Private sector borrowing plunges 88% – Journal

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KARACHI: Bank lending to the private sector fell 88 percent in more than five months of the current fiscal year, reflecting the slowdown in economic activity.

Recently released data from the State Bank showed net lending to the private sector was only Rs 10.3 billion during the period July 1 to December 11 of this fiscal year, compared to Rs 88.1 billion. during the same period of last year.

The data reflects that the Covid-19 pandemic has played a key role in the decline in economic activities in the country. The government and SBP have been offering cheaper money since the coronavirus pandemic spread to Pakistan in March 2019, but the private sector is moving cautiously.

Further details show that commercial bank branches experienced a net withdrawal of Rs 33.4 billion during this five-month period in FY21. This went against the trend of the l last year, when the private sector borrowed 31.4 billion rupees during the same period.

A positive improvement was noted in the case of Islamic banks, as private sector credit drawdowns increased during this period to reach 21.2 billion rupees from 19.2 billion rupees in the previous fiscal year. .

Loans to the private sector by branches of Islamic banks of conventional banks also showed a better picture.

However, borrowing was lower than last year. Private sector credit withdrawals from Islamic branches of conventional banks amounted to Rs 22.5 billion in the five months, far lower than the Rs 37.5 billion noted during the same period of the year. last year.

The SBP has offered a number of incentives to the private sector to stimulate economic activities, mainly due to increasing pressure from Covid-19. The central bank lowered the interest rate from 13.25% to 7% while providing cheaper financing to many sectors.

Banks were urged to restructure lending from commerce and industries, which helped them improve their liquidity. Another SBP data shows that until December 18, banks had structured loans of Rs.217.7 billion from the private sector.

Data showed that until December 18, loans of 657 billion rupees were deferred. Likewise, cheaper money was provided to commerce and industries to avoid layoffs. Loans approved for salaries amounted to Rs 2,338 billion while loans approved for investment were Rs 237.5 billion.

So far, the government has not announced another lockdown as the second wave of coronavirus grips the country. However, the weak mobilization of credit from the private sector reflects the slowdown in economic activities.

The government has fought hard to stimulate the construction industry. There is no official data available indicating the growth of the sector, except that the demand for cement and steel has increased during the current fiscal year.

Posted in Dawn, December 26, 2020


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