Conventional bank advances to the private sector increased fivefold

KARACHI: Against the backdrop of rapidly expanding economic activities, conventional banks, for the first time in the last three years, extended aggressive lending to the private sector instead of investing in risk-free government securities.

Banks made more than five times as many advances to the private sector in the first six and a half months of the current fiscal year, exceeding the combined advances they had made in all of fiscal 21 and 20 .

State Bank of Pakistan (SBP) data showed that conventional banks made total advances of Rs 514.7 billion for almost the first seven months (July 1, 2021-Jan 14) compared to Rs 97.2 billion rupees at the same time last year.

It should be noted that the flow of cash to the private sector in the whole of FY21 was well below Rs 379.5 billion, but it had energized the economy to grow at a rate of 5.37%. Interestingly, advances to the private sector in the current fiscal year seem much higher than last year, which could further improve the rate of economic growth. Combined advances from conventional banks in FY21 and FY20 were Rs 408.7 billion.

Banks posted high profitability in the first nine months of calendar year 2021.

Islamic branches of conventional banks represented a similar trend, with their advances to the private sector also increasing by 175% to Rs171 billion in the first half of FY22 from Rs62 billion in the same period last year. last.

Full-fledged Islamic banks, however, recorded a moderate improvement of 83% in lending to the private sector to Rs 101 billion from Rs 55 billion in the corresponding period last year.

According to the Ministry of Finance, most credit to the private sector has been used for working capital. Aggregate 6-month credit to the private sector for FY22 exceeded the total amount for the whole of FY21. Semi-annual credit to the private sector was Rs. Rs 766 billion for the whole of FY21.

The SBP, in its latest monetary policy statement, predicted that the economy is expected to grow 4.5% in FY22.

Posted in Dawn, January 29, 2022

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