to be recognized that pakistan ’ s banking system has witnessed a sea change : ( i ) in terms of size, structure and ownership, the banking assets doubled over cy00 - 05 reaching rs 3, 649 billion ( over $ 62 billon ) by end - cy05. around two thirds of the banking system is with local private banks and 9 % with foreign banks, while the share of public banks has been scaled down to approximately 20 % by end cy05, relative to 50 % at end cy00. interestingly, while foreign banks have a low deposit base, foreign shareholding of banks is quite significant, spread across 8 banks that account for 42 % of the deposit base. large foreign presence would facilitate adoption of international norms and practices and expose pakistan ’ s banking industry to e - banking etc. ( ii ) banks declared unprecedented profits in cy05 close to rs 95 billion before tax and rs 64 billion after tax, relative to losses of rs 4. 5 billion ( after taxes ) in cy00. aside from the gains of a relatively high interest environment, banks benefited from an increase in the volume of business ( especially increase in lending activities which are well supported by fee - earning activities ), improvements in operational efficiency and better risk management ( that helped contain administrative costs and loan infection ). ( iii ) banks have managed to contain their credit risk at prudent levels, with the net npls to net loans ratio at 2. 4 %, and gross npls to advances ratio at 9. 0 % for the overall banking sector. among the various categories of banks, foreign banks have the lowest levels of npls and domestic private banks are second in ranking. ( iv ) concentration in size and ownership structure is prominent. 5 large banks account for over half of the deposits and assets and remaining is held with smaller banks. the consolidation of the banking system generates efficiency and economies of scale as long as high system risks are well managed. ( v ) cross shareholding among banks and other financial institutions and the ownership of banks by big business houses and other segments of financial industry pose regulatory challenges for banking supervision where individual and group risk exposures in family owned banks need closer monitoring. from a development perspective the key factor that the pakistani banking industry has to work towards is enhancing access and improving financial intermediation, stimulating domestic savings, and broader financial innovation in services and products. undoubtedly, banks have realized high profits by maintaining sizeable spreads and keeping deposit rates low, while charging higher

encouraging to note that banks have already disbursed rs 326 billion during the first 9 months, which is 65 % of the target of fy 14 - 15, and is 28 % higher than the same period last year. it is also heartening that the portfolio quality of banks agri portfolio has also improved over the recent period. i believe that the banks would be able to further improve the portfolio quality of agri - lending by using innovative lending models supported with their experience curve. 9. it has been through the collaborative efforts of all stakeholders that the banks have improved their actual agri disbursement to financing requirements ratio from 37 % to 53 % over the last 5 years and we are working to improve it even further so that more and more farmers can free themselves from the shackles of exploitative informal credit. in order to make it happen, sbp has taken initiatives to promote agri - financing to bring depth, inclusion, efficiency and stability into the system : • innovations in agri - financing are being promoted by adoption of value chain and warehouse receipt financing through constant guidance and pilot projects. • enhanced risk management through crop and livestock loan insurance schemes and credit guarantee schemes, to help banks venture into providing financing to farmers, particularly the smaller ones. • sbp has been extensively involved in capacity building of farmers through offering financial literacy programs and financial service providers, through engagement of local and international experts who are helping the financial service providers to tailor their approach for improved service delivery and increased profits. distinguished guests! 10. yes state bank views positively at the recent increasing momentum, but we should not lose sight of the fact that our long journey in agri - credit market has just started. in this context, i feel we will be wrong if we say that rs. 500 billion is a big target. let us not forget that this is only 53 % of our credit demand. bis central bankers ’ speeches 11. going forward, the most critical challenges are inclusion of majority small and marginalized farmers, addressing geographical imbalances and financing to non - crop activities, which will lead to enhancing the share of agri credit in banks ’ advances. sbp is committed to continue its efforts to deliver real benefits to the farming community and it is hoped that with the joint efforts of policy makers and the industry, agri - financing would soon emerge as a sound, scalable and sustainable business segment for banks in pakistan. 12. in the end i would like to sincerely thank fao for