KARACHI, Feb 7: The National Credit Consultative Council (NCCC) has indicated of further revision of Rs145.60 billion revised annual credit plan for the current fiscal year because of rapidly changing economic conditions.
In its mid term review meeting on Thursday at the State Bank of Pakistan, the NCCC was informed of the revisions made in the original credit plan of Rs146 billion. The NCCC is the highest credit consultative body comprising all top commercial bankers, senior bureaucrats of the federal and all the provincial governments and the representatives drawn from the premier trade bodies. The governor of State Bank of Pakistan heads NCCC. On Thursday, the Chief Economic Advisor of the SBP Governor Mr Ashraf Janjua presided the NCCC meeting.
“The revisions were mainly in the government’s requirements for budgetary support as a result of enhanced financing from external sources,” an SBP press release issued after the NCCC meeting on Thursday said.
Bankers said that under the original credit plan for 2001- 2002 the government was required to retire Rs26 billion borrowing for the budgetary support. This has now been brought down to Rs19 billion in the revised plan against which the government has already retired Rs10.92 billion in last six months.
This change in the credit plan was made in October-November 2001 after signing of the PRGF with IMF and enhanced inflow of dollars in the country. A quantum jump in dollar inflow led to appreciation in rupee value much to the chagrin of the exporters.
Therefore, the SBP has dollars in the inter-bank as well as from the kerb and needs funds. For that purpose, the borrowing retirement limit of the government was relaxed from Rs26 billion to Rs19 billion, which may have to be brought down again.
It is because the build up in the foreign assets amount to Rs71.34 billion in six months only as against a projected build up of Rs75.40 build up for the whole year. Earlier in July last year, the credit planners projected Rs55 billion foreign assets.
Bankers now expect a further downward revision of government’s budgetary borrowing retirement limit and enhancement in the foreign assets as dollarization gets under way in Afghanistan with commencement of reconstruction.
The NCCC showed concern over the high lending rates of the banks and has asked these institutions to lower the rates in view of low inflation and reduction in discount rates. The NCCC advised the banks to extend more credit to the private sector rather than investing in the government papers.
Banks were also urged to review their collateral requirements against lending to the private sector to enable borrowers seek more funds from the scheduled banks.
“Substantial time was taken up by the discussion on lending rates,” Tariq Sayeed, who represented the Federation of Pakistan Chambers of Commerce and Industry, said.
He said that the representatives of the private sector and officials of the State Bank in the NCCC made a joint plea to the banks to consider relaxing collateral conditions and bringing down lending rates.
Slow credit to the private sector was attributed to the existing conditions in the country, which has affected credit demands in industry, trade and other areas.
Mounting tensions on the international borders, in the aftermath of September 11 and an all pervading global recession are being blamed for the low credit demand in export and industry.
“Although credit expansion in the private sector was lower, banks did meet all genuine credit requirements of all the sectors,” the SBP press release said.
Heated discussion was held on the loan recovery drive of the Agricultural Development Bank of Pakistan and representative of Balochistan government sought justification when all the 26 districts of his province have been declared calamity affected.
In last six months, the agriculturists have been given Rs21.70 billion loans as against Rs18.86 billion given in the first six months period of last fiscal year.
The five major banks have increased their credit disbursements by almost 90 per cent to Rs8.12 billion during July to December 2001 as against Rs4.81 billion in the same period of last fiscal year.
A meeting of the Agricultural Credit Advisory Committee (ACAC) held on Thursday before the NCCC reviewed the disbursement targets and recovery and expressed satisfaction on the performance of the five major commercial banks.
The ACAC urged the private domestic banks to take an active part in the agricultural credit expansion.