KARACHI, May 20: Prime Minister Mir Zafarullah Khan Jamali on Tuesday asked banks to take calculated risks and lend more money to the agricultural sector.
He told heads of banks at the State Bank head offices here that they could make the best use of their surplus liquidity by increasing lending to agricultural sector and small and medium enterprises (SMEs). He also advised them to offer housing finance through prudent schemes. This was his first visit to the central bank since coming to power in October last.
Sources privy to the meeting said the PM told top bankers that they should strike a balance between agricultural and industrial lending to let the economy grow. They said the PM made it clear that the banks should continue to meet credit requirements of the industrial sector; enhance lending towards agricultural sector and venture into SMEs and housing finance also.
The sources said the PM was of the view that by meeting credit requirements of both industrial as well as agricultural sectors more equitably, banks can help generate more employment and reduce poverty. Flanked by Finance Minister Shaukat Aziz and State Bank Governor Dr. Ishrat Husain the prime minister boasted of economic achievements of the present government. He said he would continue the economic reforms initiated by General Musharraf (and backed by the IMF-World Bank).
The sources said the heads of banks and DFIs —about four dozen in number—listened to PM in silence and put no question and made no remarks. The only exception was head of Meezan Bank Irfan Siddiqui who wanted to know about the future of Islamic banking in Pakistan. The PM avoided a direct answer, and only said that any balanced and mature government should take into view all relevant factors and the impact and outcome of its policies. “The PM’s address was more of a matter of protocol than anything else,” said head of a foreign bank when asked by Dawn why bankers raised no points at the meeting. “Even the finance minister kept quiet.”
Before meeting the bankers the PM was briefed by the SBP governor Dr. Ishrat Husain about the current banking scenario and future outlook. Dr. Husain informed the prime minister that retrenchment process in banks (as part of the banking sector reforms) has come to a halt—and banks are no longer offering voluntary retirement schemes. But he said “this issue needs to be resolved” if the privatization of the remaining state-run banks is to succeed. In other words he suggested that the state-run banks may need to reintroduce voluntary retirement schemes before privatization.
The SBP chief told the PM that pursuing institutional reforms and enhancing its early warning system were key challenges facing the SBP. He said the banking industry is now focussing more on the development of the products and models for rural lending and housing finance. He said SBP is preparing the banking industry for the Islamization of the economy as directed by the supreme court.
The SBP chief informed the PM that banks were offering large loans to the private sector at cheaper rates that was why the private sector credit offtake has risen past Rs100bn in less than 10 months of this fiscal year. This is more than double the full fiscal year target of Rs50 billion.