KARACHI, Oct 21: Five major banks have given Rs7.4 billion loans to farmers in the first quarter of this fiscal year, under the State Bank’s supervised agricultural credit scheme. The SBP has asked these banks to disburse Rs22.4 billion under this scheme in the entire fiscal year.

Senior bankers said state-run National Bank and Habib Bank and three privatized banks— United Bank, Muslim Commercial Bank and Allied Bank— disbursed Rs7.4 billion under SBP’s supervised agricultural credit scheme between July-September 2003. This means the big five banks disbursed, within one quarter, farm credit equal to 33 per cent of their combined target set for full fiscal year July/June 2003/04. In comparable period of the last fiscal year these banks had disbursed, under the supervised agricultural credit scheme, Rs3.7 billion that was equal to about 20 per cent of their combined annual target of Rs18.7 billion. So, these banks have apparently improved credit disbursement under the said scheme.

Banks are free to make agricultural loans in addition to the farm credit they make under the State Bank’s supervised scheme — and the banks actually do it. But under this scheme they are supposed to meet annual credit disbursement targets and the State Bank monitors their performance on monthly basis — and also impose fine on the banks that fail to meet their respective targets.

Under the 2003/04-credit plan that envisages fresh loans of Rs85 billion for the private sector, Rs65.5 billion is to be disbursed by banks under the SBP’s supervised agricultural credit scheme. Five major banks are supposed to disburse Rs22.4 billion; Zarai Taraqiati (Agricultural Development) Bank Ltd (ZTBL) Rs33 billion; Punjab Provincial Cooperative Bank Rs7.5 billion and 14 local private banks Rs2.6 billion. The list includes (i) Askari Commercial Bank (ii) Bank Al-Habib (iii) Bank Alfalah (iv) Bolan Bank (v) Faysal Bank (vi) Metropolitan Bank (vii) PICIC Commercial Bank (viii) KASB Bank (ix) Prime Bank (x) Saudi Pak Commercial Bank (xi) Soneri Bank (xii) Bank of Khyber (xiii) Bank of Punjab and (xiv) Union Bank.

Senior bankers say these fourteen banks have disbursed during the first quarter of this fiscal year Rs620 million or 24 per cent of their combined target set for the whole fiscal year. In the comparable period of last fiscal year they had disbursed only Rs172 million.

The fact that farm credit disbursement by five major local banks and 14 other local private banks have increased during the first quarter of this fiscal year is indicative of the renewed interest of banks in agricultural lending. As said earlier, this disbursement is in addition to the farm loans that the banks make on their own. Statistics about farm credit disbursement, under the banks’ own agricultural loaning schemes, is not available but senior bankers say disbursements continue.

“What has encouraged us to make agricultural loans is that this is an area that offers a big demand for funds and a good rate of return,” said head of agricultural credit division of one of the five major banks. He said that most banks are still charging a markup of 11-12 per cent on agricultural loans whereas prime corporate borrowers are now getting bank loans at 5-6 per cent.

That the demand for agricultural credit has been high — and is likely to remain so — is evident from the fact that the increases in food items are contributing more to overall consumer inflation. Consumer inflation rose 1.78 per cent year-on-year in the first quarter of this fiscal year.