FAISALABAD, Aug 11: No new license will be issued for commercial banks except Islamic banking in Pakistan, said Dr. Ishrat Hussain, Governor State Bank. Addressing a function in Faisalabad Dry Port (FDP) here on Wednesday , he said that 39 commercial banks were already operating in Pakistan.

"Many of them are small", he said and added that we want their mergers to become strong and big banks. However, he said that there was still room for Islamic banks and we are ready to entertain requests for new Islamic banks.

Commenting on agriculture, he said that the government had provided an opportunity to agriculture sector to enter into the national mainstream and grow in a big way. He said that commercial banks have been encouraged to give loans to agriculture sector.

"Out of total Rs73 billion agriculture loans, Rs40 billion were extended by commercial banks," he said and added that role of Zarai Taraqiati Bank Limited (ZTBL) is being marginalized as it has only 250 branches as compared to the 6000 branches of commercial banks available in every nook and corner of the country.

He said that commercial banks had earlier preferred to pay penalties instead of meeting given targets of agriculture loaning. "However, we are promoting healthy competition among the commercial banks to support agriculture sector."

Highlighting the role of commercial banks in agriculture loaning, he said that it has trimmed the percentage of non-performing loans from 25 to only 5pc and hoped that this situation would help agriculture sector to grow beyond our expectations.

The Governor SBP also stressed the need for confidence building measures instead of setting courts to settle the commercial disputes. Meanwhile, talking to leading cloth exporters at the All Pakistan Cloth Exporters Association (APCEA), the State Bank Governor said the consistency in economic policies since 1999 has been the mainstay of economic strategy.

The SBP governor expressed the hope that this consistency would continue when Shaukat Aziz assumed country's premiership. He said that due to these policies Pakistan was now returning its costly debts and new investment in the private sector was coming forth in a big way, he stated.

He said that another important government policy was privatization. Ever since the present government came in power, no state-owned unit had been established, rather public sector units were expeditiously but gainfully being offloaded.

The SBP governor said at present the biggest challenge for Pakistan was to fill the gap of $3.4 billion in foreign trade. This gap, he said, could not be filled with new loans and had to be filled either from exports or containment of imports.

"However, the imports were as necessary as exports and in fact imports were supporting the exports of the country." Dr Ishrat said during the last five years, machinery worth over $3 billion had been imported that had helped the country maintain the export tempo.

He said that the private sector was being given due importance, and this was reflective in the capital market performance that had expanded from Rs7 billion to Rs25 billion. -APP