SBP initiatives very encouraging but implementation poor

LAHORE-The business community has asked the central bank to get its policies implemented in true spirit to provide financial support to the trade and industry, as the SBP initiatives are very encouraging but implementation is not up to the mark.

Pakistan Industrial and Traders Association Front (PIAF) Chairman Mian Nauman Kabir, in a joint statement with vice chairman Javed Siddiqi, said that with regards to the ease of doing business, the central bank has taken several proactive measures like encouraging banks to facilitate borrowers by offering products as per their needs and demands.

“The business community urges the State Bank to check the performances and customer services of commercial banks, as the central bank is a watchdog on these banks. The banks don’t give loans to SMEs, particularly the women entrepreneurs and common customers, who are treated badly,” he added.

He suggested the SBP check the profits of all banks, besides monitoring of loans they disperse among the SMEs, farmers and businesswomen. 

“The PIAF has not seen any revolutionary step from the present SBP governor, recommending him to push the commercial banks to pick a board of directors also from SME sector instead of taking from the big corporate sector.”

“We appreciate the SBP for a huge rate cut that helped the federal government borrow at a cheaper cost from banks through the sale of treasury bills and bonds. Interest rate slashing also aims to help the government make large cash transfers to daily-wagers and bear the cost of refinancing offered to banks that make subsidized loans to households and businesses.

Mian Nauman said that the best part of such refinancing to banks relates to the subsidized lending to big companies and small and medium enterprises (SMEs) for keeping their employees on payroll amidst the disruption in economic activities, which is appreciable.

PIAF chairman said the SBP has taken several steps to mitigate the impact of Covid–19 on economic growth. Since the onset of pandemic-related economic pressure, the central bank has reduced policy rate from 13.25 per cent to 7 per cent, he said. He added that the central bank also allowed one-year extension in principal payments along with rescheduling and restructuring of loans without affecting the credit history of borrowers, which is the right step in the right direction.

Mian Nauman said that the SBP’s system was fully equipped to explore the untapped potential of the local market but the commercial banks’ policies and strategies are not fully aligned with the central bank as they have different policies and priorities which need to be checked by the regulator.

PIAF vice chairman Javed Siddiqi hailed several other measures taken by the SBP to mitigate the impact of Covid-19 while stressing the importance of the provision of the business-friendly environment. “But the ground reality is that on one side government is striving for industrialization and on the other commercial banks are creating problems and red-tapism in loans provision,” he said. “Every bank has a standard policy, as most of the banks do not entertain the customers in their true spirit.”

It is good that the SBP has formed a Steering Committee on Housing and Construction Finance chaired by SBP governor to support government’s efforts to promote housing and construction sector and has assigned mandatory targets to banks to extend mortgage loans and financing for developers and builders. He also called for simplifying construction loan policies and enhancement in their limits, as expenses have risen manifold.