KARACHI: The overall bank credit to the private sector surged by 170 per cent in the first nine months of the current fiscal year while the biggest participation was of conventional banks.

The latest figures issued by the State Bank of Pakistan (SBP) showed that economic activities were much higher in the private sector compared to the previous fiscal year while the banks’ lending trend showed their confidence in borrowers.

Earlier, the banks were cautious and reluctant to extend loans to the private sector and were eager to park their maximum liquidity in the risk-free government papers.

The data shows the privates sector during July-March FY22 borrowed Rs1,198.3 billion compared to Rs443.6bn in the same period of last year. It shows the private sector borrowed Rs754.7bn more money from banks or the increase was 170pc compared to last year.

The government achieved an economic growth rate of over 5pc in FY21 while this year the SBP said it would be between 4 to 5pc.

However, the growing appetite for bank money is a clear indication of rapidly expanding business activities and this momentum would help to keep the growth rate up to the expectations of the economic managers.

The conventional banks extended loans worth Rs791.5bn during the first 9 months of 2021-22 compared to Rs219bn in the same period of last year, registering a massive growth of 261pc or Rs572.5bn.

Bankers said barring a few sectors the stock of non-performing loans (NPLs) is not very high which encourages banks to extend more money to the private sector.

Similarly, the Islamic banking branches of conventional banks also performed much better than full-fledged Islamic banks as their lending to the private sector rose sharply.

The Islamic banking branches of conventional banks lent Rs246bn to the private sector during the July-March period against Rs133bn in the same period of last year, a growth of 85pc.

The attraction for borrowers from conventional banks and the aggressive approach of its Islamic banking branches collectively led to total lending of Rs1,037bn making it 86pc of the total lending to the private sector so far.

However, the lending of Islamic banks also increased by 76pc to Rs160.4bn in 9MFY22 compared to Rs91bn in the same period last year, but the size of total lending was less than the Islamic branches of conventional banks.

Published in Dawn, April 14th, 2022