Government accused of devouring 90 percent liquidity of banks

The government on Tuesday was accused of borrowing 90 percent liquidity of the commercial banks and leaving nothing for disbursement to agriculture and other sectors after the issue of high mark-up on agriculture sector despite low policy rate came under discussion. A meeting of the National Assembly''s Standing Committee on Finance met with Qaiser Ahmed Sheikh to discuss the disbursement of agriculture loans at exorbitant rate.
The committee members from treasury as well as opposition said when the interest rate of SBP is at the lowest level, agriculture loans are being disbursed even at 14.5 percent to farmers. Asad Umar said that mark-up on production loan for agriculture sector was 12 percent last year but it has been increased to 14.5 percent. "State Bank of Pakistan (SBP) needs to give us a clear policy whether or not this is justified," he added.
MNA Farooq Sattar of Muttahida Qaumi Movement said that industrial sector is getting benefit from low interest rate but there is nothing for agriculture sector. Nafeesa Shah, MNA of Pakistan Peoples Party parliamentarians (PPPP) claimed that tax on agriculture is also exorbitant as there is no exemption to farmers on income below Rs 400,000. She said that in India trillion of rupees go to rural economy but in Pakistan it is vice versa and farmers'' children are forced to move towards urban areas primarily because of inequitable development in rural areas.
A representative of private sector banks said that 72 percent disbursement to the agriculture sector is done by the commercial banks while ZTBL''s share is very small. He said that 41 percent of the total disbursement goes to small farmers. An official of ZTBL said, "We have Rs 54 billion credit line of State Bank of Pakistan (SBP) and are paying 7.5 percent interest to the SBP." He added that ZTBL loan size is Rs 250,000 and their administrative cost is high due to documentation and labour.
Asad Umar said that SBP appears to be facilitating those who have laundered money to Dubai and purchased property there, as it is reluctant to provide information sought on action taken by regulator against those who are giving advertisements in Pakistan for purchase of property in the UAE.
He said that he wants to say on record as to why the State Bank has not provided details which were sought almost four months back about investment by individuals in Dubai in real estate or other businesses.
Later talking to media persons, Asad Umar said that he had asked the question about investments by the individuals in Dubai - either in businesses or in the shape of properties - but got no response from the SBP. "The situation forced me to say that the SBP is supporting or facilitating money laundering," he added. He said as the incumbent SBP governor is going to retire in a few weeks and he may wants his successor to respond to tough questions.
Earlier, during the meeting, absence of governor State Bank of Pakistan, president National Bank of Pakistan and president Zarai Taraqiati Bank Limited displeased the committee members and it was decided to call them in person in the next meeting of the committee. The committee directed the Ministry of Finance & Revenue to ensure the compliance of its directions for providing brief of the meeting well in time in future for advance study of members.
The committee was briefed by the representatives of ZTBL, NBP and SBP regarding the reasons of high markup rates on agriculture loans. The committee was informed by the representative of ZTBL that 8.5% is charged for administrative expenditures.
The committee showed concern over the high markup rates charged by the ZTBL and recommended that single digit markup rates should be charged to agriculture sector.