Oct 29 - Nov 04, 2001
Banks set to cut lending rates
Banks are ready to reduce their lending rates after
a huge 2 per cent cut in the State Bank discount rate. But the
lowering of their lending rates may not correspond with the cut in
"We are working on the nitty-gritty of our
plan to cut lending rates," said senior executive of a state-run
bank. "But it is too soon and too difficult to give
Senior executives of other state-run and private
banks made a similar statement: they are ready to cut lending rates
but that might not commensurate with the reduction in the SBP discount
The reasons are obvious. Banks cannot cut costs
overnight. The lowering of SBP discount rate would enable them to
borrow money from the central bank at a cheaper rate. It would also
give them access to cheaper call money from within the inter-bank
market. "But to make a meaningful cut in our lending rates, we
need to cut down the deposit rates as well and that is a difficult
thing to do," said head of a state-run bank who declined to be
Banks already owe a cut in their lending rates in
response to a 2 per cent cut in SBP discount rate in July-August this
The SBP had lowered its discount rate from 14 to 13
per cent in July and then to 12 per cent in August. But instead of
coming down the average lending rate of all banks rose from 13.74 per
cent at end-June to 14.07 per cent at end-August.
Now after the lowering of SBP discount rate from 12
to 10 per cent, banks are rather more obliged to cut their lending
Unlike in the developed world where a cut in the
discount rate of central bank is instantly followed by rate-cuts by
banks, the banks operating in Pakistan respond to any change in SBP
discount rate with a time lag. Sometime it takes banks months to do
It depends largely on the room available for
lowering deposit rate because the banks burdened with heavy bad debts
find it very difficult to cut the cost of intermediation.
Japan may lend $800m: report
Japan may lend Pakistan as much as 100 billion yen
($814 million) to reward the government of General Pervez Musharraf
for its support of US-led military strikes in Afghanistan, the es
Japan Times reported on Thursday.
The Japanese government is expected to make a
decision on the sanctions as early as Friday, local media said.
Japan froze all new loans and grants except for
humanitarian aid after Pakistan and India conducted nuclear tests in
1998. Japan is also considering lifting sanctions against India.
The new lending to Pakistan is likely to be in
long-term loans carrying low interest rates, the English-language
newspaper said, citing government sources. The sources did not say
whether the loans would be extended immediately, the newspaper said.
$300m WB loan for banking sector
The World Bank has approved a $300-million credit
for Banking Sector Restructuring and Privatization Project to assist
the ongoing banking reform programme.
According to an announcement made by the local
World Bank office on Wednesday, the new 300 million dollar credit had
been approved by the Bank on Tuesday. Earlier, the bank had approved
350 million dollar Structural Adjustment Credit for Pakistan to
alleviate poverty and improve the growth rate.
Pakistan is working to develop a competitive
private banking system, free from the interference of vested interests
and operating under a strong regulatory framework. It is also
developing a more effective banking court system.
SBP buys $400m from kerb
The State Bank purchased about $400 million from
the open currency market between July-September to build its foreign
Sources close to the SBP say the central bank is
still buying dollars from the kerb but the daily purchase volume is
In fiscal 2000-01 the SBP had to purchase $2.1
billion from the open market to fill in the gap in the balance of
payments and to build up its reserves.
$ makes swift recovery
The dollar, after losing 40 paisa against the rupee
in the open currency market, on Wednesday made a swift recovery of 45
paisa on Thursday. Money changers said the Wednesday close of Rs61.35/Rs
61.50 per dollar lured some speculators into dollar buying as they
thought the greenback could not go further down. That lifted it up to
Rs61.80/Rs61.95 on Thursday.
Engro Chemical Pakistan Limited announced on
Thursday, the third quarter net profit at Rs419 million, showing 18
per cent growth over Rs356 million earned during same period a year
The net income for nine months to end-September
stood at Rs706 million, up 65 per cent over the three quarter earnings
amounting to Rs429 million, in 2000.
SBP cuts discount rate
The State Bank on Saturday cut its benchmark
discount rate by 2 per cent to 10 per cent to pull the economy out of
the recent slump. This is the third rate-cut so far during this fiscal
year. SBP said the new rate is effective from Monday.
SBP to cut PIBs coupon rates
The State Bank would cut the coupon rates of long
term Pakistan Investment Bonds in November when three-year and
five-year bonds would be up for sale.
Economic Adviser of the State Bank Dr Mushtaq A
Khan told a meeting of primary dealers that the coupon rate would
remain intact at 13 per cent for 10-year bonds that would be auctioned
on Monday. Primary dealers are the banks selected by the central bank
to sell PIBs in the secondary market.
Gold prices on decline
Bullion prices continued to sink in the local
market, touching Rs5,632 per 10 grams on Tuesday from Rs5,705 a day
earlier, due to continuing fall in international rates.
Global gold prices closed at $275 per ounce, down
from yesterday's rate of $278 per ounce for lack of investors'
Gold prices has fallen by Rs111 per 10 grams since
Saturday. The 10 tola gold bar (116.640 grams) is now quoted at
Rs65,690 as compared to Rs67,000 on Saturday.