SBP’s strategy causes risk-averse banks to exceed Rs 315b farm loan target


Pakistani banks surpassed the agricultural credit disbursement target of Rs 315 billion set by the State Bank of Pakistan (SBP) for the previous fiscal year that ended on June 30.
Subsequently, the total debt owed by Pakistani farmers to banks is now Rs 257.0 billion, 16 percent of what it was in the previous year. The SBP attributed the achievement of the farm loan disbursement target to a ‘multi-pronged strategy’ it adopted to contain the banks’ risk-averse behaviour given their increased non-performing loans that surged beyond Rs 6 billion. “The achievement of the agricultural credit disbursement target during the year seemed difficult in the backdrop of high risk perception of banks regarding agri financing,” a SBP statement said.
The SBP also hinted that the banks over recent years had been quite averse to private lending owing, apparently due to a mute demand and also due to huge bad debts which accumulated beyond Rs 6 billion in the last quarter of FY13.
Contrary to their primary job these banks had been vigorously investing in risk-free government securities over the past 5 years, concerned analysts reported.
These banks held government papers, treasury bills, Pakistan investment bonds and Ijara Sukuk in excess of Rs 3 trillion, official data revealed.
These banks disbursed Rs 336.1b against the indicative target of Rs 315b which was Rs 21.1b in excess of the target for FY2012-13 and 14.4 percent higher than the last year’s disbursements of Rs 293.8b, SBP figures revealed.
The agriculture outstanding portfolio stood at Rs 257b at the end of June 2013 showing an increase of 16 percent compared to last year’s Rs 221.5b.
The five largest commercial banks collectively disbursed Rs 172.8b (or 112.6 percent of their annual target), 18.0 percent higher than the corresponding period last year’s Rs 146.3b.
Allied Bank Limited (ABL), National Bank of Pakistan (NBP), MCB Bank, Habib Bank Limited (HBL) and United Bank Limited (UBL) surpassed their annual targets achieving 146.2, 119.5, 103.9, 100.3 and 100.0 percent of their individual targets, respectively.
Under the specialised banks category Zarai Taraqiati Bank Limited (ZTBL) disbursed Rs 67.1b or 93.1 percent of its annual target of Rs 72.0b while the Punjab Provincial Co-operative Bank Limited (PPCBL) disbursed Rs 8.3b by achieving 92.3 percent of its target of Rs 9.0 b during FY 2012-13. The 14 domestic private banks collectively achieved 103.6 percent of their targets.
The Habib Metropolitan, the Bank of Khyber, Bank Al Habib, Faysal Bank and Sindh Bank surpassed their annual agriculture credit disbursements targets and achieved 460, 189.6, 128.4, 124.0 and 100.2 percent, respectively.
However Soneri Bank, Bank Alfalah, Askari Bank, NIB Bank, Silk Bank and Bank of Punjab achieved 95.5, 94.6, 85.0, 73.7, 71.3 and 61.3 percent of their targets, respectively. The KASB Bank and Summit Bank managed only 15.8 and 12.3 percent of their respective annual targets. Collectively, the five microfinance banks surpassed their annual targets of Rs 13.8b by disbursing Rs 18.7b during FY2012-13.
The Tameer Microfinance Bank, NRSP Microfinance Bank and Khushhali Bank surpassed their individual annual targets achieving 206.6152.8and 150.0 percent while the First Microfinance Bank and Pak Oman Microfinance Bank managed only 77.7 and 59.0 percent of their annual targets, respectively.
Partially to contain this trend of risk-aversion by the banks, the SBP significantly slashed the discount rate and brought it down to an attractive nine percent.