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Sep 17 - 23, 2001

Gap in lending, deposit rates soars

The spread between the lending and deposit rates of the banks operating in Pakistan has risen to 8.74 per cent serving as a disincentive to the savers and adding to the financial woes of the business community.

The latest State Bank statistics show that weighted average lending rate of all the banks put together stood at 13.74 per cent in fiscal 2000-01, whereas weighted average return on their deposits was only 5 per cent. Thus the spread was 8.74 per cent up from 8.13 per cent in fiscal 1999-00 when weighted average lending and deposits rates stood at 14.02 and 5.89 per cent respectively.

The statistics show that weighted average lending and deposit rates of the state-run banks stood at 13.91 per cent and 4.39 per cent in fiscal 2000-01. In other words the banks are borrowing money from people at an average rate of 4.39 per cent to lend it at 13.91 per cent keeping the difference at 9.52 per cent. This spread was much higher than 9.18 per cent as recorded in fiscal 1999-00 when their weighted average lending and deposit rates were 14.53 and 5.35 per cent respectively.

Time and again businessmen and general public voice concern over the rise in the spread between lending and deposit rate of the banks but to no avail. Higher spread between the two rates not only discourages savings but also adds to the financial woes of businessmen.

Senior bankers say they cannot reduce this huge spread in the face of huge stocks of non-performing loans. Executives of state -run banks say that a huge drag of non-performing loans makes it difficult for them to cut markups in response to an easing off of the monetary policy. They say if they go for lowering interest rates in response to a 2 per cent cut in SBP discount rate in July-August, they will also have to cut deposit rates. But that is not possible given the fact that the banks are already paying low return on deposits.

Workers in Riyadh remit $5.58bn

Overseas workers in Saudi Arabia have transferred SR20.95 billion ($5.58 billion), through official banking channels, during the first seven months of the year, a Saudi Arabian Monetary Agency (SAMA) report revealed.

This does not include transfers through illegal means (hundi system) and the cash, which is carried by many while travelling to their homelands. This amount, transferred through official channels, accounts for 10 per cent of the Kingdom's total revenue receipts and 3.5 per cent of the national GDP.

According to the available statistics, the transfers peaked in July, coinciding with the vacations period here, when a total of SR3.64 billion ($970 million) were transferred to various countries. The lowest transfers during the seven months period was recorded in April when the amount recorded was only SR2.9 billion.

NBP to launch long-term bonds

National Bank of Pakistan (NBP) is working on a plan to launch long-term bonds to generate long-term funds for corporate sector and mortgage business (home loans).

Talking to the reporters on Monday, NBP president Ali Reza said the bank was going for retail banking from next year under which new products like expanded automated transaction machines (ATMs) network, bills payment kiosks, credit cards, auto loans, home loans (mortgage) and fund management scheme would be initiated.

SBP pumps in Rs10.5bn

The State Bank on Thursday pumped in Rs10.5 billion into cash-strapped inter-bank money market through a one week reverse repo of treasury bills. The central bank purchased T-bills from the banks at 9.45 per cent for one week at its open market operation.

Gold prices rise by Rs107

Gold prices on Wednesday swelled to all time high to Rs6,044 per 10 grams showing a rise of Rs107 in just one day as compared to Rs5,937 on Tuesday following terrorist attacks on key installations in the United States. According to a spokesman of Karachi Saraf and Jewellers Group (KSJG), the price of 10 tola bar (600 grams) has shot up to Rs70,600 from Rs69,250 on Tuesday.

Shell to invest $32m in PAPCO

The shareholders of Shell Pakistan Limited (SPL) on Monday gave a go-ahead signal to the company to invest upto $32 million in the construction of the white oil pipeline project (WOPP).

The shareholders gave their consent at an extra-ordinary general meeting. This will give the company 26 per cent shares in Pak Arab Pipeline Company (Pvt) Limited (PAPCO).

The total cost of the project is estimated to be $480 million and is expected to be completed by 2002. The planned financial structure is 75 per cent debt and 25 per cent equity, says a press release.

ADB to provide $250m

The Asian Development Bank will spend $250 million on Pakistani agriculture in the current financial year.

This was stated by ADB programs manager S. H. Rehman during a meeting with Federal Minister for Food, Agriculture and Livestock Kher Mohammad Junejo on Saturday.

ADB promises $500m loan annually

The Asian Development Bank (ADB) has provided $250 million loan for the development of Pakistan's capital markets, said resident representative of ADB Marshuk Ali Shah on Saturday.

Speaking at a seminar on 'business opportunities' held at the Lahore Chamber of Commerce and Industry (LCCI), he said rationalization, transparency, equity and professionalism would be introduced in the financial sector under the capital market development programme loan.

PICIC finances

Pakistan Industrial Credit and Investment Corporation (PICIC) has financed 1,187 industrial projects by providing Rs28 billion across the country.