It is good to see that when banks are not very much interested in extending credit to private sector for a variety of reasons, they continue to increase their tilt towards the agricultural sector. According to the latest report of the State Bank on agricultural financing, agricultural credit disbursements by banks have surged by 13.21 percent on year-on-year basis to Rs 169.42 billion in the first seven months (July-January 2013) of the current fiscal year.
Overall credit disbursements by five major commercial banks (Allied Bank, Habib Bank, National Bank, MCB Bank and United Bank) stood at Rs 89.65 billion during this period as compared with Rs 82.46 billion disbursed in the same period last year. Zarai Taraqiati Bank (ZTBL), largest agri-focused bank, disbursed a total of Rs 26.22 billion as compared with Rs 26.36 billion in the corresponding period last year while Punjab Provincial Co-operative Bank Ltd (PPCBL) disbursed Rs 4.65 billion, down by 6.46 percent when compared with Rs 4.98 billion disbursed in July-January, 2012. Fourteen domestic private banks also lent a combined amount of Rs 38.81 billion compared with Rs 28.99 billion in the same period last year. Five microfinance banks - Khushhali Bank, NRSP Microfinance Bank, The First Microfinance Bank, Pak Oman Microfinance Bank and Tameer Microfinance Bank - disbursed agri loans amounting to Rs 10.06 billion as compared to Rs 6.85 billion in July-January, 2012.
Certain conclusions could be drawn by this highly significant increase in agricultural credit during the first seven months of the current fiscal year. The State Bank had set an indicative agricultural credit disbursement target of Rs 315 billion for the banks which amounted to an average disbursement of Rs 26.25 billion per month during 2012-13. Since the current monthly average of Rs 24.1 billion is quite close to the target, the ambitious yearly target is likely to be met, which would be quite an achievement. Another healthy development is that commercial banks, even smaller ones and non-specialised, are increasing their exposures in the agriculture sector. This means that the flow of credit to the agriculture sector is likely to continue, even in the absence of prodding by the State Bank and the government to do so. The fact that banks themselves are now taking the risk to venture into the field at their own also shows the increasing creditworthiness of farmers. This may be due to higher prices of agricultural products in the recent past and shifting of incomes from the urban to rural areas but the impact in terms of employment generation, poverty alleviation, etc, is going to be positive. The biggest pleasant surprise, however, is the change in the priority of banks so far as sectoral allocation of credit was concerned. In the past, manufacturing sector and other businesses used to be their favourite sectors for credit disbursement but lately, they have shifted their attention to investment in government securities which is a risk-free avenue of investment. The latest statistics showing that they also continue to divert their loanable resources to the agriculture sector in substantial amounts is a good omen. Such a healthy trend in advances is not only in accordance with natural endowment of resources of the country but would also serve to ensure food security and exports of agricultural products like cotton and cotton-based products at a time when most economic indicators are in poor shape.
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