Cash recovery against NPLs down 38 percent

The banking sector's cash recovery against Non-Performing Loans (NPLs) posted a notable decline of 38 percent during the first quarter of Calendar Year 2013 as compared to previous quarter. Sources in banking sector told Business Recorder on Friday that some large transactions were settled during the last quarter of CY12, resulting in increase in cash recovery against NPLs in previous quarter.
"The current trend of cash recovery is ordinary and mainly banks start their tough efforts for recovery of default loans in closing quarters like June and December, they added. They also mentioned that slow industrial activity followed by energy crisis are also hurting the banks' efforts for recovery of NPLs. "The domestic, industrial borrowers are facing problems in repayment of their loans as the severe energy shortage has reduced their productivity and pushed up losses," they added.
Industry sources revealed that banking sector (including all banks and DFIs) cash recovery against NPLs has declined to Rs 16.631 billion during the January-March of CY13 as compared to Rs 26.635 billion in last quarter (October-December) of CY12, depicting a decrease of 37.5 percent or Rs 10 billion in first quarter of CY13.
The detailed analysis revealed that major dip has been witnessed in cash recovery of all banks, while DFIs have also posted a slight decrease during the period under review. All banks' cash recovery against NPLs registered a decline of 38 percent or Rs 9.962 billion to Rs 16.385 billion in first quarter of CY13 compared to Rs 26.347 billion in last quarter of CY12.
In addition, DFIs' cash recovery against NPLs dipped by 15 percent or Rs 42 million to Rs 246 million during the period under review down from Rs 288 million.
"Recently, the State Bank further slashed its key policy rate by 50 basis points to 9 percent for next two months. The rate cut has provided a golden opportunity to the bank borrowers to settle their loans at lower rate. Therefore, it is being expected that a large number of borrowers will strive to resolve their financial issues with banks in upcoming months, they added.
During the period under review, the NPLs of the entire banking industry surged by Rs 1.4 billion to Rs 630.411 billion as on March 31, 2013 compared to Rs 629 billion on December 31, 2012.