Banks advances growth slumps to 1 per cent

Tuesday, 09 June 2009 11:09

KARACHI - The private sector advances of the scheduled banks have posted only one percent growth during July-March 2008-09 as against robust growth of 15.1 percent in the corresponding period of last year amid slowdown in business advances demand during the period under review. The YoY trend of private sector advances indicated that deceleration in business sector loans stemmed essentially from the fall in working and trade related loans. In fact, the extent of

deceleration in total working capital loans was strong enough to offset the high growth in fixed investment loans.

A disaggregated analysis given in SBP report reveals that the slowdown in the business sector advances was visible in various sectors including manufacturing, construction, telecom, commerce and trade sectors and other business services.

Report, however, also foresees that the sugar sector may seen higher demand for fixed investment loans in the months ahead as the government has recently allowed a few industrialists to set up new sugar mills.
Also, working capital demand in the cement sector is expected to increase slightly in the period to come

According to the sectoral break-up of private sector advances, the trade related loans exhibited a fall of 0.3 percent during Jul-Mar FY09 compared with strong growth of 24.7 percent in the corresponding period last year. The slowdown was contributed by both the import finance and export loans.

On the other hand, the monthly trend in import finance suggests that the stability in rupee value against US dollar since December 2008 has somewhat eased the downward pressure on import finance against FE-25 loans.

Advances growth to the manufacturing sector decelerated drastically to 7.3 percent during Jul-Mar FY09 compared with robust growth of 19.2 percent in the same period last year. Monthly trend depicts that after recording strong growth in the initial few months of FY09, there was an unusual drop in advances demand during November 2008 onwards, even during Jan-Mar FY09 a number of sectors had seen net retirement which is unlike to previous years.

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