Finance Minister Dr Abdul Hafeez Sheikh informed the National Assembly on Wednesday that non-performing loans (NPLs) of the banks as on December 31, 2010 stood at Rs 464.851 billion, of which Rs 354.185 billion, or 76 percent was in loss category.
In a written reply to a question in the National Assembly, the Finance Minister said NPLs had increased from Rs 200 billion as on December 31, 2006 to Rs 464.851 billion on December 31, 2010, which meant that NPLs had doubled during the last five years.
The NPLs of local private banks have accumulated to Rs 351.657 billion; public sector commercial banks Rs 91.190 billion; and foreign banks Rs 6.774 billion. The House was informed that NPLs of specialised banks were Rs 15.212 billion as on December 31, 2010.
The government stated that out of Rs 464, 851million loans, Rs 354, 185 million, or 76 percent, is in loss category. However, it is important to note that these NPLs do not necessarily translate into banks' losses; rather these are an indicator of the quality and performance of loans/advances. A substantial part of these NPLs is eventually repaid by the borrowers, or realised by the banks through legal means.
Total amount of NPLs increased from Rs 200,272 as on 31-12-2006 to Rs 464,851 million on 31-12-2010. The reasons for increasing NPLs are economic downturn, rising borrowing cost, falling repayment capacity of the borrower due to reduction in production because of shortage of electricity, gas and poor law and order situation.
Recent floods added to the problem of loans, particularly in agriculture and SME segment. Some of the measures taken by the banks to minimise NPLs are increased monitoring, strengthening Special Asset Management function to manage the problem loans, better risk management, restructuring and rescheduling of loans in genuine cases and increased their efforts for recovery of stuck up loans.
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