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All public sector banks cut lending rates up to 2pc

RECORDER REPORTKARACHI: All public sector banks have announced cut in the lending rates up to 2 percent following the government's decision to cut rates on National Saving Schemes by 2 percent.

The State Bank had also cut its own lending rates charged from the banks by 2 percent, from 13 percent to 11 percent.

The cut in lending rates were generally introduced to pump cheaper money in the stagnant economy. The bankers believe that in the light of low inflation, up to 6 percent, it was imminent to reduce the lending rates.

National Bank of Pakistan has reduced rates of mark-up on all types of lending by 2 percent and fixed the cap at 16 percent p.a.

The cut will be applicable on short term and long term financing to trade commerce and industry.

"To reduce cap rate of 16 percent will apply with immediate effect on all international lending in future and on all renewals of existing limits in future after expiry of their current validity provided up-to-date mark-up has been paid and accounts meet all requirements of SBP Prudential Regulations and other lending norms," said the circular issued by the NBP.

Habib Bank has decided to reduce the cap on the lending rates by about 1.5 percent (1.45 percent).

"In order to help spur economic growth in the country, the largest banking network in Pakistan has reduced the maximum lending rates from 18.25 percent to 16 percent," said press release issued by the HBL.

While the Bank has reduced the lending rates to 16.8 percent, it is worth mentioning that National Saving Schemes are still offering profit rates of up to 15 percent per annum.

"The government still offers deposit rates which are at least 3-4 percent higher than those offered by the commercial banks. This makes the playing field uneven and also results in higher debt servicing cost to the business at large and the government itself," it concluded.

United Bank and Muslim Commercial Bank have also reduced the lending rate by about 1.5 percent (1.45 percent).

"Following the decision taken by the State Bank to reduce the repo rate aiming to bring down the interest rates in the economy, UBL announces reduction in the mark-up rate to 46 paisas from 50 paisas per thousand, a reduction in our lending rate from 18.25 percent to 16.8 percent p.a.," said a UBL press statement.

The Bank expressed hope that the reduction in the mark-up rate will help to increase the economic activity in the country.

The Muslim Commercial Bank has cut down the rate by about 1.5 percent (1.45 percent)." MCB announced on Thursday that effective from 1st January, 2000 it has reduced its maximum mark-up rate from 18.25 percent to 16.8 percent p.a."

MCB was also critical that the rate of return on National Saving Schemes is still too high.

Allied Bank of Pakistan had already announced 2 percent cut in the lending rate affective 1st January, 2000.

The Financing Minister had been advocating for lower lending rate since his inception in the government. Financial circle believes if the inflation remains under control, the lending rate may face another cut in future.