KARACHI, Nov 10: Banks are offering enough export finances to the eligible exporters as the season for private sector credit offtake has set in. In just two weeks ending on October 11, they have offered Rs2.4 billion additional export loans, which forms part of the total Rs9.5 billion export financing so far made during this fiscal year.

The private sector credit normally starts picking up in October — it peaks through December and maintains a relatively slow pace till March before falling in the June and September quarters. But this year the banks had seen enough demand for the private sector credit even before the end of September, and up to September 27, they had made Rs15.8 billion loans to the private sector.

Credit offtake figures for the next fortnight ending on October 11 have just poured in. These figures show the private sector credit offtake went up to Rs38 billion on October 11, showing an increase of Rs22.2 billion within two weeks. The figures available on SBP website show that out of the total Rs38 billion private sector loans, Rs35.6 billion were disbursed by the commercial banks and the remaining Rs2.4 billion by the specialized banks.

And in line with the overall increase in the private sector credit disbursement, export financing has also remained high. The banks had offered Rs6.1 billion export loans up to September 27: the figure rose to Rs9.5 billion on October 11, showing an increase of Rs3.4 billion in two weeks.

Eligible exporters get export financing from the banks at a concessional rate of three per cent annual mark-up and the State Bank reimburses the banks the amount of disbursed export finance at a rate of 1.5 per cent, thus allowing them to earn a spread of 1.5 per cent. In the current interest rate scenario, the three per cent mark-up on export loans contains a small element of concession because the SBP uses the weighted average yield on six-month treasury bills to determine export refinance rate every month.

Bankers say export financing has remained higher in the first two weeks of October because of increased borrowing needs of the exporters on the back of rising cotton prices. Cotton price went up on controversial reports of lower crop and also because cotton traders started hoarding the commodity in the hope of selling it at still higher prices — thanks to the bullish trend in New York cotton futures. Senior bankers say the private credit offtake would pick up further with the start of sugarcane crushing. Sugar mills start borrowing heavily from banks to make payments to the growers and to their own workforce during the months of cane crushing.

The strong pickup in the private sector credit — as the figures relating to October 11 indicate — will help banks use surplus liquidity profitably. It will also result in the banks’ profits through interest on advances going up. Awash with excess liquidity, banks are keen on increasing their loans portfolios.

This has become all the more important also because the new prudential regulations require banks and DFIs to restrict their investment in stocks up to 20 per cent of their equity. The banks have only two months in hand to reduce their exposures in the stock market because the new regulations will become effective from January 2004. Up to October 18, the total investment of all banks and DFIs in the stock market stood at Rs42.2 billion.

In the fiscal year July-June 2002-03, banks had recorded a huge net credit expansion of Rs133.2 billion, according to the State Bank annual report released last week.