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SBP forms body to resolve bank-borrower disputes

KARACHI (July 05 2003) : The State Bank on Friday set up a committee to resolve the disputes relating to determination of outstanding liabilities between the borrowers and the banks.

“The committee has been set up following complaints from the borrowers that the banks are compounding mark-up in violation of guidelines issued by SBP for elimination of 'Riba' from the banking system,” said a circular issued by the State Bank.

The request can originate either from the bank or the borrower and the decision of the Resolution Committee will be binding on both parties under the provisions of Banking Companies Ordinance.

The Resolution Committee, headed by Director, Banking Policy Department, Muhammad Kamran Shehzad, and consisting a representative of the concerned bank, a chartered accountant nominated by the borrower, a chartered accountant from within the SBP, will directly entertain and examine all requests for resolving disputes on the outstanding amount and liabilities owed by the borrower and claimed by the bank.

The State Bank believes that a large number of non-performing loans can be settled between the banks and the borrowers if the outstanding amount of liabilities is determined in a fair, objective and transparent manner.

Such settlement will avoid unnecessary expenses and protracted litigation, enable many of the industrial units to revive or operate at full capacity or expand their operations and generate additional employment, remove many genuine businessmen from adverse credit reporting list and allow the banks to transform many of their non-performing loans to performing category, the circular said.

“In view of the expected benefits to both the borrowers and the banks, the State Bank of Pakistan has decided to set up the above-mentioned alternative dispute resolution mechanism,” the circular added.

The State Bank has requested the Federation of Pakistan Chambers of Commerce and Industry and all other trade bodies in the country to bring this mechanism to the notice of the businesses.

The requests should be sent with full supporting documentation, the basis for disputed amount and the reasons for fresh scrutiny to Member/Secretary of the Resolution Committee at the Banking Policy Department, SBP, Karachi.

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