National Food and Agriculture Council (NFAC), should indicate, among other things, the agent bank of his choice. The MAF/NFAC is charged with the responsibility of evaluating/approving the project proposal, determining and appropriating the funds needed, accrediting the agent bank after clearance with Central Bank (CB) and endorsing/sending the approved project proposal and fund appropriation advice to the CB for the release of such funds. The Central Bank, as administrator of the Yellow Corn Fund (YCF), shall release to the Agent amounts from the YCF which the Agent shall extend to MAF authorized borrower under the following terms and conditions: 1. The amounts to be released by the Agent to authorized MAF borrower shall be based on the purchase agreements, contracts, receipts and other documents for transactions in accordance with MAF-approved project proposal and project erection timetable. 2. An interest rate of 15% per annum, inclusive of service fee and commission, shall be charged by the agent on amounts released to the borrower. The interest rate of 15% shall be collected upon payment of the loan by the borrower. The agent shall, upon collection of the loan, deduct for its own account a service fee of 1/2% per annum on the principal amount released and a commission of 1/2% per annum on the principal amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to the Central Bank by the agent. 3. The borrower shall pay the approved installment/amortization together with interest to the agent on the date of maturity of each installment/amortization as approved by the MAF. Installments/amortizations not paid on time shall be subject to a penalty of 27% per annum in addition to the 15% per annum interest until such amounts are fully paid to the agent. The Agent shall, within one (1) banking day from receipt of payment from the borrower remit to the CB such payments as specified in paragraph 2. In case of check payments, the agent shall remit to CB payments of the borrower within one (1) banking day after clearing of such checks except those drawn against the Agent's head office. 4. The Agent shall open a special account for the borrower within one (1) banking day after the Agent receives the credit advice from the CB. The Agent shall release to the borrower 100% of the amounts released by the CB required for the particular transactions after verification and certification of documents presented by the borrower in accordance with paragraph 1. Any unauthorized use or retention of the funds and/or payments received by the Agent not remitted to the CB within the prescribed period shall subject the Agent to a penalty of 42% per annum until such amount is remitted in full to the CB. 5. Any misappropriation of funds not released to borrower and/or payments received from borrower shall subject the Agent and its officers responsible therefor to administrative and penal sanctions under the Law. casia 6. The Agent shall not be held liable in case of non-payment/short-payment/late payment by the borrower of the amount released by the former to the latter. 7. In the event of non-payment/short-payment/late payment by the borrower the Agent shall institute collection measures/legal actions against the borrower. All expenses covering such measures/actions shall be for the account of the YCF. 8. The Agent shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB SES Department III. The Agent shall report all transactions to the CB on a monthly basis on as otherwise required by the CB. 9. All amounts released under the YCF to the Agent shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 10. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB-SES Departments I & II, respectively. 11. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum (Effective April 29, 1985) APPENDIX 41 Implementing Guidelines Governing the Participation of Banks in Financing Post-Harvest Facilities for the Agricultural Productivity Programs of the Government. (Appendix to Sec. 3375-F) The Monetary Board, in its Resolution No. 295, dated March 22, 1985, approved the following guidelines governing banks that will participate in financing the National Soybean Production Program (NSPP) in the provinces of Agusan Sur, Bukidnon, Davao Norte and Sur, Iloilo, Isabela, Maguindanao, Negros Oriental and Occidental, Nueva Ecija, Pampanga, Pangasinan, South Cotabato, Sultan Kudarat, Surigao Sur, Tarlac, Zamboanga Sur, and such other provinces which may be recommended by MAF/NFAC. a. The End-users/Input Suppliers Assistance Scheme Under this scheme, an Agency Agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amounts from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Food (MAF) authorized institutional end-users/input suppliers under the conditions herein indicated. For purposes of this guideline, the term institutional "end-user" shall refer to enterprises which purchase feed and food grains from farmers for the purpose of further physical processing or for packaging, such as for feeds, etc; however, traders and consumers shall not by themselves be considered institutional end-users, under this definition. The term "input supplier" shall refer to enterprises which sell inputs for the production of soybeans to farmers, such as fertilizer, pesticides, other chemicals, seeds, etc. 1. The amounts to be released by the agent bank shall be equal to the cost of the inputs released by the end-user/input supplier to the farmer-cooperators, determined as valid for financing by the MAF/CB, as supported by the promissory notes, marketing contracts and delivery receipts on inputs duly signed by the farmer-cooperators. Such loans to farmer-cooperators should not exceed the NSPP loan budget of P2,500 per hectare with interest rate of 15% p.a., inclusive of service fee and other charges, payable within a period of 150 days. The loan budget of P2,500.00 is broken down as follows: a) seeds P750; b) Fertilizer P970 and c) Farm Chemicals P780. Should the farmer not require the full amounts, based on the production technician's certification, cash may be provided for land preparation which should not exceed P300/hectare. (Effective April 22, 1985) Memorandum Circular No. 2 dated Feb. 11, 1985 issued by the National Food & Agriculture Council (NFAC) amended Memorandum No. 1 dated Feb. 1, 1985 to include locally produced liquid fertilizers in the list of Recommended Fertilizers for all National Productivity Program. (Effective Feb. 26, 1985) 2. An interest rate of 6% p.a., inclusive of service fees and commissions, shall be charged by the agent bank on amounts released to the end-user/input supplier. The interest rate of 6% p.a. shall be collected upon payment of the loan by the end-user/input supplier. The agent bank shall, upon collection of the loan, deduct for its own account a service fee of 1/2% p.a. on the principal amount released and a commission of 1% p.a. on the principal amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. 3. The end-user/input supplier must repay the principal and the prescribed interest to the agent bank within 160 days from the date that the agent bank credits the account of the end-user/input supplier. The agent bank shall within one (1) banking day from receipt of payment from the end-user/input supplier, remit to CB such payment as specified in Item 2 above. In case of check payments, the agent bank shall remit to CB the payments of the end-user/input supplier within one (1) banking day after clearing of such checks except those drawn against the agent bank's head office. Amounts not paid by the end-user/input supplier within the prescribed period shall be subject to a penalty of 36% p.a. in addition to the 6% p.a. interest shall until such amounts are fully paid to the agent bank. 4. The agent bank shall release the amount to the end-user/input supplier within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to the end-user/input supplier 100% the amount released by the CB for the particular transaction. Any unauthorized use or retention of the fund and/or payments received by the agent bank not remitted to the CB within the prescribed period shall subject the agent bank to a penalty of 42% per annum until such amounts are remitted in full to the CB. 5. Cut-off dates for lending/planting, as approved by MAF/NFAC shall be strictly adhered to in accordance with existing guidelines. 6. Any misappropriation of funds not released to end-user/input supplier and/or payments received from end-user/input supplier shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 7. The agent bank shall not be liable in case of non-payment/short payment/late payment by the end-user/input supplier of the amount released by the former to the latter. 8. In the event of non-payment/short payment/late payment by the enduser/input supplier, the agent bank shall institute collection measures/legal actions against the end-user/input supplier. All expenses covering such measures/action shall be for the account of the YCF. 9. The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 10. All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. 11. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB:SES Departments I and II, respectively. 12. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum. B. The Banking System Assistance Scheme CB will administer the Yellow Corn Fund (YCF) and shall release Special Time Deposits (STDs) to MAF/CB authorized banks for relending directly to qualified farmers. 1. Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the CB SES Department III covering the credit needs of farmers, excluding seed production, equivalent to the cost of production inputs. Such amounts shall not exceed the NSPP loan budget of P2,500 per hectare. 2. STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. All promissory notes arising from this program shall be stamped "NOT REDISCOUNTABLE". 3. CB SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 4. The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear interest of 15% p.a., inclusive of service fee and other charges, for a term of 150 days. Loan releases shall be in accordance with the approved farm plan and loan budget. 5. The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid within 160 days from date of receipt of credit advice. In the case of rural banks, the depository banks through which the credit advice is released shall remit within 24 hours the proceeds of the STD to the participant bank, otherwise, said depository bank and directors/officers responsible therefor shall be subject to the sanctions provided under the law and regulations. 6. The participant bank shall release the STDs within 30 days from receipt therefor, and any unused portion shall be immediately returned to the CB SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% per annum interest until such amount is remitted in full to the CB. Similarly, any unauthorized use or retention of the fund or non-payment thereof or non-remittance of payments received from farmer-borrowers within the 160-day term of the STD shall subject the participant bank to a penalty of 39% per annum in addition to the 3% per annum interest until the full amount is remitted to CB. LLphil 7. Cut-off dates for lending/planting, as approved by MAF/NFAC shall be strictly adhered to in accordance with existing guidelines. 8. Any misappropriation of any STD received by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 9. The participant bank shall be held liable for non-payment/short payment/late payment by the farmers of the amount released by the former to the latter. 10. In the event of non-payment/short payment/late payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. All expenses covering such measures/action against the farmer-borrowers shall be for the account of the participant banks. 11. All transactions under this scheme shall be subject to inspection and examination by the CB SES Department III. Participant banks shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 12. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB SES Department I and II, respectively. 13. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum. (Effective April 29, 1985) APPENDIX 42 Implementing Guidelines Governing the Participation of Banks in Financing the National Rootcrops for Feed Program (NRFP) (Appendix to Sec. 3375-H) The Monetary Board, in its Resolution No. 295, dated March 22, 1985, approved the following guidelines governing banks that will participate in financing the National Rootcrops for Feed Program (NRFP). A. The End-users /Input Suppliers Assistance Scheme Under this scheme, an Agency Agreement shall be executed between the Central Bank (CB) as Administrator of the Yellow Corn Fund (YCF) and the lending institution as agent bank. The CB shall release to the agent bank amounts from the YCF which the agent bank, shall extend to the Ministry of Agriculture and Food (MAF) authorized institutional end-users/input suppliers under the conditions herein indicated. For purposes of this guideline, the term "institutional end-user" shall refer to enterprises which purchase feed and food grains from farmers for the purpose of physical processing or for packaging, such as for feed, etc.: however, traders and consumers shall not themselves be considered institutional end-users, under this definition. The term "input suppliers shall refer to enterprises which sell inputs for the production of rootcrops to farmers, such as fertilizer, pesticides, other chemicals, etc. 1. The amounts to be released by the agent bank shall be equal to the cost of the inputs released by the end-user/input supplier to the farmer-cooperators, determined as valid for financing by the MAF/CB, as supported by the promissory notes, marketing contracts and delivery receipts on inputs duly signed by the farmer-cooperators. Such loans to farmer-cooperators should not exceed the MAF/CB approved loan budget per hectare for each specific commodity with interest rate of 15% p.a., inclusive of service fee and other charges, payable within the maturity periods as approved by MAF/CB. 2. An interest rate of 6% p.a., inclusive of service fees and commissions, shall be charged by the agent bank on amounts released to the end-user/input supplier. The interest rate of 6% p.a. shall be collected upon payment of the loan by the end-user/input supplier. The agent bank shall, upon collection of the loan, deduct for its own account a service of % p.a. on the principal amount released and a commission of 1% p.a. on the principal amount collected. The balance of the amount collected after deducting the aforementioned service fee and commission shall be remitted to CB by the agent bank. 3. The end-user/input supplier must repay the principal and the prescribed interest thereon to the agent bank within the required period from the date that the agent bank credits the account of the end-user/input supplier. The agent bank shall within one (1) banking day from receipt of payment from the end-user/input supplier, remit to CB such payment as specified in Item 2 above. In case of check payments, the agent bank shall remit to CB the payments of the end-user/input supplier within one (1) banking day after clearing of such checks except those drawn against the agent bank's head office. Amounts not paid by the end-user/input supplier within the prescribed period shall be subject to a penalty of 36% p.a. in addition to the 6% p.a. interest until such amounts are fully paid to the agent bank. 4. The agent bank shall release the amount to the end-user/input supplier within one (1) banking day after the former receives the credit advice from CB. The agent bank must release to the end-user/input supplier 100% of the amount released by the CB for the particular transaction. Any unauthorized use or retention of the fund and/or payments received by the agent bank not remitted to the CB within the prescribed period shall subject the agent bank to a penalty of 42% per annum until such amounts are remitted in full to the CB. 5. Cut-off dates for lending/planting, as may be recommended by MAF/NFAC, shall be strictly adhered to in accordance with existing guidelines. 6. Any misappropriation of funds not released to end-user/input supplier and/or payments received from end-user/input supplier shall subject the agent bank and its officers responsible therefor to administrative and penal sanctions under the law. 7. The agent bank shall not be held liable in case of non-payment/short payment/late payment by the end-user/input supplier of the amount released by the former to the latter. 8. In the. event of non-payment/short payment/late payment by the end-user/input supplier, the agent bank shall institute collection measures/legal actions against the end-user/input supplier. All expenses covering such measures/actions shall be for the account of the YCF. 9. The agent bank shall keep separate books of accounts to record transactions under this scheme which shall be subject to inspection and examination by the CB-SES Department III. The agent bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 10. All amounts released under the YCF to the agent bank shall be exempt from all reserve requirements and the Single Borrower's Loan Limit. LLpr 11. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB-SES Departments I and II, respectively. 12. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum. B. The Banking System Assistance Scheme CB will administer the Yellow Corn Fund (YCF) and shall release Special Time Deposits (STDs) to MAF/CB authorized banks for relending directly to qualified farmers. 1. Only banks authorized by the MAF which meet the CB eligibility requirements may avail of STDs by filing an application with the CB-SES Department III covering the credit needs of farmers, excluding seed production, equivalent to the cost of production inputs. Such amounts shall not exceed the MAF/CB approved loan budget per hectare for each specific commodity. 