Banks credit picks up after lending rate cut: Raza.

KARACHI, September 16, 2009 (Balochistan Times): Banks lending has witnessed a growth of about 15 percent in the last few months after the cut of 200 basis points in lending rates. This was stated by the president National Bank of Pakistan (NBP) Syed Ali Raza while responding to the queries of newsmen at the iftar Tuesday evening. He said that the borrowing from cotton trade and by public sector organisations have been increased after the cut in lending rate. This will further pick in coming months with the improvement in the national economy, he observed. Raza, however, agreed that private sector borrowing has remained flat during this period. Responding to a question, he said that power shortage coupled with fall in economic growth has suppressed credit demand from private sector which adversely affected in banks profitability. He said that operating expenses of the banks were higher by 20 to 25 percent while the revenues were lower due to sluggish economic growth in the country. This is the reason for low profitability, he noted. However, he said that NBPs profitability has received a minor hit compared to other banks. Our balance sheet was diversified, he added. Raza said global banking has been severely suffered in the present scenario while banks in Pakistan were safer than foreign banks. Referring to banks in UAE, he said banks in Emirates have maximum exposure in property whose prices plunged by 60 to 70 percent, causing severe negative impact on their profitability. He said Pakistans foreign exchange reserves have improved and reached a satisfactory level, bringing stability to exchange rate. This will help banks, he observed. To a question about banks exposure in project financing, Raza said that NBPs exposure was only 15 percent of the total lending which is 70 percent, which is not risky. He was of the opinion that the for large bank this was not risky. It can be risky for smaller banks, he noted.

(THROUGH ASIA PULSE)