Food leads private sector borrowing

The monthly credit numbers have been released and at the outset they seem to confirm the suspicion this column highlighted in last months credit review: the GSP+ led credit growth hype is only a hype: loans to textile businesses declined by 9 percent year on year in nine months ending March 2014.
It is true that there was some increased level of credit supply to the sector during the first half, but the last three months have seen far bigger net credit retirements by the sector than seen in any other third quarter in the recent years.
In any case, one couldn expect much from the textile sector in terms of credit growth given that the biggest beneficiaries of GSP+ are in the value-added textile sector that hardly obtains loans from the banking sector. (See BR Research story: Is GSP+ really driving textile credit? Published on March 26, 2014)
Still, 9M FY14 saw a 65 percent year-on-year growth in loans to private sector businesses, the bulk of which came from a handful of segments.
On top of this list was the food, products and beverages sector that borrowed an additional Rs34.7 billion in 9M FY14 over last years comparable period, which is about 50 percent of additional manufacturing sector borrowing, or about one-third of that by private sector businesses in total.
This is followed by additional borrowing of Rs27.6 billion by the electricity, gas and water supply, whereas the third biggest contributors were those involved in coke, refined petroleum products business. The commerce and trade category also saw in net borrowing a substantial growth from Rs1.7 billion, in 9M FY13, to Rs20.2 billion in 9M FY14 with an increase of Rs18.5 billion. This was mostly led by retail trade and wholesale that cumulatively borrowed Rs15.2 billion in nine months ending March.
Outside the private sector businesses the personal credit growth continues to stay positive. Led by three-fold rise in consumer financing for transport and a 37 percent increase in personal loans, total consumer financing grew from Rs8.5 billion, in 9M FY13, to Rs21.5 billion in 9M FY14.
On this note, the SBP would like to take notice of the negative selling practices being adopted by banks to increase their sales. BR Research has been informed of a number of recent instances where banks have sold consumer assets to their clients either by miscommunication about the product details or without proper consent or both.