Aside from their impact on depth and efficiency of financial intermediation, the profitability of banks has allowed them to earn high returns, which has attracted foreign interest and encouraged existing owners to expand and/or strengthen their businesses. Banks have not only cleaned up their own balance sheets but have impacted real sector development in a number of ways.
The private credit growth in last few years has been significant reaching over 30% in FY06. Private credit grew from insignificant levels to over Rs. 400 billion in FY06. The credit expansion fuelled economic activity, while reviving and enhancing industrial and other capacities. Credit diversification has helped achieve a degree of economic diversification too.