KARACHI, June 5: During the first nine months of this fiscal year commercial banks recorded an increase of Rs29.7 billion in net advances, according to the Economic Survey released on Thursday.

The net advances of banks rose from Rs810.1 billion in June last year to Rs839.8 billion in March 2003 or by 3.7 per cent.

In comparable period last year, net advances of scheduled banks actually declined by Rs15.2 billion. Net advances of the scheduled banks showed increase during the current fiscal year except for nationalized commercial banks and specialized banks. The strong growth in net credit was a very welcome development for the banking industry which had been forced by the continuing decline in interest rates particularly on government securities amidst increased market liquidity.

The survey says that scheduled banks deposits also increased by Rs192.7 billion in the same period i.e. from Rs1413 billion to Rs1605 billion or by 13.6 per cent. Higher deposits of the scheduled banks in the current fiscal year resulted partly due to extraordinary foreign exchange inflows in the country. Low premium between the kerb and inter-bank exchange market has induced overseas Pakistanis to use the official means for remitting foreign exchange.

Total investment of all scheduled banks have also increased from Rs471.3bn in June 2002 to Rs723.5bn in March 2003, showing an unprecedented increase of Rs252.3bn or by 53.5pc. Highest increase in net investment was recorded in the case of denationalized banks (Rs127.4bn) followed by nationalized commercial banks (Rs68.1bn) and private banks (Rs55.1bn).

Gross non-performing loans of the scheduled banks increased from Rs234.7bn in June 2002 to Rs242.2bn in March 2003. Gross NPLs of nationalized commercial banks and foreign banks declined during the period under review while gross NPLs of denationalized commercial banks, private banks and specialized banks increased. The SBP and the government have continued to encourage privatization of NCBs and merger of weak financial institutions with the large and sound financial institutions in the current fiscal year.