State Bank of Pakistan Governor Saleem Raza has agreed that textile industry must be given some relief so as to get a breathing space. Dr Mirza Ikhtiar Baig, Federal Advisor on Textiles on Thursday met SBP Governor Saleem Raza. During the meeting, the Governor also gave assurance for giving some serious thought to reducing Cash Liquidity Requirement (CLR), which will reduce cost of the funds of banks, enabling them to reduce their lending rates.
Saleem promised to have a meeting with heads of banks to finalise its modalities. He confirmed increasing present ceiling of banks saying that there was still Rs 27 billion available with banks to extend ERF to exporters out of total enhanced limit of Rs 182 billion by transferring available unutilised ERF limit to the needy banks.
Dr Baig informed the governor about the crisis in textile industry, decline in exports, closure of textile units, impact of global recession, high cost of doing business due to increase in mark-up rates, power and gas rates and load shedding. He advocated for the reduction of mark-up of banks by at least 2 percent either by reducing CLR of banks with SBP, which will also improve the liquidity position and releasing banks' interest-free funds with the SBP.
Dr Baig also informed the Governor that the banking spread is 7.6 percent which is highest in the world and banks should be requested to reduce it by 2 to 3 percent. He requested the Governor to allow one-year moratorium to textile industries for payment of their principal amount as the textile companies are unable to do their debt servicing. Dr Baig asked the SBP Governor to give relaxation to banks by exempting them to provide provisions and reporting for CIB.
He also demanded payment of 3 percent interest differential amounting to Rs 1.2 billion to the spinning sectors as approved in the Cabinet meeting of November 5, 2008 and payment of R&D claims of the shipments made upto June 30, 2008. The Governor promised to do it on priority basis. Dr Baig also suggested the Governor to form an advisory committee comprising stakeholders, bankers and the SBP officials to meet quarterly to address problems of the industry. -PR