Ishrat Husain slams banks for making risk-free returns

Former central bank chief Dr Ishrat Husain took commercial lenders to task on Wednesday for their laziness, which has resulted in vast gaps in banking services in agriculture, small and medium enterprises (SMEs), low-cost housing and personal finance segments. In his keynote address at the fourth Digital Banking and Payments Summit organised by TerraBiz, Dr Husain said he was “not satisfied” with the progress that the banking sector has made since his time as governor of the State Bank of Pakistan (SBP) in the early 2000s. “The size of the banking industry is small relative to the economy and its peers,” he said while noting that banks are overly focused on the corporate sector, high net worth individuals, trade financing and fee-based activities. “Their networks in under-developed areas are confined to deposit mobilisation rather than lending,” he said. Referring to the industry-wide advances-to-deposit ratio (ADR) of less than 50 per cent, he said banks invest heavily in government securities. Meanwhile, the share of SME credit has gone down to 7pc from a high of 17pc some years ago. Investments of commercial banks in risk-free government securities as a percentage of deposits are about 70pc — which is “not what banks should be doing… this is stifling private-sector growth”.