KARACHI, Jan 13: The private sector credit offtake has shot up to Rs156.8 billion in the first half of this fiscal year against the full year target of Rs85bn. But the State Bank expects that other factors would offset the impact of this huge growth in private sector credit on the monetary developments.

Senior bankers say the private sector credit offtake has risen to this record high for several reasons. These include (i) a low interest rate (ii) a big increase in lending to agriculture, small and medium enterprises (iii) increased consumer loans (iv) higher requirement of bank credit due to higher cotton price (v) a 14 per cent increase in large scale manufacturing sector (vi) fall in workers' remittances that reduced the component of internal funding by the trade and industry (vii) boom in stock market that created an avenue for the private sector to borrow funds from banks to reinvest in stocks; and (viii) fewer issues of term finance certificates, etc.

The National Credit Consultative Council (NCCC) will meet on Friday at the State Bank head office to review the monetary and credit developments in July-December 2004, an official of SBP told Dawn.

The Council - the highest representative body comprising public and private sector nominees - would also take up for discussion the monetary and credit issues that need to be addressed in January- June 2004.

The meeting will be chaired by the SBP Governor Dr. Ishrat Husain. The secretariat of the Council has issued a detailed working paper for the members according to which "there is no need for a revision in the credit plan itself." But the paper prepared by the Economic Policy Department of the SBP says that "the SBP will be very vigilant of the developments and will ensure that the price stability is not threatened."

Discussing the credit plan outlook the paper says that the developments between July-December 2003 "suggest that the monetary expansion has resulted mainly from the buildup in NDA (net domestic assets)." "Within the NDA expansion it is mainly private sector credit expansion which is Rs156.8bn against the full year estimation of Rs85 billion."