2. STD funding will be 100% of loans to farmers which shall not be eligible for rediscounting with the CB. All promissory notes arising from this program shall be stamped "NOT REDISCOUNTABLE". 3. CB-SES Department III shall process STD applications and shall release such STDs to the participant banks through credit advice. 4. The participant bank shall release loans to qualified farmers duly certified/endorsed by the MAF technicians. The loans shall bear interest of 15% p.a. inclusive of service fee and other charges for a maturity period as approved by MAF/CB for each specific commodity. Loan releases shall be in accordance with the approved farm plan and budget. 5. The CB shall charge the participant bank an interest rate of 3% per annum on the STD which shall be repaid within 10 days after the maturity dates of the loans to farmers. In the case of rural banks, the depository banks through which the credit advice is released shall remit within 24 hours the proceeds of the STD to the participant bank, otherwise, said depository bank and directors/officers responsible therefor shall be subject to the sanctions provided under the law and regulations. 6. The participant bank shall release the STDs within 30 days from receipt thereof, and any unused portion shall be immediately returned to the CB-SES Department III within two (2) days after the 30-day period. Any participant bank which fails to return the unused amount within this period shall pay a penalty at the rate of 39% per annum, in addition to the 3% per annum interest until such amount is remitted in full to the CB. Similarly, any unauthorized use or retention of the fund or non-payment thereof or non-remittance of payments received from farmer-borrowers within the prescribed period shall subject the participant bank to a penalty of 39% per annum in addition to the 3% per annum interest until the full amount is remitted to CB. 7. Cut-off dates for planting/lending, as may be recommended by MAF/NFAC, shall be strictly adhered to in accordance with existing guidelines. 8. Any misappropriation of any STD receded by the participant bank from the CB and/or payments made by the farmers to the bank shall subject the bank and its officers responsible therefor to administrative and penal sanctions under the law. 9. The participant bank shall be held liable for non-payment/short payment/late payment by the farmers of the amount released by the former to the latter. 10. In the event of non-payment/short payment/late payment of the farmer, the participant bank shall institute collection measures/legal action against the farmer. All expenses covering such measures/action against the farmer-borrowers shall be for the account of the participant bank. 11. All transactions under this scheme shall be subject to inspection and examination by the CB-SES Department III. Participant bank shall report all transactions under this scheme to the CB on a monthly basis or as otherwise required by the CB. 12. Commercial and thrift banks which may participate under this scheme should secure prior clearance from CB-SES Departments I and II, respectively. 13. Rural banks which may participate under this scheme shall meet the requirements which shall be covered by a separate memorandum (Effective April 29, 1985) APPENDIX 43 List of Reserve-Eligible and Non-Eligible Securities (Appendix to Sec. 3254 b(2) ) A. Government securities ELIGIBLE as reserves I. Direct obligations of the Government of the Republic of the Philippines eligible as reserve against peso deposit liabilities and deposit substitute liabilities: 1.1 2% PWED Bonds Loan of 1976/86 232 Series 1.2 4% PWED Bonds all outstanding series 2.1 4% NPC Bonds (8th to 50th Series except 29th S which bear 6% obligation assumed by the National Government) 3.1. 4th Treasury Bonds 30th; 57th; 59th 71st; 73rd-93rd S 3.2 Treasury Bonds with less than 4% per annum interest considered eligible by reason of expressed CB limited support to original purchaser: 2% T/Bond L of 1973/2003 1st Series (1st Rel. & 2nd Rel.) 3% T/Bond L of 1978/2008 55th Series (1st Rel.) 3% T/Bond L of 1979/2009 55th Series (2nd Rel.) 3-1/4% T/Bond L of 1974/1999 6th Series (1st and 2nd Rel.) 3-1/4% T/Bond L of 1978/2003 54th Series (1st, 2nd & 3rd Rel.) 4.1. 4% Treasury Notes L of 1980/1995 115th Series 4.2. Treasury Notes carrying less than 4% per annum interest considered eligible by reason of CB-support given and pursuant to MBR 2224 dated December 3, 1982 authorizing the replacement of reserve securities earning less than 4% by reserve eligible T/Bonds earning a standard rate of 4% per annum: 2% T/Notes L of 1975/85 63rd Series, 64th Series, 66th & 67th Series 5.1. PREMYO SAVINGS BONDS (Regular Series) Subject to percentage phase out. 6.1. PREMYO SAVINGS BONDS (Biglang Bahay Series) likewise subject to percentage phase-out. 7.1 Bonds made specifically eligible to its holders only: 4% Treasury Capital Bonds DBP only 4% Capital Treasury BondsPNB only II. Bonds and other evidences of indebtedness bearing interest rate of four (4%) per cent per annum, issued by government-owned or controlled corporations, political subdivisions and instrumentalities likewise eligible as reserves against peso deposit liabilities and deposit substitute liabilities. 1.1 4% NAWASA Bonds, 1st to 9th & 13 Series III. The following government securities (including CBCIs 8th and 9th Series) bearing more than four (4%) per cent per annum interest, whether Central Bank supported or not, if BEING USED BY BANKS/NBQBs as reserve against deposit substitute liabilities as of January 17, 1977 shall continue to be eligible as such; provided, that whenever said securities shall have matured, they shall be replaced by securities carrying the features/conditions enumerated under Circular No. 638, dated November 8, 1978, as amended: cdll 6% PWED Bonds All outstanding issues 6% NPC Bonds do 7% NPC Bonds do 8-% NPC Bonds 13th-22nd Series 7% NPC Capital Bonds 7th-9th Series 7% MWSS Capital Bonds All outstanding issues 6% NIA Bonds do 4-% Treasury Bonds do 4-7/10% Treasury Bonds 7th Series 5% Treasury Bonds 9th Series 6% Treasury Bonds 8th Series 7% Treasury Bonds All outstanding issues, except 15th Series 10-3/4% Treasury Bonds All outstanding issues 9% Treasury Notes 60th and 65th Series 10-% Treasury Notes 101st Series (1st & 2nd Rel.) 10-3/4% Treasury Notes 56th and 61st Series 11-3/4% Treasury Notes 59th Series 6% NAWASA Bonds 11th, 12th & 1st Series 10% EPZA Bonds 9th-11th Series 10-3/4% EPZA Bonds 3rd-8th Series B. The following government securities are NOT ELIGIBLE whatsoever for reserve purposes: Negotiable Land Certificate (NLC) Cultural Center of the Philippines (CCP) Bonds Philippine Charity Sweepstakes Office (PCSO) Bonds Public Estate Authority (PEA) Bonds National Development Company (NDC) Bonds National Housing Authority (NHA) Bonds National Food Authority (NFA) Bonds NHMTC Bahayan Certificates Light Rail Transit Authority (LRTA) Notes CBCIs (Auctioned/discounted)24th-29th Series CBCIs (Negotiated) A to D-1 Series and 5th to 7th Series (18 months) CBCIs 10-% Special Series 1st-32nd Series Central Bank Bills (Negotiated/discounted) Treasury Bills (Negotiated/discounted) Treasury Notes and Treasury Bonds bearing less than four (4%) per cent per annum, but not given CB support as follows: Treasury Bond's 2% T/Bond L of 1973/2003 4th Series 2-3/4% T/Bond L of 1974/1986 7-A & 7-B Series 3% T/Bond L of 1976/2001 26th, 27th, 31st-34th, 46th & 47th Series 3% T/Bond L of 1977/2002 49th Series 3-1/4% T/Bond L of 1974/1999 6th Series 3rd & 4th Release 3-1/4% T/Bond L of 1977/2002 6th Series 5th Release 3-1/4% T/Bond L of 1975/2000 21st Series 1st Release; 3-1/4% T/Bond L of 1977/2002 21st Series 2nd Release; 3-1/4% T/Bond L of 1977/2002 51st Series 1st & 2nd Release 3-1/4% T/Bond L of 1978/2003 54th Series 1st & 3rd Release 3-1/4% T/Bond L of 1980/2005 58th Series 3-3/4% T/Bond L of 1973/2003 2nd Series Treasury Notes 2% T/Notes L of 1976/1991 79th Series 3% T/Notes L of 1982/1997 128th Series 3% T/Notes L of 1981/1986 120th Series & 125th Series 3-1/2% T/Notes L of 1982/1997 Special Series 1st-24th Release BOOK III SUBJECT INDEX (References are to Sections/Subsections/Appendices) Advertisements prohibition, 3607 Agrarian Reform and Agricultural Credit agrarian reform beneficiaries, 3341.1d agrarian reform credit, meaning of, 3341.1b agricultural credit in general, meaning of, 3341.1c allocation required, 3341.3 alternative investments, 3341.5 borrowers, qualified, 3341.2a; 3341.2c computation of loanable funds, 3341.4 definition of terms, 3341.1 fish production, 3341.8a(4) livestock production, 3341.8a(4) marketing of farm products, 3341.8a(5) palay marketing credit program loans, 3341.3 perishable crops, production of, 3341.8a(3) poultry production, 3341.8a(4) purposes, 3341.2c reports, 3341.6 storage of farm products, 3341.8a(5) syndicated type of credit, 3341.7 transportation of farm products, 3341.8a(5) Agricultural Credit (See Agrarian Reform and Agricultural Credit) Agricultural Guarantee Fund availments. 