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Allied Bank of Pakistan's incentive scheme for loan recovery

LAHORE (December 20 2002) : Allied Bank of Pakistan Limited (ABL) has framed an incentive scheme for recovery of non-performing loans and finances, which were classified as 'loss' as on December 31, 1999 or earlier.

Sources in ABL disclosed this to Business Recorder here on Thursday. According to them, realising the importance of the recovery of non-performing loans, the State Bank of Pakistan (SBP) had prepared a new set of guidelines in consultation with banks and trade bodies, and in the light of these guidelines, this scheme has been chalked out.

A circular has been issued to all the ABL branches in this regard.

The scheme is a one-time opportunity, which would remain valid up to April 14, 2003, or for further period, if allowed by SBP.

The regional mangers/SM Wings/branches have been advised to contact all such borrowers fall under scheme and persuade them to settle their accounts under the scheme.

Under the scheme, cut-off date to avail the benefit would be December 31, 1999; ie finances classified as 'loss' as on December 31, 1999, or earlier would be eligible for consideration under the scheme.

Moreover, non-performing loans, which were classified as 'loss' for three-year or above, have been divided into three categories.
<br> Under category A, cases up to Rs 500,000 may be written-off on case to case basis subject to recovery of the outstanding amount from the respective borrowers by way of cash and there are three options available in this connection.

First, repayment of 50 percent of the present outstanding finances within a period of one month.

Second, repayment of 60 percent of the present outstanding finances with 20 percent cash down payment at the time of settlement and the outstanding balance would be repayable in 12 equal monthly instalments.

And the third is repayment of 75 percent of the present outstanding finances with 25 percent cash down payment at the time of settlement and the outstanding balance would be repayable in 24 equal monthly instalments, the sources informed.

According to them, category-B applies to those borrowers who fall between Rs 500,000 and Rs 2,500,000 outstanding amount, and the borrowers are given four options to settle their accounts.

First, repayment of 75 percent of the present outstanding finance after adjustment of liquid securities/pledged goods or 100 percent of forced sale vale of the remaining securities, which ever is less.

The borrower would have to repay the settled amount within a period of three months.

Second, repayment of 85 percent of the present outstanding finance after adjustment of liquid securities/pledged goods or 110 percent of forced sale value of the remaining securities, which ever is less.

The borrower would have to repay 20 percent cash down payment at the time of settlement and the balance amount should be paid in four quarterly instalments.

Third, repayment of 90 percent of the present outstanding finance after adjustment of liquid securities/pledged goods or 115 percent of forced sale vale of the remaining securities, which ever is less.

The borrower would have to repay 25 percent cash down payment at the time of settlement and the balance amount should be paid in eight quarterly instalments. And forth, repayment of 95 percent of the present outstanding finance after adjustment of liquid securities/pledged goods or 120 percent of forced sale value of the remaining securities, which ever is less.

The borrower would have to repay 30 percent cash down payment at the time of settlement and the balance amount should be paid in 12 quarterly instalments.

According to the sources, the category-C involves those borrowers whose loans exceed Rs 2.5 million and they have been given five options to settle their accounts.

The first four options are the same that of the B-category.

The fifth option is, where the forced sale value of the securities, as assessed by Pakistan Banks Association (PBA) approved value, is doubling the outstanding liability of the borrowers, they would pay the entire outstanding amount plus 50 percent of the accrued mark-ups of the date of the settlement, with 50 percent cash down payment.

The balance amount would be payable within six months.

The sources further informed that among the other silent feature of the scheme are, before allowing write-off, all liquid assets including FDRs, government securities and share certificates held under lien and pledged goods should be realised and sale proceeds thereof appropriated towards the reduction of outstanding liability of the borrower.

Furthermore, while considering the forced sale value of properties/assets, the valuation would be obtained from independent professional ''valuers'' listed on the panel approved by PBA, nominated by the bank.

To forestall chances of misutilisation of the scheme by unscrupulous elements, the following measures would taken: the downward variance in the forced sale value of the securities would be taken due to notice by the processing authority; and in the process of satisfying itself as to forced sale value of the security, the competent authority may require its second valuation report to arrive at a correct assessment/decision. Such revaluation would be obtained from the panel of PBA approved “valuers'' with satisfactory track record.

According to the sources, in case the bank was not in a position to recover even the forced sale value of the security, as per criteria given for categories B and C, due to any reason, the Executive Committee, COK, may allow relaxation by recording reasons/justification thereof.

Furthermore, the settlement would be made only on cash recovery, and the borrowers have to make down payment of the settled amount at the time of signing of agreement, and the remaining amount would be in instalment.

Under the above arrangements, the borrowers would only be eligible for write-off after repayment of entire agreed amount.

In case of non-adherence of terms of agreement, the borrowers would not be eligible for any concession.

The sources further revealed that the bank would pursue those delinquent borrowers vigorously who fail to avail the scheme within the time period fixed for the processing the cases under the provision of law.

Recovery suits would be filed wherever required for recovery of bank's dues. The regional managers/SM Wings/branches have been advised to contact all such borrowers fall under scheme and persuade them to settle their accounts under the scheme.

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