At a high-level meeting with CEOs and presidents of major banks, as well as State Bank Governor Jameel Ahmad, the minister made this statement. Enhancing bank lending to priority sectors was the main topic of discussion and planning for the meeting.
Mr. Aurangzeb emphasized the banking industry's vital role in advancing the government's development program and urged banks to expand lending and financing to priority industries, including as information technology, small and medium-sized businesses, and agriculture.
Banks have avoided providing credit to these important industries over the past 18 months, mainly due to the deterrent effect of a 22% interest rate.
After borrowing Rs225.4 billion a year, the private sector has reduced its borrowing to just Rs40.5 billion in the first eight months of the current fiscal year. Even though the banks made record profits in 2023, they did a terrible job of lending to priority industries.
According to the SBP's most recent data, non-bank financial organizations saw a net debt retirement of Rs74.3 billion during that time, as opposed to Rs156.6 billion the previous year.
The sharp reduction in private sector credit put a damper in economic growth, which in fiscal 2023 was negative. Nor is the situation during the current fiscal year encouraging. Compared to the projected rise of 3 percent, the second-quarter economic growth was only 1 percent.
In order to expedite financing in the priority sectors and develop workable solutions to the obstacles and bottlenecks that are currently impeding the expansion of these crucial industries, he asked the Pakistan Banks' Association to head a task force that includes members of the banking industry, the government, and pertinent stakeholders.
The governor of SBP reaffirmed the central bank's commitment to creating an atmosphere that will enable banks to expand lending to priority sectors while also endorsing Mr. Aurangzeb's efforts. He emphasized the role that the SBP plays in supporting banks to increase their financing activities that are in line with government aims by offering financial incentives, regulatory support, and policy guidance.
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