The Ferozepur Road Industrial Association (FRIA) Chairman Shahbaz Aslam has observed that banks’ credit to the private sector has declined to 8.4 percent in fiscal year of 2024, which is almost half the level seen in 2004. He said that the country’s bank deposit and private-sector credit-to-GDP ratios have also remained among the lowest compared to the regional countries. He appealed the central bank to persuade the commercial banks to diversify their lending beyond the government sector, stressing that no country can achieve sustainable economic growth with low levels of private credit. FRIA Chairman said that Pakistan’s banks allocate around 75 percent of their lending to established sectors, while only 5 percent goes to small and medium enterprises. This imbalance highlights the need for banks to reassess their strategies, he said. With a more stable economy, he hoped that the government’s borrowing would be curtailed and the banking sector could look towards increasing credit to the private sector, particularly the SMEs and agriculture sector. Countering the common argument that government lending has crowded out the private sector, Shahbaz Aslam noted that in some countries, despite equally high or even greater government borrowing from commercial banks, the private sector still holds a significant share of the financial sector’s portfolio. However, he also acknowledged the banking sector’s role in expanding bank account coverage, which has risen from 47pc of the adult population in 2018 to 64pc today. The gender gap has also narrowed from 47pc to 34pc. By 2028, the government aims to increase bank account coverage to 75pc of the adult population and reduce the gender gap to 25pc. Achieving these targets will require the financial sector to enhance its services’ depth, breadth, and quality. He suggested leveraging AI, digitisation and financial innovation to fulfil these goals. Experts said that the macroeconomic crisis and high interest rates have led banks to generate windfall profits. As highlighted in the reports, 99.8pc of budgetary deficit support to the government comes through the banking sector, allowing banks to enjoy the fruits of high interest rates. With nearly 40pc of the population living in poverty, according to the World Bank, and the middle class feeling the strain, perhaps it’s unsurprising that profitable sectors are expected to contribute accordingly. Quoting the SBP governor he said that our banks need to rethink their current business model, reassess their priorities, and play a more active role in financial intermediation. Referring to the latest National Financial Inclusion Strategy 2024-2028, he highlighted that the central bank has set a target to increase bank account coverage to 75 percent of the adult population and reduce the gender gap to 25 percent by 2028.