PESHAWAR - State Bank of Pakistan, Governor Ashraf Mahmood Wathra has urged the banks top managements to acknowledge the changing business conditions of Khyber Pakhtunkhwa and accelerate the pace of its credit expansion and other trade facilitation activities in the province.

The Governor said our banking industry has been playing its role for increasing economic activity not only through channelizing funds but through other banking services. He however expected that further improvement will also be brought in the quality of services and products. This he said while addressing a discussion session on credit expansion in Khyber Pakhtunkhwa with the representatives of Khyber Pakhtunkhwa Chambers of Commerce and Industry (KPCC), business community, Federation of Pakistan Chamber of Commerce and Industry (FPCCI) and presidents of banks at a local hotel here on Monday.

The optimistic Governor mentioned that the unfavorable security situation in Khyber Pakhtunkhwa province adversely affected the overall economic environment during the last decade. “This environment naturally compelled the financial institutions to exercise extra prudence while taking exposures in the disturbed areas. Besides, the low presence of large-scale industries, relatively smaller size of urban centers and lower demand for financing checked the credit growth in the province, he added.

He shown optimism to grow ratio of public access to financial services, as the overall law and order situations in Khyber Pakhtunkhwa is getting improved compared to the last three years. He admitted that ratio of lending by commercial banks was still very low in the province, which needed to be increased. However, he urged the business community to ensure pre-requisite including documentation, financial disclosure and source of income to ensure easy access to banking finance.

“The borrowing demand has been increased during last one and half year due to improving security situation in Khyber Pakhtunkhwa. The ratio of lending by commercial banks still below of 2 per cent against the deposit rate of 7.4 per cent from the province, which could be improved, keeping in view the improvement in security situation in the region, Mr Wathra said.

Replying to the concerns shown by the business community representative, he dispelled the impression that there is any red zone and cautioned the banks against any such discrimination. On demand of reactivating advisory committees, he advised the relevant functionaries to reactivate them and ensure their regular meetings. While acknowledging the sacrifices of the people of Khyber Pakhtunkhwa, the Governor offered full support to the business community of the province. He categorically mentioned that personal accounts cannot be used for business purposes.

On the occasion, president KPCCI, Zulfiqar Ali Khan appraised the forum about the difficulties being faced by the business community in Khyber Pakhtunkhwa, while other representatives of business community also shared the challenges faced by them. FPCCI president, Abdul Rauf Alam pointed out that potential opportunities are there after lifting of the UN sanctions on neighboring Iran.

SBP Governor said the banking industry advances to deposit ratio (ADR) approximately is around 48 per cent, which needed to be improved for development of private sector. He, however, said the ADR ratio is only 7.4 per cent in KP, which was less as compared to banking industry ADR. He stressed the need for immediate efforts to cope with the situation, in order lessen the funding gap before the execution of projects, relating to Pak-China Economic Corridor (CPEC). He expressed the hope that the larger along with Small Medium Enterprises (SMEs) industry would grow with advent to CPEC, while it could also generate business and industrial activities in the region.

The Governor emphasized upon the banks to restore correspondent relationship and SWIFT code with eligible Iranian banks as early as possible to facilitate trade between two brotherly neighboring countries.

Giving statistical figures, Mr Wathra said KP which is 8.5 per cent of the entire country, wherein a total of 10.25 per cent existed branches of commercial banks, out of which 36 per cent only functional in rural areas of the province. He also said that the percentage is higher than other provinces, whereas nearly 30,000 banking branchless agents were providing financial facilities to public, to those which didn’t access to banking accounts.

SBP Governor said the financing ratio was remained very low to Mirco SMEs and Agriculture sector due to unfavorable conditions in KP. However, he said the State Bank of Pakistan took several initiatives for development small businesses, under which the access to loans has increased for Khyber Pakhtunkhwa and other underserved areas. He said the share of KP in credit disbursement in Agriculture sector to ensure maximum provision of loans to low-income farmers has grown up by 7.6 per cent as compared to 6.5 per cent, recorded in 2015-16.

He furthermore said a sub-committee of Agriculture Credit Advisory Committee had constituted for KP and other underserved areas of KP. He said the SBP has introduced credit and refinancing scheme for marble industry in KP.

Governor said Large Scale Manfucturing (LSM) had tremedoulsy grown up in last two quarters, while CBI remained almost lowest during last five years. He said forex change reserves have improved in the country. Similarly, exchange by and large, also improved during last couple years. He further added the fiscal position had been improved in the country, said Mr Wathra.