KARACHI, Feb 3: The National Credit Consultative Council (NCCC) Monday expressed satisfaction over the overall monetary and credit developments in both government and non-government sectors during first half of current fiscal year (July-December 2002).
The entire monetary expansion (9.4pc of Rs166.4 billion) during first six months (July-December 2002) was due to “massive inflows” of foreign exchange increasing Net Foreign Assets (NFA) of the banking system, equivalent to about 88pc of full year target of money supply.
The NCCC, which met in Karachi under the chairmanship of Governor State Bank of Pakistan (SBP) Dr Ishrat Husain to review monetary and credit development in first half of current fiscal, also expressed satisfaction over credit expansion to private sector, which was about 90pc higher than last year and appreciated higher than targeted retirement by the government.
The Council discussed various constraints facing credit flows to small and medium enterprises (SMEs) and advised banks to develop financial advisory services to facilitate sectoral investment initiatives and to move on to programme lending for SMEs. It was informed that Prudential Regulations are being revised to facilitate credit to SMEs.
The NCCC was told that revision in the Credit Plan 2002-2003 have been made keeping in view developments during first half of the current fiscal.
The revised Credit Plan estimates money supply (M2) to grow by 16pc (Rs281.5 billion) compared to original estimates of 10.8pc (Rs190 billion). The bulk of monetary expansion is expected to result from further build up in NFA, i.e. by Rs271 billion as against original estimates of Rs91.5 billion.
The Net Domestic Assets (NDA), are expected to expand by Rs10.5 billion due to anticipated higher retirement of borrowing by the government (Rs44.2 billion against earlier estimate of Rs16.2 billion). The council authorized banks to advance credit to private sector so that their demand is met fully.
Significant credit need is being met by self-financing through ‘unprecedented’ foreign inflows of remittances, etc., and by other-than-bank sources like TFCs, leasing and others. The Council was informed that SBP will be watching carefully all developments to ensure that price stability is not ‘threatened’.
Earlier, a meeting of Agricultural Credit Advisory Committee (ACAC) chaired by SBP Governor, and attended representatives of Nationalized Commercial Banks, Agricultural Development Bank, privatized banks, private domestic banks, Punjab Provincial Cooperative Bank, Provincial Chambers of Agriculture and other stakeholders of agricultural credit, recorded its appreciation at the “impressive” performance of major commercial banks who increased agriculture credit by 22pc compared to the previous year. This was the second year in succession that commercial banks surpassed their targets.
The ACAC asked commercial banks to launch aggressive publicity campaign for awareness of farming community, like initiatives being taken by National Bank and Allied Bank on reducing agricultural lending rates by 3pc and 2pc respectively. Other banks were advised to review their rates.
Expressing satisfaction on availability of farm credit, ACAC stressed need for enhanced credit to non-farm sector, including livestock, which is contributing significantly in agriculture sector. A committee was constituted under chairmanship of Qaisar Zulfiqar Khan, member ACAC and Director SBP central board to streamline issues relating to revolving credit scheme and make it consistent with that of Bank of Punjab.
The SBP governor and commercial banks appreciated 5-day Agricultural Credit Training Programme conducted by Agricultural Credit Department of the SBP in Karachi recently and desired such programmes at other centres like Hyderabad, Sukkur, Quetta, Peshawar, Lahore and Faisalabad, to create awareness about Agricultural Credit Scheme among all stakeholders.
It was emphasized that Chambers of Agriculture should play role of watchdog and monitor credit lending activities of banks closely, by participating in meetings of local Credit Advisory Committees.—PPI