KARACHI, Nov 6: Despite government persuasion and State Bank of Pakistan’s constant advice, 10 private commercial banks out of total 13 banks are either staying away or show only token involvement in agricultural loaning.
In the last two years, 2001-02 and 2002-03, five private banks did not offer any loan to farmers. The other five banks offered hardly about Rs200 million in these two years. The three active private banks are Askari Commercial Bank, The Bank of Punjab and The Bolan Bank.
All these 13 private banks had been given target of Rs2.50 billion in 2001-02, against which their actual disbursement was less than Rs600 million. This disbursement declined during the last fiscal year to Rs572 million as against increase in their targets to Rs2.70 billion.
All these banks have virtually no presence in Sindh’s rural areas where farmers are starving for loans. Sindh Agricultural Minister Arif Mustafa Jatoi believes that it is “their perception problem,” while speaking about private banks’ staying away from the loaning.
He reacted sharply when told that private banks might be staying away from rural Sindh because powerful feudals exercise pressures to obtain loans and prefer to default. “Are there no defaulters in other provinces,” the minister retorted.
He disclosed that there was no possibility of revival of Sindh Provincial Cooperative Bank and instead a proposal to launch a micro-finance banks with Rs200 million seed money was being planned. “Days of cooperatives are over,” he said.
Arif Jatoi and Sindh Finance Minister Syed Sardar Ahmad are reported to have discussed this proposal with State Bank Governor Dr Ishrat Hussain. After finalizing a corporate structure and necessary paperwork, the Sindh government may launch this micro-finance bank by next year.
Sindh’s Provincial Cooperative Bank was closed down more than 10 years ago because over Rs1 billion loans were defaulted. The Federal Bank on Cooperatives (FBC) stopped providing loans to Sindh Provincial Cooperative Bank. But it continued to provide such loans to Punjab Cooperative Bank which maintained a good track record of disbursement and recoveries till this day.
Even when the FBC has been wound up the Punjab Provincial Cooperative Bank is active and disbursed Rs5.12 billion in 2001-02 and Rs5.48 billion in 2002-03. It recovered Rs4.61 billion in 2001-02 and Rs5.11 billion in 2002-03.
Overall, the State Bank has assigned 21 big and small banks in the agricultural loaning and offered many new avenues of investment in agricultural field. During the last two years — 2001-02 and 2002-03 — these banks showed an increase of Rs6.60 billion in their disbursements, an improvement of Rs6.17 billion in their recoveries, but the portfolio of their outstanding loans increased by Rs8.56 billion.
Available figures and data shows that these banks disbursed Rs58.92 billion loans during 2002-03 as against Rs52.31 billion a year earlier. Their recoveries in 2002-03 went up to Rs59.43 billion from Rs53.25 billion a year earlier. But the portfolio of their outstanding loans went up to Rs109.82 billion.
Bankers believe that the amount of default loans is gradually increasing and the most affected bank is Zarai Taraqiati Bank Limited (formerly Agricultural Development Bank of Pakistan).
ZTBL is the biggest provider of loans to the farmers and for the last few years it is showing a good improvement in recoveries. But still its portfolio of outstanding loans shows no sign of respite. Its outstanding loans increased to Rs87.68 billion in June this year from Rs83.73 billion in June last year.
This is despite the fact that a large amount of default loans has been settled under the State Bank’s scheme which offered relief to a very big number of farmers. Harsh measures were taken to ensure recoveries.
Five big commercial banks have also accelerated the pace of their recoveries. During the last fiscal year these five big commercial banks recovered a total of Rs19.48 billion, an improvement of about Rs5 billion over 2001-02 recoveries. These five banks show a portfolio of Rs16.58 billion outstanding loans till end June this year.
Figures and data available on agricultural loans disbursement, recoveries and portfolio of outstanding loans during 2001-02 and 2002-03 does not give age-wise details of loans. An analysis of data of disbursed loans, recoveries and outstanding loan portfolio during the last two years, 2001-02 and 2002-03, shows that the portfolio of unrealized loans has increased by more than Rs8 billion.
Figures show that all these banks carried an outstanding loans portfolio of Rs101.36 billion by the end of June 2002, which increased to Rs109.82 billion by the end of June 2003.
During these two years, the banks reported recoveries of Rs53.25 billion in 2001-02 and Rs59.43 billion in 2002-03.
All the 21 banks involved in agricultural loaning have reported total stock of Rs109.82 billion outstanding loans by the end of June 2003, showing an increase of more than Rs8 billion in the last one year.
By end-June last all these banks disbursed total amount of Rs58.92 billion production and development loans.