3351.11 Agricultural Loans abaca, production of, 3341.8a(2) cacao, production of, 3341.8a(2) coconut, production of, 3341.8a(2) coffee, production of, 3341.8a(2) corn and palay, production of, 3341.8a(1) fish production, 3341.8a(4) livestock production, 3341.8a(4) marketing of farm products, 3341.8a(5) maximum amount, 3341.8a non-perishable crops, production of, 3341 8a(2) perishable crops, production of, 3341.8a(3) poultry production, 3341.8a(4) ramie, production of, 3341.8a(2) storage of farm products, 3341.8a(5) transportation of farm products, 3341.8a(5) Allied Undertakings (See Investments) Arrearages in Supervised Credit Rediscounting (See Supervised Credit Rediscounting) Articles of Incorporation amendment, 3126.3; 3273.2g pro-forma, App.4 Assessment fees on banks annual fee, 3608.1 assessment, 3608.1a manner of collection. 3608.1b Audits exemption, 3165.2 procedural guidelines, 3165.1 Bad Debts definition. 3136.1a Banking Days and Hours changes in banking days and hours, 3156.2 definition, 3167.2b days banks required to open for business, 3156 emergencies, 3156.3 existing authorizations and notifications, 3156.5 minimum, banking hours beyond, 3156.1 report, 3156.2 schedule, posting of, 3156.6 special holidays 3156 Bakahang Barangay ( See Special Financing Programs) Banking Offices additional rural bank, 3175.8 approval by Monetary Board, 3151.1 banking office definition, 3167.2a capital requirements, 3151.2 conditions precluding acceptance of applications, 3151.4 conditions precluding processing of application, 3151.5 date of opening, 3151.7 extension offices, 3155 money shops, 3152 office and premises, 3175.10; 3175.12 other requirements/factors, 3151.3 premises, 3175.11 priority in processing, 3151.6 relocation, 3154. savings agencies, 3153 Banks categories of, 3146.5 Bank Protection compliance, sample format of certificate, App. 16 corrective action, 3167.7 Objectives, 3167.1 reports, 3167.6 rules and regulations, 3167 Barrio Guarantee Fund contributions to, 3218.2 guidelines, App. 9 Barrio Savings Fund collection, guidelines for, App. 13; App. 9 constitution of, 3218.1 Biyayang Dagat (See Special Financing Programs) Board of Directors delegation of power to approve loan, 3301.2 Bonds officers, surety bonds for, 3148 security for loans, 331 1b(1) investment in, 3604.1 Borrowings borrow, meaning of, 3327; 3328 Central Bank, borrowings from, 3335; App. 11 direct borrowings, meaning of, 3329a Build-up Program for gradual liquidation of past due accounts, 3273.2; 3273.2e government, borrowings from, 3291 indirect borrowings, meaning of, 3329b investment houses, borrowings from, 3292 trust departments, borrowings from, 3292 Burley Tobacco Supervised Credited Program (See Special Financing Programs) Calamities natural calamities, effects of, 3270.4 Capitalization book value of paid-in capital, meaning of, 3326.2e build-up program, 3106 minimum capital, determination of, 3106.1 minimum capitalization, 3106 supervised credit rediscounting arrearages, conversion of, 3273.2f Cash Price definition, 3305.2c CB-IBRD Rural Credit Project ( See Special Financing Programs) CB-MEC Supervised Experience Education Program ( See Special Financing Programs) Checks lipstick checks, 3604.2 payment of STD or rediscounting obligations, 3234e without sufficient funds, 3205 Clean note policy, 3610 Coconut Financing Program ( See Special Financing Programs) Colleges accredited, App. 19 Commercial Loans amount of loan, 3342.1b purposes, 3342.1a renewal, 3342.1c securities, 3342.1b terms, 3342.1c Cooperative Finance System ( See Special Financing Programs) Cottage Industry Fund rediscounting guidelines, 3274.2 supporting papers, 3274.2a when to rediscount. 3274.2a Credit accommodation, meaning of, 3327; 3328 credit examination of banks for purposes of rediscounting, 3270.5 non-supervised credit, 3271.1a; 3271.2a normal credit, definition, 3269.1 special accommodation by the Central Bank, 3275 conditions to access, 3275.2 loan values, 3275.3c nature of accommodation, 3275.1 quota, 3275.4 repayment period, 3275.3d security, 3275.3b terms of credit, 3275.3 supervised credit, 3271.1.a; 3271.2a; 3273.2a Current Accounts officers and employees, accounts of (See Demand Deposits ) temporary overdrawings (See Demand Deposits ) Damages liquidated, 3271.5 Debt collection. in process of, 3136.1c well-secured, definition, 3136.1b Definitions accredited schools, 3368.2k administration of the fund, 3368.2r agrarian reform beneficiaries, 3341.1d agrarian reform credit, 3341.1b agricultural credit in general, 3341.1c amount due from the Central Bank, 3116.2e amount to be financed, 3305.2g Area Marketing Cooperative (AMC), 3364.1c arrearages, 3273.2a bad debts, 3136.1a banking days and hours, 3167.2b banking office, 3167.2a bank premises, depreciated, 3116.2g bonded stocks, 3360.1d(11) book value of paid-in capital, 3326.2d borrow, 3327; 3328 cash on hand, 3116.2d cash price, 3305.2c certificate of authority, 3360.1d(5) certificate of credibility, 3368.2j cooperative, 3364.1a cooperative finance group, 3364.1h cooperative rural bank, 3364.1d cottage industry, 3367.1b credit accommodation, 3327; 3328 creditor, 3305.2a debt-equity ratio, 3364.1i depository funds, 3239.2b direct borrowings, 3329a directors, 3141; 3146.6; 3326;2a disposable earnings, 3364.1k down payment, 3305.2d effective rate, 3303.1 examination, 3161.2a(3) finance charge, 3305.2h financing institution, 3367.1c; 3371.2b fund or money from the Government, 3239.2b furniture, fixtures and equipment, depreciated, 3116.2h gifts and "giveaways", 3261.2 government-owned or controlled corporation, 3239.2a government securities, 3391.1b guarantee, 3367.1e guarantee fund, 3364.1g guarantor, 3367.1f holding corporation, 3131.1 indirect borrowings, 3329b inexcusable neglect, 3304.6a(1) in process of collection, 3136.1c joint custody, 3166.4 lending institution, 3360.1d(2) loanable funds, 3341.1a loan fund, 3364.1e loans secured by a hold-out on or assignment of deposit, 3116.2f long-term loan, 3342.3b losses, 3367.1h managerial skills, 3368.2c manipulative skills, 3368.2b marketing agreement, 3368.2p Masagana creditor, 3360.1d(3) Masagana 99 farmer, 3369.1d(10) Masagana 99 financed palay stock 3360.1d(7) Masagana 99 loan, 3360.1d(9) Masagana 99 program, 3360.1d(8); 3356 medium-term loan, 3342.3b memorandum of agreement, 3360.1d(4) money market placements, 3391.1a National Management Committee, 3368.2-1 negotiable palay quedan, 3360.1d(6) net worth, 3116.2c non-finance charges, 3305.2f normal credit, 3269.1 obligations, 3143.1e officers, 3326.2b; 3142 outstanding deposits, 3326.2d persistent violation, 3391.1c person, 3305.2b rediscount availment, 3368.2e refusal to permit examination, 3161.2a(4) Regional Management Committee, 3368.2m report, 3161.2a(1) revenue funds, 3239.2b risk assets, 3116.2a samahang nayon, 3364.1b secured loan, 3326.2g seed fund, 3368.2g selda/damayan, 3301.3 simple annual rate, 3305.2i small fisherman, 3352.1a small producer, 3364.1a special savings deposit, 3368.2i special time deposit, 3368.2d; 3364.1j; 3367.1j specific implementing plan of the schools, 3368.2o stockholders, 3326.2c subloan, 3371.2d subsistence allowance, 3368.2n supervised credit, 3368.2f Supervised Experience Education Program, 3368.2a TIPID, Item "a" of App. 6 technical assistance, 3368.2q total assets, 3116.2b total loan portfolio, 3326.2f trade-in, 3305.2e trader-borrower, 3360.1d(1) trust fund for AMCs, 3364.1f trust funds, 3239.2b unsecured loan, borrowing or credit accommodation, 3326.2h well-secured, 3136.1b wilful delay in submission of reports, 3161.2a(2) write-off, 3368.2h Demand Deposits authority to accept or create, 3201 bonding of officers, 3148 checks without sufficient funds, 3205 current accounts of bank officers and employees, 3206 interest (See Interest on Deposits ) number of accounts, 3201.3 officers and employees, demand deposits of, 3206 overdrawings, temporary, 3204.1; 3344 other rules and regulations, applicability of, 3201.5 permit to accept or create, 3201.2 trade-in, 3305.2e trader-borrower, 3360.1d(1) trust fund for AMCs, 3364.1f trust funds, 3239.2b unsecured loan, borrowing or credit accommodation, 3326.2h well-secured, 3136.1b Wilful delay in submission of reports, 3161.2a(2) write-off, 3368.2h Demand Deposits authority to accept or create, 3201 bonding of officers, 3148 checks without sufficient funds, 3205 current accounts of bank officers and employees, 3206 interest (See Interest on Deposits ) number of accounts, 3201.3 officers and employees, demand deposits of, 3206 overdrawings, temporary, 3204.1; 3344 other rules and regulations, applicability of, 3201.5 permit to accept or create, 3201.2 pre-requisite to accept or create, 3201.1 reserves (See Reserves against Deposit Liabilities ) uncleared check deposits, 3166.11h Deposits cash deposits with Central Bank, 3254a certification on deposit, 3262.4, App. 10 compensating deposit, 3361.6c demand deposits (See Demand Deposits ) depositor identification of, 3226b depository bank, 3215.1a(1) depository