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| January 30, 2003 | Thursday | Ziqa’ad 26,1423 |
Private sector credit rises
By Mohiuddin Aazim
KARACHI, Jan 29: Commercial banks have finally listened to the SBP advice of making more credit available to the private sector.
In the first half of this fiscal year i.e. in July/December 2002, commercial banks lent around Rs 68.7 billion to the private sector up from about Rs 40 billion in the same period of 2001.
“Lately we have seen a pickup in the demand for private sector credit...and we have also been more accommodative in meeting the requirements of our clients,” said head of a large local bank.
The demand for the private sector credit has risen on the back of increased activity in textiles and other high-performing sectors like basic metal industries; automobiles and engineering goods. In the first quarter of this fiscal year, the textile sector that accounts for one fifth of large scale manufacturing grew 3.2 per cent up from 2.95 per cent a year-ago and basic metal industries grew 1.01 per cent against a negative growth of 3.2 per cent in a year-ago period.
The automobiles sector doubled its growth rate to 24 per cent and engineering goods industry posted a dramatic growth of 19 per cent against a negative growth of 8 per cent a year-ago.
Bankers say what makes the volume of the private sector credit look larger than before is that credit retirement has not been as fast as in the past—thanks to a low interest rate environment.
They also say that credit disbursement to some non-traditional sectors like consumer leasing business has already started though the volumes are low.
Some bankers say another reason for the private sector credit moving up is that the banks have lately started credit marketing and all major local and foreign banks have designated mid-tier officials to deal exclusively with some of their prime borrowers.
But the bankers are divided on whether the credit target set for the private sector would be met. While some of them say the target of Rs 94.7 billion is not too large to meet, others say seasonal credit offtake would slow down from March before the figure rising to the targeted level. “Unless the banks find more innovative ways to employ funds in the private sector especially in non-traditional areas like housing and consumer finance etc,” adds a local banker.
TARGETS: According to the Monetary Policy Statement of the State Bank issued here on Wednesday, the target for the private sector credit remains unchanged at Rs 94.7 billion for fiscal year 2002/2003. The document shows that the target for the whole of non-government sector has also been kept unchanged at Rs 114.7 billion including Rs 20 billion for public sector corporations and autonomous bodies.
But in the first half of this fiscal year, credit disbursement to public sector corporations and autonomous bodies stood at minus Rs 7 billion which means these organizations retired this much credit on net basis.
Senior bankers say they are not sure whether this trend would continue as some corporations like KESC might require bank credit in the second half of the fiscal year.
The target for the government sector borrowing has also been kept unchanged at minus
Rs16.2 billion that the government sector has already met
in the first half of this fiscal year.
Senior bankers say that in the week ending on January 4 the government sector borrowing has rather gone down to about Rs47 billion. Many of them say the government sector may end up with its negative borrowing exceed the target of Rs16 billion given the fact that the government sector has enough funds and no big spending plans at hand.
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