SBP sets Rs315 billion agricultural credit target
KARACHI: The State Bank of Pakistan (SBP) has set an indicative target of Rs315 billion for agricultural credit disbursement through banks during the current fiscal year 2012-2013 (FY13).
The proposed target is nearly 10.5 percent higher than the past fiscal year’s target and about 7 percent above total disbursement for fiscal year 2011-2012 (FY12).
Sources in the banking sector told BR on Friday that for the first time ever, SBP set a target of over Rs300 billion for agricultural credit disbursement on growing demand across the country followed by rising cost of raw materials.
The target, set for commercial, specialised and microfinance banks for FY13, is Rs30 billion higher than the past year’s (FY12) target of Rs285 billion. The target is also 7.2 percent or Rs21.2 billion higher than total agricultural credit disbursement during the past fiscal year. Cumulatively, banks disbursed Rs293.8 billion in FY12.
Bankers are confident that the target will be achieved easily with the support of microfinance banks because of their higher penetration in rural areas.
They said that the achievement of the last fiscal year target was extremely difficult for the industry in the backdrop of a declining trend in the overall private sector credit and high agricultural non-performing loans (NPLs) of major banks in the wake of devastating flood of 2010 followed by heavy rains in Sindh during 2011.
However, they said, with the support and special initiatives of the central bank, the industry could easily surpass the previous year’s target.
“The SBP adopted a multi-pronged strategy, making an all out efforts for achieving the target. This included swift settlement of crop loan insurance claims, close coordination with provincial revenue departments to facilitate the One Window Operation (OWO) in agriculture-intensive districts for timely completion of revenue formalities, holding of farmers’ awareness and financial literacy programmes and follow up of indicative targets with top managements of banks and their agricultural heads,” they said.
In addition, the contribution of the central bank’s Banking Services Corporation (BSC) field offices towards proper monitoring of regional targets also significantly helped in achieving the target, they maintained.
Meanwhile, agricultural credit disbursement targets of five leading commercial banks have also been enhanced by nine percent.
Among them are Allied Bank of Pakistan (ABL), Habib Bank Limited (HBL), MCB Bank Limited, National Bank Limited (NBP) and United Bank Limited with a 48 percent share in total farm credit disbursement.
Of the total target of Rs315 billion this year, about Rs153.5 billion has been allocated to these banks against Rs141 billion for the past fiscal year, depicting an increase of Rs12.5 billion.
In addition, indicative agricultural credit disbursement target of two specialised banks i.e. Zarai Taraqiati Bank Limited (ZTBL) and Punjab Provincial Cooperative Bank (PPCBL) has been increased by 2.17 percent and 18.42 percent, respectively. A target of Rs72 billion has been given to ZTBL, while that of PPCBL has been increased to Rs9 billion from Rs7.6 billion.
Similarly, a target of Rs 13.8 billion has been set for microfinance banks inducted into farm credit business during the past fiscal year for FY13 against the past fiscal year’s target of Rs12.2 billion. Fourteen private banks have been given an indicative target of Rs66.7 billion up from Rs 54.1 billion.
In addition, Standard Chartered Bank, which was de-listed from the list of domestic private banks last year, has again been given a target of Rs500 million for FY13.
Despite an indicative target set by the State Bank, the Standard Chartered Bank was de-listed because it had not been lending to farmers for the past few years.
Bankers said that devastating floods across the country had hit hard the agricultural loan disbursement process during FY10 and FY11. However, they said, this year’s indicative target could be achieved easily as there is no flood threat, while the federal government had also announced to increase the wheat support price.