ISLAMABAD: Pakistan Economy Watch (PEW) on Tuesday said commercial banks are not serving masses as the business community has weakened their bond with market economy.
Central bank continued to provide liquidity to commercial banks which in turn lend it to the government that guarantee security and good returns; therefore, banks have started avoiding masses, business community, rural economy and reduced efforts to attract borrowers or depositors, said Dr Murtaza Mughal, President PEW in a statement.
“The situation is hurting economy as the credit offtake by the private sector has been reduced by over 100% in 2015 as compared to 2014 despite record cut in interest rates by SBP.”
Dr Mughal said that banks has also started preferring financing ongoing projects on short-term basis, hitting those who want money for new projects.
“Enhanced loans to the government has also pushed banks to avoid agricultural loans having a shade of default and start focusing urban centres. Easy profitability has disconnected banks with the market economy, resulting in frustration among businessmen while some are charging much higher than the policy interest rate,” he said.
Banks would not take risk while they can earn by lending to the government, he said, adding that it seems difficult to achieve growth without the participation of banks.