Banks again miss agriculture credit target by Rs seven billion

Commercial and specialised banks again missed indicative agriculture credit disbursement target of Rs 270 billion for the fiscal year 2010-11 by Rs 7 billion, mainly due to slow economic activity and floods in the country. Banks have been missing indicative agri credit target since fiscal year 2008-09 and this is third consecutive fiscal year where the commercial and specialised banks have not achieved the target set by the State Bank of Pakistan.
In FY10, the indicative target of Rs 260 billion was missed by Rs 12 billion to Rs 248 billion. Sources in banking sector told Business Recorder on Tuesday that the State Bank had set an indicative credit disbursement goal of Rs 270 billion for the agriculture sector for fiscal 2010-11, which was higher by Rs 10 billion, than fiscal year 2009-10 projection of Rs 260 billion, and Rs 22 billion, higher than the actual disbursement of Rs 248 billion in FY10.
Against the target, the commercial and specialised banks have achieved 97 percent of agricultural credit disbursement target during FY11. State Bank of Pakistan''s latest statistics revealed that banks have disbursed Rs 263.02 billion in FY11, which is some Rs 15 billion or 6.0 percent higher than the disbursement of Rs 248.1 billion in FY10. However, the disbursement in FY11 is some Rs 7 billion less than the indicative target of Rs 270 billion set by the SBP.
Bankers said this is an achievement that despite several hurdles banks have achieved 97.4 percent target. "This achievement has been made despite the fact that there is a shortfall of around Rs 14 billion in the disbursement by largest specialised bank - Zarai Taraqiati Bank Limited (ZTBL) due to stuck-up of their flood affected loans/related liquidity issues," they added.
They said banks have performed well despite almost stagnant private sector credit and aftermath of devastating floods in the country that has damaged vast agriculture infrastructure and caused huge losses to standing crops. According to disbursement details, sharp decline in disbursement had been registered in ZBTL and some 7 private banks, while agricultural credit disbursement by other commercial and specialised banks, including 5 leading commercial banks - Punjab Provincial Co-operative Bank and 5 domestic private banks, have posted massive increase.
Five major commercial banks included Allied Bank (ABL), Habib Bank (HBL), MCB Bank, National Bank (NBP) and United Bank (UBL). These banks have surpassed their target of Rs 132.45 billion by Rs 8 billion. The overall agricultural credit disbursement by these banks has registered an increase of 17.31 percent in FY11. Cumulative disbursement by these commercial banks stood at Rs 140.312 billion in FY11 compared with Rs 119.608 billion in FY10, depicting an increase of some Rs 20.8 billion.
Agricultural credit disbursement by ZBTL - the largest specialised bank, posted a sharp decline of 17.28 percent during the period under review. Disbursement by ZBTL stood at Rs 65.36 billion in last fiscal year against disbursement of Rs 79.01 billion in fiscal year 2010, showing a decrease of Rs 13.65 billion. The bank has achieved only 80 percent of its indicative target of Rs 81.8 billion.
The agricultural credit disbursement by Punjab Provincial Co-operative Bank (PPCBL) and 13 private commercial banks has surged by 25 percent and 14.64 percent respectively by surpassing their annual targets. PPCBL has disbursed Rs 7.16 billion up by Rs 1.44 billion in FY11. The disbursement is also Rs 310 million higher than the target of Rs 6.85 billion.
Similarly, 14 domestic private banks also disbursed combined Rs 50.187 billion in FY11 against Rs 43.77 billion in FY10, up by Rs 6.41 billion. Domestic private banks achieved 78 percent target of Rs 48.9 billion. "Floods across the country and slow economic activity on the domestic front had badly hurt the agricultural credit disbursement, although majority of banks has tackled the situation intelligently, however indicative target has been missed because of ZTBL''s slow disbursement," analysts said.
They said floods in August had seriously affected agricultural activities in Punjab, Sindh and KP, resulting in decline of the credit disbursement. Although banks'' operations in most parts of the flood-affected areas have restored in the second half of FY11, but in some areas growers had given priority to rebuild their destroyed homes. Therefore, in the first half of last fiscal year agricultural credit disbursement was in negative. While later in the second half they focused agricultural activities and some improvement was also witnessed on the disbursement side, they added.