Private Sector Borrowing Sees 88% Decline
KARACHI: Private sector borrowing from banks has declined by 88% in the first five months of this year, reflecting sluggish economic activity.
According to the data issued by State bank of Pakistan (SBP), the total credit extended to the private sector during the period from July 1 to December 11 was only Rs 10.30 billion as against the same period last year. This amount was Rs 88.10 billion.
Further details show that in the first five months of the financial year, loans of Rs 33.40 billion were written off in commercial banking branches, which is against the trend of last year in which the private sector borrowed Rs 31.40 billion during this period.
There has been a positive improvement in the affairs of Islamic banks as the private sector borrowed Rs 21.20 billion from Islamic banks in five months as against Rs 19.20 billion in the same period last year.
In addition, obtaining loans from Islamic banking branches of traditional banks paints a better picture.
However, borrowing was lower than last year and the private sector borrowed Rs 22.50 billion from Islamic banking branches of traditional banks, much less than the Rs 37.50 billion borrowed in the same period last year.
The State Bank of Pakistan (SBP) had introduced a number of incentives for the private sector to boost economic activity, especially in the face of mounting pressure due to COVID-19.
The central bank had reduced interest rates from 13.25 per cent to 7 per cent and provided affordable financing to many sectors.
Along with this, banks were asked to restructure the loans of traders and industries, which increased their liquidity.
Other SBP figures show that as of December 18, banks had restructured loans worth Rs. 217.70 billion.
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