funds, definition, 3239.2b drawings against uncollected deposit, 3204.2 foreign government deposit, interest income on, App. 13 government deposits (See Government Deposits ) NOW accounts (See NOW Accounts ) opening of accounts, 3262.1 outstanding deposits, definition, 3326.2d rental deposits, 3219 savings deposits, 3219 savings deposits (See Savings Deposits ) Schemes to attract deposits, 3261 gifts or giveaways, 3261.2 other promotional schemes, 3261.3 raffles and lotteries, 3261.1 signature card, 3262.3 signature, specimen, 3262.2 slip, 3262.3 solicitation, barangay savings movement, 3215.1 time deposits (See Time Deposits ) Directors bio-data, 3244 definition, 3141; 3146.6; 3326.2a disqualifications, 3143 disqualifying procedures, 3143.3 interlock, 3146.1; 3146.2 loans (See DOSRI Loans ) qualification, 3141 Disclosures effective rate of interest, 3248 Dividends declaration, 3136.2a definition of terms, 3136.1 limitations, 3136.2b; 3336a payment, 3136.2; 3136.3 records, 3136.3 reports, 3136.3 DOSRI Loans ceiling aggregate, 3331 ceiling, exclusion from aggregate, 3332 ceiling, individual, 3330 ceiling on unsecured loans, 3331 definitions, 3326.2 direct borrowings, 3329b indirect borrowings, 3329a policy, general, 3326.1 procedural requirements, 3333 approval of the board, 3333.1; 3333.2 majority of directors, computation of, 3333.3 resolution, contents of, 3333.4 transmittal of board approval, 3333.5 reportorial requirements, 3334 sanctions, 3336 transactions covered, 3327 transactions not covered, 3328 Effective Rate definition, 3303.1 Employees bonds, 3148 provident fund contribution, 3247 salaries, 3149.1 training, 3148 Extension Offices chartering, general guidelines, 3152.1; 3155.1 conditions for processing applications, 3155.2 establishment, 3155 Facsimiles authority, 3609.2a; 3609.3a coins, commemorative, 3609.2 Central Bank notes, 3609.3 government securities, 3609.1 legal tender, 3609.2 procedure for reproduction, 3609.1c purpose, 3609.1b; 3609.2b; 3609.3b Finance Charges definition, 3305.2h Financial Assistance aggregate loans/credit accommodations, 3337.2c amortization, 3337.1e amount of assistance, 3337.1d collateral requirement, 3337.1h form of assistance, 3337.1c maturity, 3337.1d mechanics, 3337.1 number of availment, 3337.1f, 3337.1g officers and employees, financial assistance to, 3337 purposes, 3337.1b qualifications of officers and employees, 3337.1a real estate, equipment and other chattels, investment in, 3337.2a; 3337.2b repairs or renovation of residential house, 3337.1f reportorial requirements, 3337.3 residential house and lot, prohibition, 3337.1f terms and conditions vis-a-vis regular lending, 3337.2c Fines collection of fines, 3611.1; App. 32 cost of checks and documentary stamps, 3611.2 excess DOSRI loans, 3336d unpaid fines, 3256.3 Fisheries Production and Development ( See Special Financing Programs) Fishermen (Small) Special Credit ( See Special Financing Programs) Fixed Assets investment in, 3175.11 limitations, 3175.11 Food Quedan Financing Program ( See Special Financing Programs) Foreclosure of Mortgage publication requirement, exemption, 3314 Foreign Exchange Dealership , 3604.4 Fringe Benefit to Officers and Employees , 3337 Gifts and "Giveaways" definition, 3261.2 notice to the Central Bank. 3261.2f Government Deposits authority to service, 3239 application for authority, 3239.5 banks which may accept, 3239.1 definition of terms, 3239.2 exempt transactions, 3239.4 liquidity floor, 3239.3 sanctions, 3239.7 Government Fund/Money , definition, 3239.2b Government-Owned or Controlled Corporation definition, 3239.2a Government Securities definition of, 3391.1b purchase and sale of, 3601.3; 3601.4 facsimiles of, 3609.1 Guarantee of Loans , 3352.4; 3354.2h; 3356.4; 3357.3; 3359.2h; 3359.5b(3); 3368.5b; 3372.3e(13) Gulayan sa Kalusugan ( See Special Financing programs) Holding Corporation definition 3131.1 Industrial Loans amount of loan, 3342.2b purposes, 3342.2a renewal, 3342.2c securities, 3342.2b terms, 3342.2c Industries export, 3271.2a list of potential small industries for IGLF financing, App. 7 small and medium scale, 3271.2a IGLF Program ( See Special Financing Programs) Integrated Agricultural Financing , 3274.1; 3369; (See also Special Financing Programs ) Interest allowance for uncollected interest on loans, 3304.5a arrearages, 3273.2i bakahang barangay loans, 33621.1b(2)(f) Burley Tobacco Supervised Credit Program, 3370.5b(8) CB-IBRD Central Bank loans to participating banks, 3371.5f CB-IBRD rural credit project subloans, 3371.4h CB-MEC Supervised Experience Education Program, 3368.5h ceiling, 3271.3; 3303.1a; 3303.1b coconut financing program loans, 3353.4g computation of interest, 3243.1; 3244.1; 3303.1c Cooperative Finance System, 3364.10 Cotton Supervised Credit Financing Program, 3372.2e(9) demand deposits, 3202; 3242 effective rate, 3303.1a; 3352.5e effective rate disclosures, 3248 floating rate, 3303.5 Fishermen (Small) Special Credit, 3352.5e Food Quedan Financing Program, 3363.4c(5); App. 34 IGLF Program, 3354.2g increase in interest rates, 3271.7 integrated agricultural financing for Ilocos Region, 3369.4 livestock and poultry financing loans, 3355.1e(6); 3355-2g(2)(d) Maisagana program loans, 3357.2f NOW accounts, 3224; 3243 Palay Marketing Credit Program, 3360.2c(4) payment, in time of, 3244.2 reduction of rates, 3303.1f Rehabilitation Program for Rice Production Areas, 3365 savings deposits, 3213; 3243 Second Rural Development Settlement Project Loans, 3362.3g small and medium-scale fisheries credit program loans, 3366.7e time deposits, 3244; 3352.3 Interest Income accrual of, 3303.3 bank deposits of foreign government, App. 13 reserve deposits, 3254.2 Insurance funds transit, 3215c(4) office building, furniture and funds, 3175.12 Internal Control System accounting records, 3166.1 balancing, independent, 3166.2 dormant/inactive accounts, 3166.12 dual control, 3166.6 duties and responsibilities, division of, 3166.3 internal auditor, independence of, 3166.9 joint custody, definition, 3166.4 miscellaneous, 3166.13 number control, 3166.7 other standards, 3160.11 requirements, 3166 rotation of duties, 3166.8 signing authorities, 3166.5 verification, direct, 3166.10 Inventory Financing, R/P Window for , 3276.1 delivery, 3276.1d rate, 3276.1a security, 3276.1c term, 3276.1b Investments allied undertakings financial, 3377 limits on investments, 3378; 3379 non-financial, 3379 companies providing drying facilities for agricultural crops, 3379c companies providing processing facilities for agricultural crops, 3379b enterprises investments in all enterprises, 3380.2 investments in and loans to a single enterprise, 3380.1 government investment in rural banks with rediscounting arrearages, 3273.3b insurance agencies, 3379e limitations and restrictions in, 3380 money market, 3391 safe deposit companies, 3379f storage companies, 3379d warehousing companies, 3379a Joint Custody definition, 3166.4 Kalabaw ng Barangay ( See Special Financing Program) Kilusang Kabuhayan at Kaunlaran (KKK) Livelihood Program ( See Special Financing Program) Lending and Investing the Cooperative Marketing Project Funds with Samahang Nayons ( See Special Financing Program) Livestock and Poultry Financing ( See Special Financing Programs) Loans agricultural loan (See Agricultural Loans ) amount of loans, 3342.1b; 3341.8a 3342.2b approval of loans, 3301.2; 3333.1; 3333.2 basic policies, 3301; 3353.3 ceiling (See Loan Limits ) collection, referral to lawyer, 3301.4 co-makers, 3301.3; 3341.8b(2) (e); 3351.7d; 3352.5c commercial loans (See Commercial Loans ) cooperatives, loans to, 3342.4 kinds, 3342.4a meaning of, 3342.4c purposes, 3342.4a requisites for grant of loan, 3342.4b terms, 3342.4d definition, 3327; 3328 delinquency in payment of, 3143.1e directors, loans to (See DOSRI Loans ) escalation clause, when allowable, 3303.4 guarantors, 3301.3 interest, 3301.3 interest, 3341.10; 3303; 3271.2; 3352.3g; 3352.5e; 3353.4g lawyer, referral of collection to, 3301.4 limits, 3301; 3330; 3331; 3332; 3352.5b loanable funds, 3341.1a long-term loan, meaning of, 3342.3b medium-term loan, meaning of, 3342.3b overdrawing against current accounts, temporary, 3344 past due accounts, 3304 Masaganang Maisan (see Special Financing Programs) Merger approval by the Central Bank, 3111.1 exchange of shares, 3111.3 paid-in capital requirement, merger as means to meet, 3111 net worth-to-risk assets ratio, suspended application of, 3116.1 Money Market Placements definition, 3391.1a (See also Receivables ) Money Orders, PNB , 3604.3 authority, application for, 3604.3b qualification, 3604.3c requirements, 3604.3a Money Shops , 3152 authority, application for, 3604.3b qualification, 3604.3c requirements, 3604.3a Money Shops , 3152 chartering, general guidelines in, 3152.1 establishment, factors to be considered, 3152.2 operational guidelines, 3152.3 Neglect, Inexcusable , definition, 3304.6a(1) Net Worth-to-Risk Assets Ratio basic ratio, 3116 deficiency, effects of, 3116.5 definition/explanation of terms