Write-off scheme Banks, DFIs settle Rs10.50bn bad loans

LAHORE, June 23: Banks and development finance institutions (DFIs) are stated to have settled over 19,000 nonperforming loans involving a default amount of around Rs10.50 billion so far under the central bank's guidelines for the write-off of “irrecoverable loans and advances.”

Sources in the central bank told Dawn here on Monday that some 25,000 defaulters had applied for the settlement of their NPAs to the tune of Rs54 billion under the State Bank's guidelines issued on Oct 15 last year. The amnesty expires on June 30.

The central bank gave the write-off guidelines to enable banks and DFIs clean their books by restructuring or recovering the bad loans. The objective of the amnesty is said to be revival of sick industry in the country by providing them a breathing space.

It may be mentioned that the banks and DFIs had settled around 18,000 cases involving Rs10 billion by the end of May. Therefore, it's safe to presume that little headway is made during the first three weeks of this month by the banks/DFIs.

Several borrowers, who've applied for the amnesty, insist that banks/DFIs are looking for one pretext or the other to “disqualify” their cases instead of “qualifying” them under the amnesty. “They (bankers) insist on implementing the letter of the scheme and not its spirit,” they say.

A businessman told this reporter that the re-payment period of three years offered by the banks was too short for the sick units that were already burdened by financial difficulties and demanded that the period needed to be extended to five years. “Any shorter re-payment period will make the projects unsustainable,” he said.

He said thousands of jobs would be saved or created if all the cases were settled by the lending banks and DFIs by allowing them sufficient re-payment period.

“It's also in the interest of the lenders because they will be able to recover their money,” he added.

Another businessman claimed that the lending institutions were hesitant to classify bad loans as “loss” as they tend to “indulge in window dressing by renewing or rescheduling them.” This act of bankers is keeping many “genuine” applicants out of the scheme.

Yet another major factor proving a major hurdle in the success of the scheme is claimed to be the status of second charge holder banks. First charge holder banks are said to be willing to settle for the entire Forced Sale Value (FSV) of the mortgaged assets or properties leaving nothing for the second charge holders. Hence, the second charge holder banks are said to be unwilling to settle the accounts, preferring to continue litigation with borrowers to recover their money.

Meanwhile, the SBP Committee for Resolution of Dispute arising between the delinquent borrowers applying for the amnesty and the lenders has so far helped settle some 39 cases. Another 88 cases/complaints are expected to be settled by July 10.

In all the committee has received some 633 complaints from the borrowers against their banks/DFIs.

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