After receiving feedback from senior officers of 18 commercial banks, SBP has said that, the two main factors supporting the expansion in the credit demand has been the need of firms for inventories and working capital and improved economic conditions.
In addition, fixed investment, seasonal increase in credit demand are the other factors identified by the survey respondents. The biggest positive change is in economic conditions, which is significantly contributing to increase in overall demand for credit.
Interestingly, SBP said that, the expansion in current credit demand is broad based as it has increased for agriculture, corporate, SME and consumers alike. The largest increase in demand from the last survey is witnessed in the corporate sector which bodes well for both economic growth and employment generation.
According to SBP, the overall availability of fund has continued to expand in the last quarter and is expected to visibly increase for the next quarter. The declining trend that was present for the last few quarters have reversed for both current and expected availability of funds. This is in line with the pickup in the second quarter of previous years as well, it added.
The availability of funds has been positively affected by the volume of deposits, bank liquidity and economic conditions. While, the results show that Non-Performing Loans are affecting the overall availability of funds negatively, the share of such views is slightly decreased in Q2-FY18 survey as compared with the previous survey.
The perceptions regarding the effect of competition in the banking industry on the availability of funds for loans has changed from greater than 50 in the last survey to below 50 in the current survey. As per opinion of banks officials, the availability of funds has increased for the corporate sector compared to the last wave. However, it has declined for SME, agriculture and consumer sectors.
The overall cost of borrowing has increased significantly from the last wave of the survey. The expectation for increase in cost of borrowing is even higher for the next quarter. These expectations are in line with recent increase in lending rates, the survey revealed.