SBP asked to raise provinces' Overdraft limits

The federal government granting guarantee has asked the Sate Bank of Pakistan to enhance the Overdraft (OD) limits of the provinces to 86 percent to meet their current expenditure, in case of non-availability of funds.
Sources told Business Recorder on Monday that the federal government, on the request of provinces, has granted approval for the enhancement in the OD-a limit up to which an account holder may borrow from a bank-when there are no funds in his or her checking account, and finally has given green signal to the SBP to increase the credit limit of provinces as per procedure.
As per procedure describe by the government, the provinces are allowed to avail OD limit equal to six weeks' salaries and following the announcement made by the federal government in budget 2010-11 all four provinces have enhanced salaries of government employees by 50 percent.
Therefore, now they in principle have the right to take more OD from the central bank. However, it requires official approval and a guarantee from the federal government, which has given NOC to provinces for increase in OD according to impact of raise in salaries. Sources said that Punjab had asked for OD limit of Rs 37.2 billion against previous Rs 26.9 billion, depicting an increase of Rs 10.3 billion, or 38 percent.
With an increase of Rs 5.1 billion, or 51.51 percent, Sindh province's new OD limit would be Rs 15 billion, against current Rs 9.9 billion. Khyber Pakhtunkhwa (KP) has asked for an increase of Rs 4.6 billion to 10.1 billion, or 86.63 percent, for the current fiscal year as compared to Rs 5.5 billion.
Balochistan has asked for an OD of Rs 7.1 billion from Rs 4.5 billion, depicting increase of 2.6 billion or 57.7 percent. After approval from the federal government the SBP is likely to sign an agreement with all provinces during this week, given opportunity to borrow more from the central bank for their current expenses. Sources said that the new Governor of the State Bank (SBP) would finalise the increase in the overdrafts and it is likely that SBP would allow provinces to borrow as per new limits.