KARACHI, Dec 11: State Bank Governor Dr Ishrat Husain on Wednesday said the banking system had excess liquidity, necessitating aggressive marketing to sell their loans.

Presenting the address of welcome to Adviser to the Prime Minister on Finance and Economic Affairs Division, Shaukat Aziz on the inaugural session of Housing Finance Conference here, organized by the SBP, he said the competitive forces, reduced borrowing demand from the government, lower interest rates, upsurge in rupee deposit mobilization, de-dollarization of the economy and rising inflows of remittances have created an excess supply of loanable funds at the disposal of the banking system.

“For the first time in many decades the banks have embarked on aggressive marketing to sell their loans. The beneficiaries of this excess supply of funds are the well established corporate sector firms which are able to obtain credit at very thin margins, thus squeezing the profitability of the banking system,” he argued.

The increased awareness of risk management and the traditional reliance on security and collateral of loan can be employed profitably to develop asset-based lending and housing finance provides a major opportunity in this regard, he suggested.

The recovery rates in mortgage housing markets and profit margins have been on average, higher than project and corporate lending, he said.

The SBP governor said Pakistan was one of the few countries which was blessed with billions of investment locked up in the existing stock of residential as well as commercial properties that could be recycled for similar class of assets.

Dr Ishrat was of the view that this leveraging on bankable properties could unfreeze immense amount of investment funds for households. Virtually every major city of the country has fully bankable assets locked up in the commercial and residential areas, he said.

The challenge for the banking industry is to develop home equity products which can put cash in the hands of these property owners for consumption and investment purposes, he added.

The SBP governor deplored that despite favourable developments, the housing finance sector has not yet taken off.

“There are many constraints and difficulties in the way of this take-off”.—APP