Governer State Bank of Pakistan, Ashraf Mahmood Wathra said that Pakistan banks need to restore their SWIFT codes with eligible Iranian banks as soon as possible to enable the process of trade between Iran and Pakistan.
The governor said this in a joint meeting on credit expansion in Khyber Pakhtunkhwa Chamber of Commerce and Industry (KPCCI), banks’ CEOs and other stakeholders were also present in the meeting, the banks were also asked to recognize the shifting business conditions.
He insisted that the banks should accelerate the pace of credit expansion and other trade facilitation.
He pointed out that despite the improved security conditions, Khyber Pakhtunkhwa’s bank deposits share was at 7.4% and also a very small 1.13% share in overall banking loans. He agreed to the loan share being low and expected it to increase in the future.
36% of banks’ branches in Khyber Pakhtunkhwa were in the rural areas from the total of 10.25% in the province, which is commendable compared to the other provinces. There were 30, 000 branchless banking agents operating in the province as well.
The governor aimed to provide more loans to the farmers in the agricultural sector thus he increased the share of credit disbursement in KP to 7.6pc from 6.5pc.
Commercial banks consisting of two working groups to promote agriculture have been formed in the province and central bank is pushing pressure to open agriculture designated banks in KP and under-served provinces.
The governor said that although the Pakistan’s bank industry was playing its role in lifting economy by channelizing funds but he expected them to further improve in quality of services and products.
The governor said that the deplorable security situation obliged the financial institutions to practice being extra cautious while taking exposures in disturbed areas of KP that harmfully affected the overall economic development in the last decade.
Commercial banks’ lending practices also came under the radar of the businessmen present in the meeting, they said that banks had the province in the negative list of lending and the documentation was also complicated. The governor added that lower demand for financing, smaller size of urban centers and foremost the low presence of large-scale industries affected the credit growth of the province.
KPCCI President Zulfiqar Ali Khan said that banks were not interested in lending in KP. The designed documentation process was apparently strict and people could not lend because of that, it was an excuse for refusing credit to KP businessmen.
Former president KPPCI, Fawad Ishaq said that KP was a declared red zone by the banks and the default rate on bank loans was lowest in this province.
The strict documentation strategy and KP’s name in negative list were strongly denied by Chairman Pakistan Banks’ Association Mohammad Aftab Manzoor, he said that the rules were same across the country in all the provinces.
SBP governor dismissed the idea of KP being in the red zone and warned the banks against any discrimination in addition to command the relevant functionaries to reactivate advisory committees and ensure meetings on regular basis. He also met with Chief Minister Pervez Khattak and his team and discussed different ways to increase KP’s financial presence and emphasized on resolving and overcoming the challenges faced by the business community.