and phrases, 3116.2 reports required, 3116.3 sanctions, 3116.4 suspended application in case of merger or consolidation, 3116.1 Non-Finance Charges definition, 3305.2f Notes, Central Bank , 3609.3 NOW Accounts authority to accept, 3223 interest (See Interest on Deposits ) pre-requisites to accept, 3223.1 reserves, 3225 servicing, 3226 Obligations definition, 3143.1e delinquency in payment of, 3143.1e Officers allowances and per diems, 3149.2 bonding of (See Bonds ) bio-data, 3144 definition, 3142; 3326.2b disqualifications, 3143.3 disqualifying procedures, 3143.3 interlock, 3146.2; 3146.3 list of proposed principal officers, App. 4 qualifications, 3142 salaries, 3149.1 training, 3148 Organization application for permit to organize, 3175.5 form of organization, 3175.6 organize, who may, 3175.1 organizers, disqualifications of, 3175.3 organizers, qualifications of, 3175.2 requisites in formal organization, 3175.7 supplementary rules and procedures, 3175.9 Palay Marketing Credit Program ( See Special Financing Programs) Past Due Accounts allowance for uncollected interest on loans, 3304.5a deposit for redemption of foreclosed property, 3304.1b foreclosed property, redemption of, 3304.1 partial payments, 3304.1a Payments , application of, 3301.5 Penalty (See also Sanctions ) loans, past due, 3304.6a(1) special time deposit, 3234d Truth in Lending Act violation, 3305.8 Person definition, 3305.2b Personal Property security for loans, 3311b Premyo Savings Bond Operation , 3601.1 Profit-Sharing Programs , 3150 approval by Monetary Board, 3150.4 base for computation, 3150.2 LLpr inclusion in by-laws, 3150.1 priorities, 3150.3 prohibition from participating, 3336c Real Property security for loans, 3311a; 3313; 3352.5c private lands with Torrens title 331 1a(1) private lands not registered under the Torrens system, 3311a(2) friar land estates, 3311 a(3) homesteads, 3311a(4) land transfer certificates, 331 la(5) RBAP Building expansion of, 3175.13 Receivables ceiling, 3391.2c definition of terms, 3391.1 maturity, 3391.2c pre-conditions on placements, 3391.2 purchase of, 3391 sanctions, 3391.4 Records and Reports categories of, 3161.1 compliance with required reserves, 3257 crimes and losses, 3161.4 list of required reports, App. 1 resolution format for signatories to category A-1 reports, App. 1-a resolution format for signatories to category A-2 reports, App. 1-b resolution format for signatories to category B reports, App. 1-c reports on dividends, 3136.3 reports on reserves, 3253(c) sanctions for wilful delay in submission of reports, defined, 3161.2a(2) appeal to the Monetary Board, 3161.2e examination, defined, 3161.2a(3) fine for refusal to permit examination, 3161.2d fine for wilful delay in submission of reports, 3161.2b refusal to permit examination, defined, 3161.2a(4) sanctions, 3161.2d signatories to bank reports, 3161.1 Rediscounting application procedures, 3169.5; App. 12 arrearages, 3273.2 authority to rediscount with branches of PNB, LBP and AB, 3271.6 Burley tobacco supervised credit papers, 3370.4d checks in payment of rediscounting obligations, 3234e concept, 3269.1 cottage and small-scale industry financing papers, 3274.1 rate and term of rediscounting, 3274.2b repayment of rediscounting obligations, 3274.2c cotton supervised credit financing papers, 3372.2d credit examination of borrowing rural banks, 3270.6 credit facilities, denial of, 3270.3 disqualifications, temporary, 3270.2 eligible papers, 3270.1 grains quedan financing papers, 3274.3 integrated agricultural financing papers, 3274.1 rate and term of rediscounting, 3274.1b integrated agricultural financing for Ilocos region papers, 3369.5 resolution format for signatories to category A-1 reports, App. 1-a resolution format for signatories to category A-2 reports, App. 1-b resolution format for signatories to category B reports, App. 1-c reports on dividends, 3136.3 reports on reserves, 3253(c) sanctions for wilful delay in submission of reports, defined, 3162.a(2) appeal to the Monetary Board, 3161.2e examination, defined, 3161.2a(3) fine for refusal to permit examination, 3161.2d fine for wilful delay in submission of reports, 3161.2b refusal to permit examinations, defined, 3161.2a(4) sanctions, 3161.2d signatories to bank reports, 3161.1 Rediscounting application procedures, 3269.5; App. 12 arrearages, 3273.2 authority to rediscount with branches of PNB, LBP and AB, 3271.6 Burley tobacco supervised credit papers, 3370.4d checks in payment of rediscounting obligations, 3234e concept, 3269.1 cottage and small-scale industry financing papers, 3274.1 rate and term of rediscounting, 3274.2b repayment of rediscounting obligations, 3274.2c cotton supervised credit financing papers, 3372.2d credit examination of borrowing rural banks, 3270.6 credit facilities, denial of, 3270.3 disqualifications, temporary, 3270.2 eligible papers, 3270.1 grains quedan financing papers, 3274.3 integrated agricultural financing papers, 3274.1 rate and term of rediscounting, 3271.1b integrated agricultural financing for Ilocos region papers, 3369.5 loan, ceiling, 3269.4; maturities 3269.3; App. 11 natural calamities, effects of, 3270.5 plans of payment, request for, 3273.2-o rates, 3271.3; 3274.1b; 3274.2b promissory notes blue chip/high grade shares of stock, 3274.5 overseas contract workers, 3274.6 qualifications, 3270.1 raw/frozen tuna, credit instruments from domestic sales, 3274.7 requests, other, 3270.4 supervised credit arrearages, 3273.2 scope/definition of preferential areas, 3271.2 Rehabilitation Program for Rice Production Areas ( See Special Financing Programs) Reports agrarian reform and agricultural credit, 3341.6 banking days and hours, and changes thereof, 3156.2 bank protection, 3167.6 capital required and capital accounts, 3116.3 Coconut Financing Program, 3353.7 crime/losses, 3161.4 deposit collection on TIPID Movement, 3215.1a(2)(e) dividends, 3136.3 financial assistance, 3337.3 Fisheries Production and development, Financing Program for, 3359.9 Fourth CB, IBRD Rural Credit Project, 3371 casia real estate transactions between a bank and its DOSRI, 3161.5 reserves on deposit/deposit substitute liabilities, 3257 transfers of common shares, 3126.2a; 3126.2b(4)(c) Representatives of Government , 3146.4 Repurchase Agreements with the Central Bank , 3276 Reserves against Deposit Liabilities drawing against reserve, when allowable, 3254.1 computation of reserve position, 3255 deficiencies, 3256,3256.1 demand deposits, 3203; 3253a form or composition of reserves, 3254 NOW accounts, 3253b report on compliance, 3257 savings deposits, 3253c special savings deposit, exemption, 3218d time deposit, 3253d valuation reserves, 3304.5b Revenue Funds definition, 3239.2b Risk Assets definition, 3116.2a Salary and Compensation Benefit Program allowances and per diems, 3149.2 salaries, 3149.1 Sanctions (See also Penalty ) failure to comply with capital build-up program, 3273.2n general, 3199; 3299; 3399; 3610 non-compliance with rules on the disclosure statement and the posting of abstract of R.A. No. 3765, 3305.8 refusal to permit examination, 3161.2e risk asset ratio deficiency, 3116.4 violation of rules on government deposits/funds, 3239.7 violations of Secs. 3326-335, 3336 violations of rules on purchase of receivables and other obligations, 3391.4 wilful delay in the submission of reports, 3161.2b Samahang Nayon funds, 3216.1a barrio savings fund, 3218.1 barrio guarantee fund, 3218.2 Savings Agencies banking hours, 3153.4 establishment, factors to be considered, 3153.2 general guidelines, 3152, 3153.1 market, establishment inside, 3153.4 operational guidelines, 3153.3 Savings Deposits authority to accept, 3212 dormant accounts, 3217 interest (See Interest ) rental deposits of lessees, 3219 reserves (See Reserves against Deposit Liabilities ) special deposits of farmers, 3218; 3246; 3351.8b; 3353.4e; 3359.5h; 3372.2e(10) servicing deposits outside bank premises 3215 withdrawal, special savings deposit, 3219b; 3219e Schools accredited for Supervised Experience Education Program, App. 19 Second Rural Development Land Settlement Project ( See Special Financing Program) Security chattel mortgage, 3341.1b; 3342.2b; 3351.7; 3353.4b; 3359.5b(1); 3362.3; 3367.3c; 3368.5b; 3370.5a(5); 3370.5b(6); 3372.2e(6) government securities, 3311b(1); 3312 junior mortgage, 3313 personal property, 3311b real property, 3311a; 3351.7; 3362.3a 3367.3c; 3370.5a(5); 3370.5b(6) 3371.4i standing crop, 3370.5a(5); 3372.2e(6) stock, 3311b(2) Security Devices , 3167.5 Security Officers , designation of, 3167.3 Security Program , 3167.4 Securities debt, 3604.1 government securities, definition, 3391.1b government securities, sale of, 3601 Selda/Damayan definition, 3301.3 Simple Annual Rate , 3305.2i Service Fees , 3303.2; 3351.8e Small Fishermen definition, 3352.1a medium term credit, 3370.4a(7) number of farmers, 3370.3b objectives, 3370.2 production credit, short term, 3370.4a(1) purpose, 3370.5a(1) projects, eligible, 3370.5b(1) rationale, 3370.1 rediscounting, 3370.4d release of loan proceeds, 3370.5a(4) 3370.5b(5) requirements, 3370.5a(3);3370.5b(3); securities, 3370.5a(5); 3370.5b(6) seed STD funding and procedure, 3370.4b target areas, 3370.3 CB-IBRD Rural Credit Project ( fourth), 3371 accreditation, 3371.19a agro-industries, 3371.4f application and processing, subloan, 3371.13 arrearages, 3371.2b auditing requirements, 3371.20 CB loans to participating financing institutions, 3371.19 collateral, 3371.12 compliance, 3371.2g consortium of financing institution, 3371.19b cottage industries, 3371.4f credit risk, 3371.19g credit standing, 3371.2d credit worthiness, 3371.7 definition of terms, 3371.2 documentation, 3371.19g eligibility requirements, 3371.2; 3371.3 eligible borrowers, 3371.5 extension periods, 3371.16 farm mechanization, 3371.4a fisheries development, 3371.4c grace period, 3371.10 interest rates, 3371.11; 3371.19f investment position, 3371.2c limit, loan, 3371.19d limit subloan, 3371.6 liquidity position. 