ISLAMABAD, Dec 5: A high-level meeting on Wednesday directed the commercial banks to reduce their interest rate as the State Bank has already cut its discount rate by 4 per cent.

The meeting, chaired by Finance Minister Shaukat Aziz and attended by Governor State Bank, Dr Ishrat Hussain was of the view that there was no justification for commercial banks not to reduce their mark-up rate specially when the central bank had considerably cut its discount rate.

Official sources said that the meeting noted that since lending rates were not being reduced by the commercial banks, business community was reluctant to take part in any meaningful business activity despite various incentives already providing to it by the government.

The meeting especially directed the presidents of Nationalised Commercial Banks (NCBs) to take a lead in reducing their interest rate so that other commercial banks, both local and foreign, could also be asked to follow the same.

“The reduction in lending rate is necessary to stimulate growth and attract investment in the country,” the finance minister was quoted as having said in the meeting.

The sources said that the governor, State Bank also said that banks’ interest rates were needed to be rationalized specially after the reduction in the discount rate of the central bank. The State Bank had reduced its discount rate by 4 per cent during July to October this year.

The sources said that the meeting was told that central bank’s intervention was necessary to have an aggressive monetary policy for increasing private investment.

Generally, it is alleged that inefficiency in the commercial banks and lack of harmonious discount rate were the major causes of having low private sector investment in the country.

“Banks’ deposit rates have reduced but their lending rates are still to be lowered,” said an official of the ministry of finance.

When contacted he said that the treasury bills rates of the State Bank were further needed to be reduced so that banks could cut their lending rate to the businessmen without certain hesitation.

Habib Bank Limited and the United Bank Limited are the main lenders to the private sector as they provide 50 per cent lending and this lending becomes 70 per cent if the advances of the Muslim Commercial Bank and the Allied Bank Limited are also included.

Officials said the federal government directly offers every year Rs30 to 40 billion to UBL and HBL.