Banks offer below-KIBOR financing

Several banks are offering new financing to businesses at rates below the Karachi Inter-Bank Offered Rate (KIBOR), as the benchmark six-month KIBOR—representing the interest rate at which banks lend to each other—dropped by 63 basis points, reaching a 19-month low of 17.94% on Thursday. Speaking to The Express Tribune, Saad Hanif, Head of Research at Ismail Iqbal Securities, explained that the drop in KIBOR, coupled with the offer of new credit to the private sector at below the benchmark rate, is creating monetary easing. This shift is enabling capital-intensive industries such as cement, steel, and other construction sectors to resume borrowing from banks, thereby supporting economic activity and growth in the country. Hanif noted that some banks are offering new credit to businesses at KIBOR minus 25-50 basis points to avoid additional taxes imposed for the calendar year 2024. He recalled that the government decided to levy extra taxes on banks whose advance-to-deposit ratio (ADR)—the ratio of their lending to the private sector against total deposits—falls below 50% this year.