Banks may miss agriculture credit disbursement target

Banks may miss agriculture credit disbursement target of Rs 270 set by the State Bank of Pakistan for the current fiscal year owing to flood and slowdown in agricultural activity, sources told Business Recorder on Tuesday. According to sources, the SBP had set an indicative credit disbursement goal of Rs 270 billion for the agriculture sector for the fiscal year 2010-11 (FY11), which was higher by Rs 10 billion than 2009-10 projection of Rs 260 billion.
As against the target, the commercial and specialised banks have achieved only 72 percent of agricultural credit disbursement target during the first ten months (July-April) of current fiscal year 2010-11. Year on Year (YoY) basis, the disbursement during the period is only 3 percent higher than the same period of last fiscal year.
State Bank of Pakistan's latest statistics show that in absolute terms disbursement of credit to the agriculture sector has surged by Rs 6.13 billion to Rs 194.156 billion in July-April of fiscal year 2011 when compared with total disbursement of Rs 188.024 billion in the same period last fiscal year.
In the remaining two months the commercial and specialised banks are required to disburse about 28 percent, or Rs 76 billion, in May and June, which seems impossible. As a result, the commercial and specialised banks will miss the indicative target of agricultural credit by some Rs 25-30 billion.
This will be third consecutive year when the banking sector will not achieve its indicative agricultural credit disbursement target set by the central bank. Although the disbursement has posted 3.26 percent increase, yet it is much better than the first half of current fiscal year, in which over 4 percent decline was registered. So far, total disbursement during July-April FY11 is some 72 percent of indicative target of Rs 270 billion set by the State Bank of Pakistan.
Sources said that during the two remaining months, with all efforts, disbursement by the commercial and specialised banks would not be more than Rs 40 billion. Therefore, total disbursement of credit for agriculture would be maximum Rs 240 billion by the end of this fiscal year. "Flood across the country and slow economic activity on domestic front had badly hurt the agricultural credit disbursement", analysts said.
They said that flood in August had seriously affected agricultural activities in Punjab, Sindh and KP, resulting in decline of the credit disbursement. Although banks' operations in most parts of the flood-affected areas have restored, growers have given priority to rebuild their destroyed homes. Therefore, in the first half of current fiscal year agricultural credit disbursement was in negative side as growers in the flood-hit areas were engaged in reconstruction of their houses. However, in the half second half they resumed agricultural activities and some improvement was also witnessed on disbursement side, they added.
According to disbursement details, sharp decline in disbursement had registered in Zarai Taraqiati Bank and United Bank, while agricultural credit disbursement by other commercial and specialised banks, including 4 leading commercial banks, Punjab Provincial Co-operative Bank and 8 domestic private banks, have posted some increase.
Overall credit disbursement by five major commercial banks including Allied Bank (ABL), Habib Bank (HBL), MCB Bank, National Bank (NBP) and United Bank (UBL) registered an increase of 12.26 percent during the first ten months of current fiscal year. Agricultural credit disbursement by five major commercial banks stood at Rs 107.719 billion in July-April of 2011 compared to Rs 95.95 billion in the same period of last year, depicting an increase of some Rs 12 billion.
Agricultural credit disbursement by Zarai Taraqiati Bank, the largest specialised bank, posted a sharp decline of 22.27 percent during the period. Disbursement by ZBTL stood at Rs 43.68 billion during July-April of current fiscal year as compared to Rs 56.19 billion in corresponding period of last fiscal year, depicting a decrease of Rs 12.5 billion. The ZBTL achieved only 53 percent of its indicative target of Rs 81.8 billion.
The credit disbursement by Punjab Provincial Co-operative Bank (PPCBL) and 14 private commercial banks surged by 26 percent and 18.44 percent respectively. Disbursement by PPCBL achieved 66.32 percent of its target as its disbursement stood at Rs 4.54 billion during the period under review.
Similarly, 14 domestic private banks also disbursed a combined Rs 38 billion in first ten months of current fiscal year against disbursement of Rs 32.265 billion in same period of last fiscal year. Domestic private banks achieved 78 percent target of Rs 48.9 billion.