LAHORE: Most of the beneficiaries of the Prime Minister Youth Loan Schemes are not ready to pay the cost of funds besides the originally agreed mark-up, a situation leading to recovery proceedings against them by the respective banks operating in the public sector, said sources.
In the majority of the cases, they said, the borrowers are unable to pay markup against the principal amounts and are found challenging the recovery proceedings before the relevant forums.
It may be noted that all the governments of major political parties, including Pakistan Peoples Party, Pakistan Muslim League-N and Pakistan Tehreek-e-Insaf have been launching these schemes one after another to attract the youth of the country towards entrepreneurship. Since over 60 percent of the country’s population is consisted of young generation, therefore, all the political parties have offered attractive bank loans to allure them as a strong vote bank base.
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Therefore, the financial experts take it as a politically motivated drive on the part of political parties with no tangible use of valuable financial resources. According to sources in the banking industry, most of the young borrowers default in payment of monthly installments, followed by challenging their recovery proceedings at the relevant forums.
They said the borrowers challenge recovery proceedings against them on the plea that they were only liable to pay the cost of funds from the date of default but the banks were also charging it parallel to the initially agreed mark up against the loan, which tantamount to mark up over mark up.
However, the beneficiaries could not prove their stance in the presence of properly executed the charge documents including the finance agreement, demand promissory note and letter of hypothecation with their banks while mortgaging their properties in terms of collateral security.
Sources said the defaulters try to play with the recovery proceedings by mixing the liability of cost of funds with originally agreed mark up against the loan with their banks. They said the customer who defaults in fulfilment of obligations is supposed to be liable to pay cost of funds for the period from the date of default till its realisation as certified by the State Bank of Pakistan besides the other liabilities accrued under any contract executed by him in favour of the financial institution.
It is no way exonerates the borrower from the payment of the mark up in the event of his default, they said, adding that the basic aim and theme behind the arrangement is to compensate the financial institutions for the finance blocked on account of breach of the fulfilment of the obligation by a customer.
Keeping in view certain conditions duly enumerated in the sanction advice together with other charge documents between the bank and the borrower, sources stressed, the borrowers are accountable to pay both costs of funds from the date of default of monthly installments as well as the mark up amount.
Copyright Business Recorder, 2023
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