KARACHI, March 27: During the current fiscal year, banks are making faster recovery of agricultural loans as they are making loans more prudently and employing better techniques of credit recovery.

Senior bankers involved in distribution of agricultural credit say that the local private banks, outside the big-five club, have been so prudent in agricultural loan making that their rate of recovery is ninety-three per cent. However, overall rate of recovery is more than 82 per cent.

According to data obtained from the State Bank of Pakistan, 21 banks involved in distribution of agricultural credit made total recovery of Rs51 billion during July-Dec 2005 against the actual disbursement of Rs62 billion. More recent data are not available. During July-Dec 2004 they had recovered Rs35 billion against actual lending of Rs49 billion. Thus the rate of recovery improved from 71 per cent to 82 per cent.

In the past banks were reporting much poorer rates of recovery. For example, in the entire fiscal year July-June 2004-05, these banks had recovered only 51 per cent of agricultural loans and a year earlier only 43 per cent.

Since two major agricultural loan-makers namely Zarai Taraqqiati (Agricultural Development) Bank and the Punjab Provincial Co-operative Bank are supposed to offer agricultural loans out of the recoveries, they are making serious efforts to improve their rates of recovery. These banks reported 97 per cent and 75 per cent rates of recovery, respectively during July-Dec last year.

Five major commercial banks, namely National Bank, Habib Bank, Muslim Commercial Bank, United Bank and Allied Bank combined reported about 72 per cent rate of recovery. Fourteen local private banks outside this club of the big five posted 93 per cent recovery rate.

These banks include Askari Commercial Bank, Bank Al-Habib, Bank Alfalah, Faysal Bank, Mybank, 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.

Net Credit: Whereas banks can rightly take pride in improving their rates of recovery of agricultural loans, this means a fall in disbursement of net credit or credit minus recovery. During July-Dec 2005, all 21 banks, involved in agricultural loans making, offered only Rs11 billion worth of net credit as they recovered Rs51 billion out of the total lending of Rs62 billion. During July-Dec 2004, their net credit distribution stood at Rs14 billion since they had recovered Rs35bn out of the actual lending of Rs49 billion.

Agriculturists say this proves their point that the banks are not making very few loans of more than six-month maturity. Had the banks been making one-year and two-year agricultural loans more generously, the amount of net credit in six-month period would not have been much larger. This brings to the fore another important aspect of agricultural lending i.e., banks are reluctant in offering loans for agricultural development and farmers often get loans only for raising crops and purchasing seasonal farm inputs, like fertilizer and seeds. They give very little for purchasing machinery like tractors.

Tractor Financing: During July-Dec 2005, banks’ lending to farmers for purchase of tractors stood at Rs3.3 billion only or a little more than five per cent of their gross agricultural credit distribution of Rs62 billion. In July-Dec 2004 also, banks’ tractor financing of Rs3 billion was equal to six per cent of their total agricultural lending.