The State Bank of Pakistan (SBP) has clarified that the reports which appeared in some sections of the press on July 23 regarding loans written-off during the last 30 years by banks/DFI’s are factually incorrect and misleading.
“It is clarified that during the aforesaid period, for amounts of Rs 50 million and above, the total amount of written-off loans/waiver of mark-up/other charges amounts to Rs 171 billion and not Rs 430 billion as reported in the press,” a statement from the SBP said.
Similarly, the bank added, during the last 3 years, banks/ DFIs written-off loans/ waiver of mark-up/other charges amounted to Rs 20 billion and not Rs 280 billion. The written off amounts are Rs 5.91 billion for 2013, Rs 4.518 billion for 2014 and Rs 9.815 billion for 2015, quite in contrast to the exaggerated amounts stated in the press.
“The press has reported the banks write-off’s in generic terms without delving into the details of principal, mark-up and other charges waived off by the banks. Whereas in a large number of cases, quoted by the press, the amount written-off pertains to mark-up and other charges only.”
More than 80% of the banking sector operating in Pakistan is now owned by the private sector and the rest by the public sector which are both duly monitored and guided by their respective board of directors, the bank said. The financial institutions, despite their best efforts, have to write-off some loans which are irrecoverable due to some bonafide business reasons i.e. adverse business cycle, deteriorated economic conditions, changes in policy and global environment etc.
“The writing-off of loans by the banks is a common practice all across the globe and Pakistani banks are no exception. The banks have to provide for their loan losses under the State Bank of Pakistan Prudential Regulations and more than 80% of the non performing loans are fully provided for,” the statement said.
“Further, as a matter of transparency, banks/DFIs disclose the details of written-off loans of Rs 0.5 million and above in their published Annual Audited Financial Statements.”