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Banks may miss Rs60bn farm loan target
KARACHI, Nov 2: For the third consecutive year in 01-02
banking sector would not be able to meet loaning target (Rs 60
billion) for the farmers, as the biggest loaning agency , the
Agricultural Development Bank of Pakistan (ADBP) is virtually
limping in its operations for want of resources.
Banking circles say that the ADBP has not been able to get any
line of credit from the nationalized and the privatized
commercial banks for onward distribution of farm loans.
Following discontinuation of the concessionary line of credits
from the State Bank of Pakistan since October last year, the
ADBP was asked to seek credits from the banks to augment its
resources.
According to banking circles, the banks and the ADBP were not
able to reach an agreement on the rate of interest on which
the banks should offer credit to the ADBP.
Finally, the intervention of the State Bank settled the issue,
and it was decided that banks will charge a minimum average of
T- Bills rate from the ADBP on credit they would offer.
The State Bank also offered an option to the banks to include
their credits for the ADBP in their mandatory targets of the
agricultural credit. However, banks have not been tempted to
offer any line of credit to the ADBP. A meeting of the Federal
Committee on Agriculture (FCA) held last Friday at Islamabad
was informed that the ADBP was depending entirely on its own
recoveries to offer loans to the farmers.
The meeting was chaired by the Federal Food and Agricultural
Minister Khair Mohammad Junejo to take stock of the crops
situation and review the credit disbursement position in
agricultural sector.
Out of total Rs60 billion credit to be disbursed in the
current fiscal year, the ADBP has been given the highest
target followed by the nationalized and the privatized
commercial banks.
For last two consecutive years, the ADBP has not been able to
achieve its recovery and loan disbursement targets. Since the
ADBP is the single largest loaning agency for the agricultural
sector, its shortfall in recoveries and disbursement affect
the overall credit supply to the agriculture.
In 1999-2000, the target for agricultural credit was set at
Rs52.92 billion. But the SBP annual report for 2000-2001
informs that Rs39.7 billion agricultural loans were disbursed
in 99-00. The loan disbursement was scaled down to Rs49.26
billion in 00- 01 when actual disbursement was Rs44 billion.
The ADBP was asked to disburse Rs35 billion in 99-00. It could
offer only Rs24.4 billion loans to the farmers in that year.
In last fiscal year, the ADBP was given a task to give Rs31.25
billion loans but it provided only Rs27.6 billion loans to the
farmers.
Main reason for this shortfall in loan disbursement is ADBP's
inability to recover targeted amount in last two year. During
the last fiscal year the ADBP was asked to recover Rs49.29
billion loans from the farmers. It could recover only Rs31.9
billion. Since the ADBP depends entirely on its recoveries for
loaning operations, the disbursement fell short of the
targets.
The SBP report attributes low loan recovery from farmers to
drought that struck a big part of the country. The government
has to defer the recovery drive in many districts of Sindh and
Punjab, and the ADBP was asked to restructure farmers' loans.
An official document reported total outstanding loans of the
ADBP at Rs75.72 billion at the end of May this year. Total
outstanding agricultural loans of all the institutions,
commercial banks, the ADBP and the Federal Cooperative Bank
amount to Rs89.52 billion at the end of May this year.
The SBP report ADBP recovery at 75 per cent of the target
fixed for Punjab, 62 per cent of Sindh's target, 63 per cent
of NWFP target and only 21 per cent of the Balochistan target.
The SBP has discontinued concessionary credits to the ADBP
mainly to motivate it for recovery. The ADBP was asked to seek
credit lines from the commercial banks to ensure that market
based cost of funding would force agricultural lending rates
to be aligned with commercial lending rates, and in the long
run, greater competition amongst the banks in terms of lending
to agriculture should bring down lending rates.
November 3, 2001
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