Private sector credit off-take doubles

Private sector credit off-take doubles

Private sector credit off-take doubles KARACHI: After a long spell of downtrend, private sector’s credit off-take more than doubled in 2015-16 compared to the preceding fiscal year, the State Bank of Pakistan (SBP) said on Friday.

The State Bank earlier reported that banks’ advances to the private sector were diverse and lending to fixed projects was encouraging. However, analysts believe the credit growth was still not enough to spur the economy.

Banks continued to invest heavily in the government papers during 2015-16, indicating that most of the liquidity was flowing towards the government instead of going to the economic development.

The banks were investing 88 per cent of their investment in the government papers, leaving little option for others to attract banks’ liquidity.

According to another SBP report, the government has so far accumulated Rs8.79 trillion by selling government papers as of May 31, 2016; out of this amount, banks’ investment amounted to Rs6.31tr.

The recent two auctions of treasury bills and Pakistan Investment Bonds indicated that the government would continue to borrow through banks as the amount raised was much higher than the targets set for the auctions.

A latest SBP report said the government borrowed Rs1.365tr from scheduled banks, slightly less than the borrowing of Rs1.413tr in the fiscal year 2014-15.

Monetary expansion during the fiscal year 2015-16 was slightly higher in terms of percentage as it was 13.67pc compared to 13.2pc. In terms of rupees, the expansion amounted to Rs1.542tr compared to Rs1.315tr. Higher monetary growth suits economy if the inflation is low, as it was in the previous fiscal year.

However, monetary expansion was dominated by increase of currency in circulation which was almost double than the previous fiscal year. The currency circulation rose to Rs779bn compared to Rs377bn.

The State Bank’s third-quarterly report said the deposits of the banking industry faced difficult situation as their growth fell significantly in the first nine months (July-March) of 2015-16. Figures for the entire year have not yet been issued.

The low growth of bank deposits and continued trend of investing most of the liquidity in the government papers could hurt the private sector credit off-take in the current fiscal year.

Source: http://www.dawn.com/news/1272495/private-sector-credit-off-take-doubles

 

Leave a Comment