She made these observations while chairing the second meeting of the Private Sector Credit Advisory Council here on Monday. The meeting discussed the recent trends and issues relating to availability of credit to the private sector and also discussed ways and means to enhance credit disbursement to key sectors of the economy.
Dr Akhtar said the growth in private sector credit was in line with the SBP policy, and added as compared to last two years' growth, the credit expanded by Rs 103.1 billion in July 1 to November 24. Private sector credit growth in 2007-08 financial year mainly reflected convergence to its long-term trend, relative to the surge observed in 2005-06 financial year due to several years of pent up demand and need for investments in BMR by the industry, she added.
The Governor stressed that in FY07, the credit growth supported effectively the growth in real economic activity. "It is expected that private sector credit disbursement this year will continue to support economic growth as SBP has continued to efficiently manage liquidity.
"Private sector credit is expected to pick up in the second half of FY08 as investors launch the pending projects and various independent power producers (IPP) projects, involving investment of around Rs 100-120 billion, are also in the pipeline," the Governor added. She said there was a general agreement that the private sector credit had been impacted, among others, by the following:
-- Banks adopting cautious lending stance given the experience with loan defaults in some sectors.
-- Mergers and acquisitions have required banks to focus on restructuring, while adjusting their portfolios and rationalising their branch network. However, banks after their restructuring and upgradation of their credit policies and risk management systems were expected to be positioned better for credit delivery in the coming years, she said.
During the meeting, relevant directors of the State Bank made detailed presentations on agricultural finance, SMEs finance, consumer finance, infrastructure and housing finance, microfinance and Islamic banking finance.
They also highlighted the issues and constraints in the growth of credit in respective areas and initiatives taken by the State Bank to resolves these issues.
Concluding a comprehensive discussion, the Governor set up a task force for the development of mortgage financing and a task force to devise a mechanism for the rating of small and medium enterprises (SMEs).
The meeting was attended, among others, by senior officials of State Bank, presidents of selected banks, representatives of Pakistan Banks' Association, Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and other trade bodies and government officials.