KARACHI, March 19: Weighted average lending rate of the three state-run banks (namely National Bank, Habib Bank and United Bank) inched up from 13.78 per cent at end-December 2001 to 14.08 percent at end-January 2002.

Senior bankers involved in interest rate management attribute it to faster repayment of low-cost loans at the year-end. “The weighted average lending rate of state-run banks has risen due to faster recovery of loans,” said chief financial officer of one of these banks. State-run banks restructure and reschedule their non-performing loans more in December than in other months. They also make more cash recoveries at the year-end. “This lowers the weightage of low-priced loans in overall lending rate structure and makes the average lending rate look a bit higher in January.”

It is because of this that senior executives of state-run banks say their weighted average lending rate will show a fall in February and onwards.

The State Bank statistics show that despite a slight increase in the weighted average lending rate of state-run banks the weighted average lending rate of all the banks put together fell to 13.10 per cent at end-January 2002 from 13.41 per cent at end- December 2001.

The statistics show that the weighted average lending rate of privatized banks namely Muslim Commercial Bank and Allied Bank put together fell to 14.76 per cent from 15.11 per cent. Similarly the weighted average lending rate of local private banks came down to 13.48 per cent from 13.77 per cent—and that of foreign banks declined to 11.14 per cent from 11.69 per cent. The weighted average lending rate of specialized banks also slipped to 14.07 per cent from 14.08 per cent.

Heads of state-run banks say it is difficult to comment on the weighted average lending rate of the state-run banks as a group. But they claim that the weighted average lending rate of their respective banks has been on the fall since July when SBP started slashing its discount rate.

“I assure you that our lending rates have fallen by at least 100-125 basis points across the board since July,” said Syed Ali Raza. Zakir Mahmood also claimed that the lending rate of his bank had declined during this time but he would not say by how many basis points. Both Ali Raza and Zakir Mahmood claimed that their prime borrowers were still getting loans at less than 10 per cent. The two said that it is the credit quality that banks had to keep supreme in pricing their loans rather than anything else.

Since July the weighted average lending rate of all the banks combined has fallen by 132 basis points to 13.10 per cent at end- January 2002. Bankers say this cut in the lending rate is not too bad in response to a 4 per cent cut in the SBP discount rate as they believe that “there is no direct correlation between the SBP discount rate and banks lending rate,” to quote Syed Ali Raza.

But businessmen think the banks should have made deeper cuts in lending rates particularly because treasury bills rate has also fallen by up to 6 per cent since July—and more importantly the banks have also cut down the weighted average deposit rate.

The SBP statistics show that weighted average lending rate of all the banks combined fell to 4.73 per cent at end-January 2002 from 4.99 per cent at end-July 2001.