KARACHI, Nov. 13: Pakistan’s industrial landscape may soon be marked with dead and sick units and there would be massive unemployment because of the “devastating impact” on businesses from increase in interest rate on bank loans.

“You will see the deadly effect of two per cent increase in State Bank’s discount rate, not in years and months, but in weeks,’’ remarked Anjum Nisar, the president of Karachi Chamber of Commerce and Industry on Thursday at a meeting with SBP Governor Dr Shamshad Akhtar.

Nisar was skeptical of the governor’s assurance that KIBOR will be restructured and there would be no increase in rate of interest by the banks. He charged banks of extorting money from their clients in the name of commissions, service charges and fees. He held high commission rates of banks and their poor service responsible for forcing expatriate Pakistanis to use money changers and other informal sources for remittance.

“One of my acquaintances in Australia was intending to remit $600 to Pakistan,’’ he informed the State Bank governor to substantiate his charge sheet and pointed out the banks demanded $32 commission on this service. “How is this justified?’’ he asked.

His plea was to consider banks’ dealing with clients, particularly in respect of remittances when money changers virtually offer a commission free home delivery service with a premium on remittance to overseas Pakistanis.

“I assure you if a quick, hassle free and incentive-laden remittance scheme is given, our expatriate Pakistani brothers will remit more than twice of what the government is seeking from International Monetary Fund (IMF),’’ Nisar said. He warned that remittances had shown a downward trend in October, which should serve as a warning bell to all of us.

He made a reference to the massive loss suffered by a large number of businessmen, who were virtually “trapped by the banks - foreign banks - into swapping their rupee loans into dollars’’ and are now left high and dry after steep depreciation of Pakistani rupee value against dollar.

He said that the State Bank was a part of this deal as documents were processed here. Many banks have filed suits in the courts against businessmen for recovery of loans as default amounts piled up after fall of rupee exchange value from Rs60 a dollar to Rs80.

In response, the SBP governor constituted a committee headed by a director to review the service charges, commissions and fees being recovered by the banks from their clients. There were similar charges against the shipping companies and other service agencies.

Turnout of businessmen in Thursday meeting of the State Bank was found to be much less than on Tuesday. The KCCI president was the only speaker to speak out his heart, while a few others, who spoke, were all praise for the State Bank for providing 100 per cent refinance on both part-1 and part-11 without raising interest rate.

Businessmen are dismayed on the SBP decision to raise discount rate but try to give a brave face. The general prevailing impression is that loan defaults will now mount and portfolio of non-performing loans of all banks will bulge to almost out of proportion limits in coming weeks and months, said a top industry leader. The fear is that the banks’ interest rate for a majority of businessmen is bound to touch 20 per cent mark no matter what the central bank governor says about restructuring of KIBOR he added.

“KIBOR is a product of a cartel of selected bankers,’’ the top business leader remarked. Every morning these elite bankers get together to set new rates on loans,’’ he said. The rates on which loans are given differ from client to client. Foreign companies are given a privileged status and they enjoy a special rate.

For long the State Bank, Competitive Commission, Security and Exchange Commission of Pakistan and other national institutions, the businessmen allege, overlooked banks arrogance towards fellow Pakistani businessmen and expatriate Pakistanis abroad.

India, China, Bangladesh Sri Lanka, Philippines and many other Asian and African countries give a privileged status to their fellow citizens and involve them in national reconstruction and economic activities.