State Bank of Pakistan (SBP) Governor Dr Ishrat Husain has expressed the hope that commercial banks will meet the target of disbursing Rs 100 billion credit to the agriculture sector this year. He said that the banks were reluctant to extend credit facility to agriculture sector a few years ago, but due to effective policies adopted by the central bank now they are willingly giving credit to the sector and consequently they disbursed Rs 75 billion to the agriculture sector last year.
He said that while on the one hand, this credit facility will improve the agricultural yield of the country, on the other, it would also play a crucial role in the development of rural areas.
He dispelled the impression that consumer financing is creating consumerism in the country, instead it is proving to be engine of economic growth.
Ishrat was addressing the award presentation ceremony of the Asian Bankers here on Friday.
The Asian Bankers has awarded Askari Bank the "Best Retail Bank in Pakistan".
The SBP governor said that consumer financing is not creating consumerism in the country, but it has provided a desired impetus to the economic growth of the country by enhancing the supply response of both the manufacturing as well as the service sector.
In support of his assertion, he referred to some statistics of manufacturing side and said that as a result of easy access to credit to the people the local production of electronic appliances and automobile have increased manifold.
While further increase in automobile production is expected, which is likely to touch the figure of 130,000 units this year. Similarly, he said that it is the first time that the country is being able to export automobile spare parts.
Likewise, he said that mortgage financing also plays a very significant role in the economic development of the country as it directly or indirectly affects 37 construction-related industries.
He said that banking operations/activities were very limited five years ago and their recovery ratio was very bad. There were about Rs 250 billion stuck up loans in 1999, owed mostly by the large borrowers, out of which 70 percent has been recovered, he added.
Ishrat said that the credibility of small and medium enterprises (SMEs) is much better than the large borrowers who tend to default. For this reason, the SBP eased out credit conditions for the SMEs and set a separate credit criteria for them so that they can play the desired role in the progress of the country.
To a question, he said that the present recovery ratio of banks is satisfactory and stands at over 95 percent. He described the introduction of fair professional credit appraisal as the major factor for this improvement.
To another question, he said that the SBP does not disturb the open market mechanism by intervening repeatedly in the inter-bank market on regular basis, but it intervenes only when it is required due to high volatility of the market, same as all other central banks of the world do.
He also felicitated the Askari Bank for winning the Best Retail Bank in Pakistan Award.
Others who also spoke on the occasion included Askari Bank President Kalim-ur-Rehman, The Asian Bankers Managing Director Emmanuel Daniel and Askari Bank Retail Banking Group Head Agha Ali Imam.
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