February 23, 2006	Thursday	Muharram 24, 1427

KARACHI, Feb 22: Banks lent Rs71.76 billion to the farm sector during the first seven months (July-Jan) of this fiscal year. This lending was 25 per cent more than their agricultural lending of Rs57.52 billion for the agriculture sector during July-Jan in the previous year, senior bankers involved in farm credit disbursement told Dawn on Wednesday.

The lending for the farm sector of more than Rs71 billion in seven months of current fiscal not only looks huge when compared with the amount an year-ago, it also constitutes over one fourth of the total private sector credit off-take of Rs374 billion during this period. Senior bankers say what has led to a huge growth in farm sector lending is that the commercial banks have moved more aggressively into this area than in the past.

Five major banks namely, National Bank, Habib Bank, United Bank, Muslim Commercial Bank and Allied Bank lent Rs37.6 billion to the farming community in seven months to January 2006, up 39 per cent from Rs27bn lent a year-ago. Fourteen other smaller local banks offered Rs8.2bn as agricultural credit, up 55pc from their year-ago lending of Rs5.3bn. These banks are: Askari Commercial Bank, Bank Al-Habib, Bank Alfalah, Bolan Bank, Faysal Bank, Metropolitan Bank, PICIC Commercial Bank, KASB Bank, Prime Commercial Bank, Saudi Pak Commercial Bank, Soneri Bank, The Bank of Khyber, The Bank of Punjab and Union Bank.

The farm lending by the Punjab Provincial Co-operative Bank and Zarai Tarraqiati Bank (ZTBL) stood at Rs3.3bn and Rs22.6bn, respectively, in seven months of this fiscal year. They had made Rs4.6bn and Rs20.5bn, respectively, during the same period of the last fiscal year.

Agriculturists say that the banking sector would hopefully meet agricultural credit target of Rs130 billion during this fiscal year on the back of growing demand. But, they fear that the rising mark-ups on farm loans would push up the overall input cost of the farmers, forcing them to increase prices of various crops. “Look, the prices of oil and gas are rising, the prices of fertilizers are rising and now even banks are charging higher mark-ups on farm loans,” laments Syed Qamaruzzaman Shah, the president of Sindh Chamber of Agriculture.

“All this is bound to push up our input cost,” he says while claiming that most banks are currently charging up to 13 per cent mark up on agricultural loans. “The only exception is the ZTBL which continues to charge nine per cent.” Bankers admit that they have increased the agricultural loans prices lately in the backdrop of an overall increase in interest rates. The weighted average of lending rate of all the banks combined rose by 140 basis points to 9.81 per cent during July-December 2005 as the State Bank kept a tight monetary policy in place to check the rising inflation.

Syed Qamaruzzaman complains that while disbursing agricultural credit under the State Bank’s revolving credit scheme, some banks insist on the borrowers to return the loans within one year. “They are supposed to allow us maximum three years for overall credit retirement,” he explained.