Overall demand for loans rose during Q2 FY18, says: SBP

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LAHORE: The State Bank of Pakistan released its “Bank Lending Survey” for quarter two FY 2018 on Thursday, with feedback from 18 senior officers of commercial banks.

According to the survey, the bank officials expressed overall demand for loans kept on rising during the last quarter and predicted this trend would continue well into the next quarter as well.

The central bank said in comparison to its previous survey, the amount of people having positive views about credit conditions was higher this time.

Citing the two main reasons for increased credit demand was attributed to the requirement of firms for inventories and working capital besides improvement in economic conditions.

Also, SBP said fixed investment, seasonal rise in credit demand and other factors were also highlighted as the reason for growth by the respondents. It said the major impact made was due to change in economic conditions, which was fueling the demand for increased credit.

The survey pinpointed the highest rise in demand compared to the last survey was made in the corporate sector, which central bank boded well for both employment generation and economic growth.

It added, expansion in credit demand was expansive as it rose for agriculture, corporate, SME and consumers alike. Also, SBP observed overall cost of borrowing rose in comparison to the last survey and predicted an increase in overall cost of borrowing for the next quarter.

It added, this increase fell in line with the recent interest hikes made by the central bank.

Regarding overall availability of funds, SBP said it had exhibited expansion during the last quarter and forecast it to visibly increase for the next quarter. The central bank stated the declining trend that had continued since the last few quarters had rebounded for both current and expected availability of funds.

Moreover, it added this trend was in line with the increase in second quarters of previous years too. Availability of funds had positively impacted bank liquidity, economic conditions and volume of deposits, said SBP.

Non-performing Loans (NPLs) were impacting overall availability of funds adversely, although those views fell slightly during quarter 2 FY18 survey compared against preceding survey.

Furthermore, views in response to impact of competition in the banking industry on availability of funds for loans altered to less than 50 in this survey against over 50 during preceding one.

According to bank official’s opinion, funds availability had risen for the corporate sector compared to the previous wave but it declined for agricultural, SME and consumer sectors.