3371.2b litigation, loans in, 3371.2b litigation, subloans in 3371.17 livestock development, small scale, 3371.4d management competence to handle program, 3371.2f maturity of subloans, 3371.8; 3371.19e net worth, 3371.2e participating institutions, 3371.2 penalty for non-payment, 3371.15; 3371.19m period of operation, 3371.2a plantation crop development, 3371.4 prepayment of loans, 3371.19l procurement, 3371.18 processing of loan applications, 3371.19j purpose of loan, 3371.19c release of subloan proceeds, 3371.14 release of loan proceeds, 3371.19k repayment of loan, 3371.9 reportorial requirement, 3371.20 restructuring guidelines, 3371.21 security, 3371.19i subloans, 3371.4 transportation, 3371.4b CB-MEC supervised experience education program application, loan, 3368.5e budget and releases, 3368.5f definition of terms, 3368.2 evaluation of program, 3368.9 guarantee of loans, 3368.5c implementing agencies and their responsibilities, 3368.6 interest, 3368.5h lending operations, 3368.5 maturity, 3368.5h monitoring system, 3368.8 objectives, 3368.1 personnel of implementing agencies and their responsibilities, 3368.7 plan and budget, 3368.5d policies, 3368.4 loan priorities, 3368.5a priority projects, 3368.3 repayments, 3368.5h review of program, 3368.9 security of the loan, 3368.5b SSD withdrawals, 3368.5g Coconut Financing Program, 3353 application, 3353.4c budget, 3353.4d evaluation, 3353.8 farm plan and budget, 3353.4c implementing agencies, 3353.5 interest, 3353.4g lending operations, 3353.4 maturity, 3353.4g objectives, 3353.1 personnel of implementing agencies, 3353.6 policies, general, 3353.3 priorities, 3353.4a purchases of inputs and farm implements, 3353.4f releases, 3353.4d repayment, 3353.4g reporting system, 3353.7 security, 3353.4b special restructuring scheme for past due loans, 3353.9 SSD deposit and withdrawals, 3353.4e strategy, basic, 3353.2 checks in payment of STD or rediscounting obligations, 3351.5 commodity loan, conversion from production loan, 3351.9 Consolidated Special Agricultural Rehabilitation Fund, 3365 amount of loan, 3365d availment of special funds, 3365a books of accounts, 3365k commission, 3365f eligibility, 3365b, 3365c maturity of loan, 3365e procedures, 3365h release of loan, 3365i sanctions, 3365j service charge, 3365f Cooperative Finance System, 3364 application for financial assistance, 3364.12a application of payments, 3364.14 approval of application, 3364.12c authorized lenders, 3364.4 amount of loan, 3364.7 area marketing cooperative, 3364.1c borrowed funds, use of, 3363.13 borrowers, eligible, 3364.5 cooperative, 3364.1a cooperative finance group, 3364.1b cooperative rural bank, 3364.1d; 3364.4 credit policies, 3364.2 credit requirements, 3364.6 debt-equity ratio, 3364.1 default, 3364.15 definition of terms, 3364.1 disposable earnings, 3364.1k diversion of borrowed funds, 3364.13 extension of loan term, 3364.8 foreclosure, 3364.15 guarantee fund, 3364.1g interest rates, 3364.10 joint or split financing, 3364.3b lending procedures, 3364.14 loan fund, 3364.1e processing and evaluation, 3364.12b purposes, 3364.3a release of loan proceeds, 3364.12d repayment schedule, 3364.11 samahang nayon, 3364.1b security, 3364.9 special time deposit, 3364.1j term of loan, 3364.8 trust fund for AMCs, 3364.1f trust fund investment, 3364.3c types of financing, 3364.3 value, loan, 3364.9 Cottage Industry Guarantee and Loan Fund definition of terms, 3367.1 eligibility of borrowers, 3367.3b eligibility requirements for banks, 3367.2 guarantee, 3367.4 limit, loan, 3367.3d purpose of loan, 3367.3a rediscounting, 3367.6 security, 3367.3c special time deposit, 3367.5 term of loan, 3367.3e joint or split financing, 3364.3b lending procedures, 3364.14 loan fund, 3364.1e processing and evaluation, 3364.12b purposes, 3364.3a release of loan proceeds, 3364.12d repayment schedule, 3364.11 samahang nayon, 3364.1b security, 3364.9 special time deposit, 3364.1j term of loan, 3364.8 trust fund for AMCs, 3364.1f trust fund investment, 3364.3c types of financing, 3364.3 value, loan, 3364.9 Cottage, Industry Guarantee and Loan Fund, 3367 definition of terms, 3367.1 eligibility of borrowers, 3367.3b eligibility requirements for banks, 3367.2 guarantee, 3367.4 limit, loan, 3367.3d purpose of loan, 3367.3a rediscounting, 3367.6 security, 3367.3c special time deposit, 3367.5 term of loan, 3367.3e Cotton (Special) Financing Program, medium term, App. 21 amount of loan, Item III.B.2, App. 21 availments, Item IV, App. 21 borrowers, eligible, Item III.B.2, App. 21 funding, Item III.A, App. 21 interest, Item III.B.7, App. 21 maturity, Item III.B.6, App. 21 policies, Item III.B, App. 21 purpose, Item III.B.1, App. 21 release, Item III.B.4, App. 21 repayment, Item III.B.8, App. 21 security, Item III.B.5, App. 21 Cotton Supervised Credit Financing Program, 3372 borrowers, eligible, 3372.2e(2) evaluation of farm projects, 3372.2e (15) funding, 3372.2a guarantee, 3372.2e(13) hectare, loan per, 3372.2e(4) implementing agencies, 3372.3 interest, 3372.2e(9) maturity, 3372.2e(8) monitoring, 3372.2e(14) objectives, 3372.1 policies, 3372.2e procedures, 3372.2b; 3372.2e processing, 3372.2e(7) project areas, 3372.2e(1) rediscounting, 3372.2d releases, loan 3372.2e(5) repayment, 3372.2e(11) restructuring, 3372.2e(12) security, 3372.2e(6) SSD withdrawal, 3372.2e(10) STD funding, "seed", 3372.2b; 3372.2c strategy of implementation, 3372.2 Expanded Yellow Corn Production Assistance Program (EYCPAP), 3375-C Eligibility requirements for participation, 3375-C2 Implementing guidelines for participation, 3375-C1 Fisheries Production and Development, Financing Program for, 3359 borrowers, eligible, 3359.5a(2) budget, 3359.e; 3359.g coordinating agencies and their responsibilities, 3359.8 funding requirement, 3359.4 guarantee, 3359.5b(3) marketing aspects, 3359.6 maturity, 3359.5L objectives, 3359.2 personnel of implementing agencies and their responsibilities, 3359.8 plan and budget, 3359.5a priorities, 3359.5a procedures, 3359.4 projects, eligible, 3359.5a(1) purchase orders, 3359.5i rationale, 3359.1 release, loan 3359.5g repayment, 3359.5m reporting system, 3359.9 security, 3359.5b(1) SSD withdrawals, 3359.5h Food Quedan Financing Program 3363.1; App. 34 authority to collect, 3363.3-L board, 3363.3e bonded warehouse, 3363.8; App. 34 collateral, 3363.4c(1) ceiling, loan, 3363.4c(2) collection agreement, 3363.3k; 3363.4b(9) CONFED, 3363.3i eligibility requirements, 3363.4b fund, 3363.3g food businessman, 3363.3a food quedan, 3363.3c food trust receipts, 3363.9; App. 35 guarantee coverage of food quedan, 3363.7 legal bases, 3363.2 lending bank, 3363.3b lending rates, maximum, 3363.4c(5) Masagana creditor, 3363.3j National Grains Authority, 3363.3h objectives, 3363.1 purchase guaranty, 3363.3b(8) purpose of loan, 3363.4a quedan-guaranty fund' 3363.4c(7) rediscounting rate, 3363.4c(6) rediscounting of paper, 3274.3 responsibilities of participating agencies, 3363.5 special time deposit, 3363.3e; 3363.6 statement of policies, 3363.4 terminology, 3363.3 terms and conditions, 3363.4c types and term of loan, 3363.4c(4) value, loan, 3363.4c(3) Gulayan sa Kalusugan, 3358, App. 14 IGLF Program amortization, 3354.2i compliance with laws, rules and regulations, 3354.1a credit rating, 3354.1d criteria, general, 3354.1 debt-equity requirement, 3354.2e default in amortization, 3354.2-L eligible projects, 3354.2a evaluation, project, 3354.2d financing per application, 3354.1e insurance policy, 3354.2c(1)(e) interest rate, 3354.2g maturity, 3354.2f paid-in capital, 3354.1c papers required, 3354.2c past due ratio, 3354.1b proceeds, 3354.1f purpose, 3354.2b releases, 3354.2j service charges, 3354.2k violation by financial institution, 3354.2m Integrated Agricultural Financing for Ilocos Region, 3369 borrowers, eligible, 3369.2 financing for Ilocos Region, 3369 hectare, loan per, 3369.3 interest rate, 3369.4; 3369.7 loan releases, 3369.8 preliminary statement, 3369.1 rediscounting, 3369.5 special time deposit, 3369.6 Intensified Rice Production Program (IRPP), 3375-D Eligibility Requirements