KARACHI, July 5: Six domestic private banks out of a total of 14 in the country have preferred to stay out of agricultural lending despite “repeated reminders and specialized training” by the Agricultural Credit Department of the State Bank.
Staff limitations, lack of proper infrastructure facilities and huge administrative cost involved in lending and monitoring of agricultural credits have forced these banks to stay out of entering this area.
For the last more than one year every government functionary, from the finance minister to the State Bank governor, miss no opportunity to sermonize bankers to come out of “traditional mind set” and instead of confining lending activities to trade and corporate sector they should consider agricultural lending as one of the attractive prospective areas.
Zarai Taraqiati Bank Limited (ZTBL), a new name given to Agricultural Development Bank of Pakistan, groans under a huge portfolio of unpaid loans of more than Rs100 billion. Majority of the defaulters come from elite farmer families who took loans in their names and in names of their ‘haris’ whom they rented their lands.
Private bankers do not see agricultural lending an attractive prospect. “The lending rates on agricultural credit have fallen and are now in single digit, but a feudal’s psyche has remained unchanged,” one of the bankers explained. “Zamindars still enjoy taking all issues to the court, including the payment of loans to banks,” another executive of the bank remarked. The bankers say that zamindars have strong connections in judiciary, police and provincial administrations and they can circumvent any law, regulation and rule.
But executives of these banks, including the big banks that offer generous credits to farmers, say that it was essentially client-banker relationship and trust that matters in all lending operations and agricultural lending is no exception.
These six banks that did not offer farm loans in 2002-03 are KASB Bank, Metropolitan Bank, PICIC Commercial Bank, Faisal Bank, Pak Saudi Agriculture and Commercial Bank and Union Bank. These banks were given indicative targets of Rs775 million during the outgoing fiscal. None of them offered any credit to the farmers in 2002-03. These banks have now been given an indicative target of over Rs700 million agricultural lending in the current fiscal 2003-04.
“We have to make a lot of preparation before offering credits to the farmers,” a senior executive of one of the private commercial banks told Dawn on Saturday. He made a specific reference to the advice given by the State Bank Governor Dr Ishrat Hussain on Friday at the Agricultural Credit Advisory Committee (ACAC) meeting. Dr Ishrat is reported to have advised ‘caution’ to the bankers before they enter agricultural credit area.
A senior banker in another private bank wondered as to what are the criteria on which the ACAC indicates targets for individual banks. “Is Union Bank going a big way in agricultural credit this fiscal year and offering Rs300 million credit to farmers?” A banker quipped while drawing attention towards the fact that Union Bank was expected to give Rs230 million farm credit in 2002-03 but did not offer anything.
Of other eight banks that participated in agricultural lending, two banks — Askari Bank of retired servicemen and Bank of Punjab — exceeded their targets. But six other banks made a token participation in agricultural lending. Bank Al Habib is reported to have offered only Rs18 million against an indicative target of Rs250 million; Bank Al Falah gave only Rs8 million against an indicative target of Rs250 million; Prime Commercial Bank gave Rs36 million against Rs100 million; Soneri Bank is somewhat better at Rs57 million against Rs100 million target; and Bank of Khyber Rs26 million against a target of Rs150 million.
Askari Bank has offered Rs490 million in 11 months of 2002-03 against a target of Rs425 million, and Bank of Punjab had disbursed Rs626 million against a target of Rs500 million.
The bankers say that staff of these two banks have strong rural connections and are at home when they offer loan to the farmers.
Bank of Punjab is now expected to disburse Rs800 million loans and Askari Bank Rs450 million loans to the farmers in the current fiscal.
The five big banks with huge branch networks have offered about Rs19.5 billion loans in the outgoing fiscal 2002-03 exceeding their indicative target of Rs18 billion. These banks have now been given a task of disbursing Rs21.8 billion in the current fiscal year.
All these five big banks — National Bank, Habib Bank, United Bank, Allied Bank and Muslim Commercial Bank — have been given the task to recover more than Rs18 billion unpaid loans from the farmers in the current financial year.
ZTBL has been asked to recover Rs35 billion unpaid loans from the farmers and disburse an equal amount as loans to the agriculturalists in 2003-04.
The State Bank has come out with many new circulars to protect the interest of the bankers offering agricultural loans.