Responding to a query on fiscal and debt limitation act she told the house during question-answer session that the government is going through all conditions of the fiscal responsibility and debt limitation law.
The only aberration is its annual reduction in total debt to GDP ratio, which was explained in the policy statement after announcement of budget under the law. About the interest rates of banks, she said that the banks should clarify to their customers about the exact interest rates. Under the present circumstances, the discount rates are on the higher side.
In response to a question, she said the banks should comply with the State Bank of Pakistan (SBP) regulations and properly inform their customers about the exact amount of interest rates. Hina Rabbani Khar further said that total number of loans in US dollars received/disbursed from abroad since March 2008 till September 2009 amounted to $5,895.0 million.
An amount of $2,630.6 million is payable as interest on these loans till maturity. The domestic loan obtained from banks during March 2008 to September 2009 amounted to Rs 558.4 billion for budgetary financing. Responding to another question, she said that the World Bank (WB) has provided an amount of US $3,144.38 million as assistance during the last three years. Out of this, the government has utilised an amount of US $2,358.59 million.
In a written reply, Minister for Finance and Revenue Shaukat Tarin said that the Board of Directors of the respective banks approve credit policies under which the mark-up rates on bank's loan and credit cards are determined by the banks. The State Bank of Pakistan (SBP), being regulator of the financial sector, ensures that the mark-up rates as well as other important terms and conditions of various commercial banks are properly revealed to the customers enabling them to take better decision.
There is no such proposal under consideration of SBP to reduce the mark up rates on banks loans. The bank has intimated that increase or decrease in interest rates depends on interwoven economic factors including the risk profile, years of association, type of lending facility, tenor of loan, prevailing economic conditions. Minister for Finance further said that the SBP has already developed strategic plan for Islamic banking in Pakistan in 2008.
The SBP has taken following steps for growth and development of Islamic banking industry in the country. Three-pronged strategy outlining detailed criteria for opening of full fledged Islamic banks, Islamic banking subsidiaries and dedicated Islamic banking branches of conventional banks have been developed. The SBP licensed 6 full-fledged Islamic banks and 13 conventional Banks to operate dedicated Islamic banking branches.
An expanded branch network of over 500 branches with presence in over 50 cities and towns and covering four provinces of the country and AJK has been developed. The credible and unique Shariah compliance framework including a Sharia Board at SBP, Fit and Proper Criteria for Shariah Advisors to be engaged by Islamic Banking Institutions and Instructions and guidelines for Sharia compliant banking has been developed.
The essential modes of financing and model agreements for Islamic Banking Industry as per minimum requirements for Shariah compliance have been issued. The guidelines on Islamic Agriculture Finance and provision of Islamic microfinance services have been issued by SBP being the first Central Bank in the world to issue such guidelines.
To bring Islamic banks at par with conventional banks, Islamic Export Refinance Scheme has been launched. Guidelines on Risk Management for Islamic Banking Institution have been issued. Besides, Islamic Banking Bulletin and Islamic Banking Sector Review have been launched.
To promote Islamic Banking, International Islamic Infrastructure Institutions such as Islamic Financial Services Board (IIFSB) International Islamic Financial Market (IIFM) & Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) have been collaborated with. Having a full-fledged Islamic Banking System in Pakistan is a gradual and time-consuming process. Hence it would be premature to give any timeframe, he added.