for participation, 3375-D 2 Implementing Guidelines for participation, 3375-D 1 Kalabaw ng Barangay, 3361.A basis, 3361.A1c(2) eligibility requirements, 3361.A.1b implementing strategy, 3361.A.1a interest, 3361.A.1c(6) lending policies, 3361.A.1c projects, 3361.A.1b(3) purpose of loan, 3361.A.1c(1) releases, loan, 3361.A.1c(3) security requirements, 3361.A.1c(7) size of loans, 3361.A.1c(4) term, loan, 3361.A.1c(5) Kilusang Kabuhayan at Kaunlaran (KKK) Livelihood Program accreditation of rural banks, 3375.A.3 application, loan, 3375.A.3(b) Bank clearance for applicants, 3375.A.2 fees, 3375.A.2(3) papers required, 3375.A.3(b) past due ratio, 3375.A.1(2); 3375.A.3(A.2) priority borrowers, 3375.A.2(3) qualification requirements, 3375.A-3(a) risk assets ratio, 3375.A.1(1); 3375.A.3(A.1) Lending and investing the Cooperative Marketing Project Funds with Samahang Nayons, 3364-A application of financial assistance, 3364.A.12(12.01) application of payments, 3364.A.14 authorized lender, 3364.A.04 amount of loan, 3364.A.07 area marketing cooperative, 3364.A.01(1.03) BCOD, 3364.A.01(1.14) borrowed funds, use of, 3364.A.13 borrowers eligible, 3364.A.05 CMP, 3364.A.01(1.11) collateral security loan value, 3364.A.09 cooperative, 3364-A.01(1.01) cooperative finance group, 3364.A.01 (1.08); 3364.A.12(12.03) cooperative rural bank, 3364.A.01 (1.04) credit policies, 3364.A.06 credit requirement, 3364.A.06 default, 3364.A.16 definition of terms, 3364.A.01 disposable earning, 3364.A.01(1.10) diversion of borrowed funds, 3364.A.13 economic environment, 3364.A.06 (6.05) foreclosure, 3364.A.16 financial conditions and operations, 3364.A.06 (6.04) guarantee fund, 3364.A.01 interest rates, 3364.A.10 lending procedure, 3364.A.12 loan funds, 3364.A.01(1.05) loan periods, 3364.A.08 loan monitoring and servicing, 3364.A.15 NEDA, 3364.A.01(1.13) NFA, 3364.A.01(1.15) purposes, 3364.A.03(3.03) release of loan proceeds, 3364.A.12(12.04) repayment ability, 3364.A.06(6.03) repayment schedule, 3364.A.11 samahang nayon, 3364.A.01 (1.02) security, 3364.A.09 special time deposit, 3364.A.01 (1.09) term of loan (Loan periods), 3364.A.08 Trust fund for SNs, 3364.A.01(1.06) Trust fund investment, 3364.A.03 (3.02) types of financing, 3364.A.03 value, loan, 3364.A.09(9.02) USAID, 3364.A.01(1.12) Kinds of loans , 3351.6 Livestock and Poultry Financing, 3355 backyard broiler production, 3335.2e backyard cattle/carabao breeding/fattening, 3335.2a backyard egg production, 3355.2d backyard goat raising, 3355.2b backyard hog fattening, 3355.2c backyard small scale duck raising, 3355.2f basis of loan, 3355.1e(2); 3355.2c(2)(b); 3355.2d(1) (c); 3355.2e(4) 3355.2f(2) (b); 3355.2g(2) (b) eligibility of banks, 3355.1d; 3355.2g(1) (a) evaluation of projects, 3355.1c(2)(e) farm plan, 3355.1.c(2) (b) features, 3355.1c grant of loan, 3355.1c(2)(c) inspection of project, 3355.1c(2)(d) ipil-ipil forage financing, 3355.2g interest, 3355.1e(6); 3355.2g(2)(d) marketing tie-ups, 3355.2a(2); 3355.2e(2) maturity, 3355.2g(2)(d) objectives, 3355.1b policies, general 3355.1 policies, lending, 3355.1e; 3355.2f(2) procedure, 3355.1f project requirements, 3355.2b(1); 3355.2c(1); 3355.2d(1); 3355.2e(1) 3355.2f(1) priority areas, 3355.1g; 3355.2a(3); 3355.2b(2); 3355.2c(2) (d); 3355.2f (3); 3355.2d(2); 3355.2e(8) purpose of loan, 3355.1e(1); 3355.2c(2) (a); 3355.2e(3); 3355-2f(2)(a); 3355.2g(2)(a) rationale, 3355.1a release, 3355.1e(3); 3355.2d(1)(d); 3355.2e(5); 3355.2f(2)(c); 3355.2g(2)(c) repayment plan, 3355.1e(5); 3355.2c(2)(d); 3355.2d(1)(f); 3355.2e(7); 3355.2f(2)(e); 3355.2g(2)(d) seasons for lending, 3355.2f(2)(d) security, 3355.1e(7); 3355.2g(2)(c) specific programs, 3355.2 strategy of implementation, 3355.1h supervised credit scheme, 3355.1c(2) term, 3355.1e(4); 3355.2c(2)(c): 3355.2d(1)(e); 3355.2e(6); 3355.2f(2)(f) Marketing tie-up , 3351.10 Masagana 99 Rice Production Program, 3356 borrowers, disqualified, 3356.2a(2) borrowers, qualified, 3356.2a(1) collection, 3356.2a(6) court action, accounts undergoing, 3356.6 direct seeding scheme 3356.7 guarantees, 3356.4 implementation, strategy of, 3356.1 input distribution scheme, 3356.5 maximum loan per hectare, 3356.2a(3); 3356.2a(4) package of technology, use of, 3355.1a procedures, 3356.2b sabog tanim, 3356.7 supervised credit, 3356.1b technicians as collection agents, 3356.3 term, 3356.2a(5) valuation reserves, 3345.4 Masaganang Maisan Program, 3357 guarantee, 3357.3 objectives, 3357.1 procedures, 3357.2 rediscount of export papers, 3274.8 National Rootcrops for Feeds Program (NRPP), 3375-H Eligibility Requirements for participation, 3375-H 2 Implementing Guidelines for participation, 3375-H 1 Orchard Crops, Supervised Credit for banana, financing, marketing and cultural package, App. 31 coffee, financing, marketing and cultural package, App. 31-a definitions, 3375.2b eligibility requirements, 3375.3a general policies, 3375.3b objectives, 3375.1 papaya, financing, marketing and cultural package, App. 31-b pineapple, financing, marketing and cultural package, App. 31-c strategy of implementation, 3375.3 penalty on past due STD, 3351.4 production loans, conversion to commodity loan, 3351.9 production loans, requirements, 3351.8 agreement, 3351.8a amount of loan, 3351.8c interest rate, 3351.8e priority, 3351.8d Philippine Aquaculture Development Project, 3375-E Eligibility Requirements for participation, 3375-E 2 Implementing Guidelines for participation, 3375-E 1 Post-Harvest Facilities, 3375-F Eligibility Requirements for participation, 3375-F 2 Implementing Guidelines for participation, 3375-F 1 Soybean Production Program (NSPP), 3375-G Eligibility Requirements for participation, 3375-G 2 Implementing Guidelines for participation, 3375-G 1 Supervised Credit Production Program for Rural-Out-of-School Youth (OSY) under the KASAKA Program, App. 33 application procedure, 3375.B.1 basis, 3375.B.4 beef cattle fattening project, 3375.B.4(a); 3375.B.5(a); 3375.B.6(b1) books of account, 3375.B.14 borrowers, eligible, 3375.B.3 commission, 3375.B.9 eligibility requirements for participation, 3375.B.1 financial statements, 3375.B.14 goat production project, 3375.B.4(b); 3375.B.5(b); 3375-B-6(b) guidelines, 3375.B implementing procedure, 3375.B.11 interest rates, 3375.B.6(a) legume production project, 3375.B.4(c); 3375.B.5(c, d); 3375.B.6(b2) loan ceiling, 3375.B.5 losses, 3375.B.10 maturity of loan, 3375.B.6(b) misappropriation of funds, 3375.B.13 NFAC, 3375.B.11 (b, c) promissory note, 3375.B.8 release, loan, 3375.B.11 (c, d); 3375.B.12 repayment loan, 3375.B.11(e); 3375.B.13 terms, loan, 3375.B.6 Pukyutang Barangay Program, 3374 accreditation, 3374.12 basis of loan 3374.4 eligibility requirements, 3374.2 restructuring of past due supervised credits, 3273.2h rural banks entitled to additional assistance, 3273.3a sanctions, 3273.2n special availment of rediscounting privilege, 3273.5 Tax withholding tax on deposits of foreign diplomatic establishment, 3362.5 Tellers Station or Window , definition, 3167.2c Term Loan amortization, 3342.3d classification, 3342.3b maturity periods, 3342.3d purposes, 3342.3a TIPID Movement adviser, savings club, Item c(5), App.6 concept, Item A, App. 6 depository bank, 3125.1a(1) eligible banks, 3215.1a manifestation, pro-forma letter of, App. 6-a members, savings club, Item c(2), App. 6 minors, deposit of, Item f, App. 6 objectives of savings club, Item c(1), App. 6 officers, savings club, Items c(3) and c(4), App. 6 purpose, Item b, App. 6 reports, Item 3, App. 6-b report of deposit collection, 3215.1a(2)(e) savings club, Item c, App. 6 savings, sources of, Item d, App. 6 segregation of TIPID accounts, 3215.1b cdta solicitation of deposits, 3215.1a(2) Time Deposits authority to accept, 3230 interest (See Interest ) matured deposits, 3244.3 minimum size, 3233 past due special time deposits, 3234d; 3351.3 pretermination, 3244.4 reserves (See Reserves against Deposit Liabilities ) special deposit for agricultural production, 3234; 3246 application, 3234 a rediscounting, 3234c utilization, 3234b special deposit for fishermen-borrowers, 3352.3; 3359.5j special deposit for special financing programs, 3351.2; 3352.3 Total Assets definition, 3116.2b Trade-in definition, 3305.2e Trust Funds definition, 3239.2b Truth in Lending Act abstract of Truth in Lending Act, App. 23 availability for inspection of copies of contract, 3305.4 definition of terms, 3305.2 disclosure statement, format of, App. 22 information sheets and other reports, 3305.5 information to be disclosed, 3305.1 offices authorized to enforce rules and regulations, 3305.7 penal provisions, 3305.8 posters, 3305.6 scope of regulations, 3305.3 Unclaimed Balances , 3264 Valuation Accounts , 3304.5 Valuation Reserves , 3304.5b; 3345.4a Violation, persistent , 3391.1c Withdrawal , 3215c(7) check deposits, uncleared, 3166.11h overdrawing with the Central Bank, failure to cover, 3356.2 reserves with the Central Bank, withdrawal against, 3354.1 samahang nayon funds, 3216.1 special savings deposits, 3218b; 3219e Write-off of Loans , 3304.4