State Bank of Pakistan Governor Salim Raza has said that the central bank is working on the establishment of ''Infrastructure Development Bank'' and ''Mortgage Refinance Company'' under public-private partnership for the growth and development of infrastructure and housing sector in the country. Presiding over a meeting of Private Sector Credit Advisory Council (PSCAC) held at State Bank on Monday.
He said that the State Bank has taken several initiatives for enhancing credit disbursement to undeserved segments ie agriculture, SMEs, microfinance, housing and infrastructure. "State Bank is playing its due role to stimulate private sector credit off-take and to turn around economic slowdown," he said. He, however, stressed upon the private sector to come forward with well thoughtout project plans so that the banks are able to finance them. "I strongly believe that growth stimulus has to come from agriculture and SMEs sectors," he added.
Talking about overall scenario of private sector credit disbursement, Raza noted that decelerating trend of credit disbursement has been arrested and lately disbursement has picked up. He pointed out that overall decline in credit disbursement was limited to Rs 28 billion as of July-November 7, 2009 compared with a decline of Rs 81 billion till July-September 2009.
He said that the share of private sector credit in total credit has declined from 61 percent as at end December 2008 to 53.3 percent by 7th November 2009 due to continuous contraction in PSC and enhanced flow of credit to government sector & PSEs during the last three quarters.
Referring to reasons behind low credit off-take, he said that prolonged power shortages and poor security situation had an adverse impact on industrial production, which grew by a mere 0.2 percent in July-August 2009. Similarly, decline in exports exhibited some impact of global recession, particularly in major export destination like the USA and the European Union which have witnessed one of their worst economic slowdown during the last two quarters of 2008 and in the first three quarters of 2009.
Textile sector exports earnings have declined by 0.3 billion dollar during July-September FY10, he added. The SBP Governor noted that gross non-performing loans (NPLs) of banks continued to grow to reach Rs 421.6 billion (12.36 percent of total loans) at end of September 2009 compared with Rs 397.9 billion (11.5 percent of total loans) at the end of June 2009, and Rs 241.3 billion at the end of June 2008.
Textile sector holds around 30 percent of total NPLs, which is much higher than its share in loans ie 19 percent, he added. Similarly, he pointed out that loans for working capital marked decline of Rs 79 billion during first quarter (July-September) of FY10 mainly due to low demand of running finance by small business, food products'' (Rs 33.4 billion) and textiles (Rs 10 billion).
Credit retirement by sugar sector against pledge of sugar stocks also supported the decline in advances. However, the declining trend under working capital was somewhat offset by credit under fixed investment, which increased by Rs 13.3 billion during July-September, 2009. The main sectors that availed fixed investment credit included electricity, gas & water and manufacturing, he added.
Raza said that agricultural credit disbursement was continuously showing increasing trends and during July-October 2009 increased by Rs 5.2 billion or 9 percent from corresponding period, while credit to SMEs and housing finance exhibited declining trends.
Infrastructure finance grew by 37 percent mainly due to capital investment in power generation and telecommunication sectors, he said, and added that deposits and advances of microfinance banks/institutions increased to Rs 5.8 billion and Rs 8.9 billion, respectively, as on 30th September 2009. The meeting was attended, among others, by representatives of business and industries, agricultural associations, commercial banks besides senior officials of the State Bank.
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