The State Bank of Pakistan has convened a meeting of chief executives of all banks on Monday to work out a strategy to comply with the directives of the Supreme Court regarding recovery of written off loans.
Talking to media on Saturday after the 17th lecture of Zahid Hussain Memorial Lectures series, organised by the central bank, Shahid H Kardar, Governor SBP said notices have been issued to banks in this regard and a meeting of all the chief executives has been called on Monday at 4pm on the issue.
He said the SBP in its circular had given clear directives to banks to clear their outstanding loans because interest amount was increasing on them. Kardar dismissed a question that central bank has issued any circular regarding loan write-off and said the decision to write off loans was taken by the relevant banks and it has nothing to do with the SBP.
He said most of the loans written off by banks were way back in 2002 and were Non-Performing Loans (NPLs), which had been cleared by the banks from their books. The SBP governor said that on many occasions the governments directed to write off agriculture loans in the wake of natural disasters such as floods and draught and because of global recession industries could not pay back their loans.
Replying to a question about the government borrowing from the central bank, Kardar said the government borrowing from the central bank onward from July 2010 has reached Rs 185 billion and attributed low collection of taxes, flood situation and delayed payments on account of Coalition Support Fund (CSF) by the US as major reasons for this. He said the CSF outstanding amount of $2.5 billion has been a problem for the government because expenditures are being incurred while reimbursement is being delayed. He acknowledged the fact that high borrowing by the government is spiking inflationary impact on the economy and the high inflation was not allowing the bank to lower the interest rate.
Kardar who admitted that high interest rate has been hurting the private sector but said it was kept high because of inflation that was having negative impact on the value of rupee to a question about high spread, he said that banking spread in Pakistan was neither on the higher side nor lower in terms of international scenario.
The SBP governor said that provinces have been directed not to exceed the borrowing limits and limit of Punjab on account of 50 percent increase in salary for the last six month has been increased to Rs 37 billion for Punjab, Rs 15 billion for Sindh and Rs 10 billion for Khyber Pakhtoonkhwa Rs 10 and an agreement with the Balochistan has not been reached in this regard yet. He said that NPLs have reached Rs 450 billion and circular debt on account of commodities Rs 422 billion.