RIZWAN BHATTI
KARACHI: Non-Performing Loans (NPLs) of the banking industry posted a phenomenal increase of over Rs 25 billion during the first nine months (January-September) of this calendar year (CY16). Bankers said the massive surge in NPLs is not a good sign for the industry and banks should take certain measures to arrest the increasing trend. "We believe that higher NPLs are also posing some new challenges of credit risk to the highly profitable sector of the country," they added.
The surge has been witnessed at a time, when most of banks' investment is in government securities and interest rate is at lowest level, therefore banks are required to develop long-term policies to curtail the rising trend of NPLs, they said. The State Bank of Pakistan (SBP) on Wednesday revealed that overall NPLs (domestic and overseas operation) of the financial sector including banks and Development Finance Institutions (DFIs) increased by Rs 25.782 billion during January-September of CY16. With the current surge, cumulative NPLs of banks and DFIs reached Rs 646.230 billion as on September 30, 2016 compared to Rs 620.448 billion as on December 31, 2015.
The detailed analysis revealed that NPLs of banking sector witnessed an upward trend, while NPLs of DFIs posted a slight decline during the period under review. NPLs of all banks reached Rs 631.326 billion at the end of the third quarter of CY16 against Rs 605.444 billion in December 2015, depicting an increase of Rs 25.882 billion. During the period under review, NPLs of DFIs declined by Rs 100 million to Rs 15.904 billion in September 2016 down from Rs 15 billion in December 2015.
The sector-wise analysis revealed that NPLs of Public Sector Banks (PSBs), Specialized Banks (SBs) and Local Private Banks (LPBs) witnessed upward trend, while NPLs of Foreign Banks (FBs) moved down during the period under review. NPLs of SBs posted a massive surge of Rs 9.383 billion during the first nine months of this calendar year. NPLs of SBs surged to Rs 39.550 billion in September 2016 up from Rs 30.167 billion in December 2015.
During the period under review, NPLs of PSBs mounted by Rs 14.943 billion to reach Rs 205.011 billion as on September 30, 2016 up from Rs 190.068 billion in December 31, 2015. NPLs of LPBs climbed by Rs 1.72 billion to Rs 383.762 billion at the end of the third quarter of CY16. Similarly, NPLs of FBs stood at Rs 3.002 billion in September 2016 compared to Rs 3.167 billion in December 2015, showing a decline of Rs 165 million. Net NPLs to net loans ratio increased from 1.94pc to 2.1pc at the end of the third quarter of CY16.
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