KARACHI, May 23: State Bank Governor Dr. Ishrat Hussain said here on Thursday that after the privatization of United Bank Limited by next month, the sell-off of the Habib Bank Limited would complete by October.

He said the process of privatization of all the government-owned banks would be over by the year-end and till such time there was no possibility of reduction in interest rates.

Speaking as a chief guest at a luncheon meeting of the Pakistan Hosiery Manufacturers Association at the PHMA House, the SBP Governor said that high cost of running government owned banks did not leave any room for reducing interest rates.

He said the non-performing loans to the tune of Rs300 billion of the government owned banks would be transferred to the Corporate and Industrial Restructuring Corporation (CIRC) so that these banks could start their new life with a clean slate.

“When these banks will be in the private sector and there will be competition only then one could expect the reduction in interest rates,” Dr. Ishrat responded to a demand raised by PHMA chairman Shahzad Azam in his address of welcome.

The SBP chief said the banking sector could not improve its working and efficiency without under going a major surgery and the time had come to act in this direction if “we want to see interest rates lower to meet the business community’s outstanding demand”.

He expressed the hope that in the new budget there would be further cut in corporate taxes, which had been reduced from 58 per cent to 50 per cent in the past.

The export refinance rates, he said, had been linked with the T-bills and the SBP had directed the banks not to charge more than 1.5 per cent from exporters, which was equal to what the government is paying.

There was a time when the economy was under the grip of dollarization but the same had been reverted to the rupee. However, he said account holders had been allowed only to keep 20 per cent of their deposit amount in dollar accounts. Nevertheless, he said exporters had been exempted from this condition.

Like long-term rupee finance being provided under Pakistan Investment Bonds, he said, there was a need for having long-term dollar finance as well. Very soon, Dr. Ishrat said, there would be such facility as the SBP was under negotiation with the Exim Bank of Japan and other banks for providing such service, which was stopped under sanctions.

Initially, he said such facility would be available for import of machinery as some European banks had also been approached for providing long-term dollar financing to “our industry”.

Referring to a point raised by PHMA vice-chairman Mohammad Kamran Chandna with regard to opening of foreign exchange branches in the city’s industrial areas like SITE, Korangi, Landhi, North Karachi and Federal ‘B’ Area, the governor said, on Friday, he was holding a meeting with bankers and would advise them to look into the matter.

Dr Ishrat assured to have a sympathetic review to the problem of showing performance by exporters for availing export refinance scheme under Part-II.