The State Bank of Pakistan (SBP) has once again asked the banks to make sure 100 percent provisioning of non-performing loans (NPLs) till December 31 2007. The SBP had issued BSD Circular No 07 on October 12, 2007 making amendments in Prudential Regulations regarding loans and advances.
In the side amendment SBP completely withdrew the benefit of forced sale value against all NPLs (except against Housing Finance) for calculating provisioning requirement with effect from December 31, 2007.
SBP in its new BSD Circular No 11 issued on Tuesday, said: "All banks/DFIs are hereby advised to ensure strict compliance of the above referred circular during the course of preparation of the financial statements for the year ending December 31, 2007 and onwards.
"External auditors of banks/DFIs are also advised under Section 35 of the Banking Companies Ordinance, 1962 to ensure while issuing their opinion on the financial statements as of 31st December, 2007 and onwards that banks / DFIs have made full provisions as per requirements of the Prudential Regulations as amended vide BSD Circular No 7 of 12th October, 2007." SBP said that any violation of instructions on the subject will attract punitive action under relevant provisions of the Banking Companies Ordinance, 1962.
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