The overall bank credit to the private sector increased by 170 percent during the first nine months of the present fiscal year however the conventional banks showed a major participation.
According to the recent figures released by the State Bank of Pakistan (SBP), economic activities remained much higher in the private sector as compared to the last fiscal year though the banks’ lending trend revealed their trust in borrowers.
In recent past, the banks were cautious and hesitant to provide private loans and were keen to park their most of the liquidity in the risk-free government papers.
The data further reveals that the privates sector borrowed Rs 1.198 trillion during July-March FY22 as compared to Rs 443.6 billion in the same period of previous year. It demonstrates the private sector lent Rs 754.7 billion more money from banks or the increase was 170 percent as compared to the previous year.
Read more: Bank advances to private sector more than doubled to Rs 874.3 billion in eight months
The government attained an economic growth rate of more than 5 percent in FY21 whereas this year the SBP said it would be between 4 to 5 percent.
Moreover, the increasing appetite for bank money is a clear sign of fast expanding business activities and this motion would help to keep the growth rate up to the expectations of the economic managers.
Bankers stated apart from a few sectors the stock of non-performing loans (NPLs) is not much high which motivates banks to extend more money to the private sector.
Likewise, the Islamic banking branches of conventional banks also performed better compared to full-fledged Islamic banks because their borrowing to the private sector increased sharply.
During the July-March period, these conventional banks loaned Rs 246 billion compared to Rs 133 billion in the same period of last year, showing a growth of 85 percent.
The attraction for lenders from conventional banks and the antagonistic approach of its Islamic banking branches mutually resulted in total lending of Rs 1,037 billion making it 86 percent of the total lending to the private sector until now.