Some Rs 27 billion worth agriculture and SME sector loans' rescheduling/ restructuring is expected following the State Bank of Pakistan's flood relief package. The SBP under a special relief package for borrowers of flood affected areas Tuesday allowed banks, DFIs and Microfinance Banks (MFBs) rescheduling of loans and advances in flood affected areas.
The relief package also includes a Rs 10 billion concessional financing scheme for SMEs & agricultural sector at 8 percent mark-up. Sources told Business Recorder on Wednesday that banking industry was already expecting a relief package for borrowers of flood affected areas, as the volume of Non Performing Loans (NPLs) in the flood-hit areas has increased substantially and according to initial estimates, the total NPLs are more than Rs 50 billion.
They said major NPLs have been registered in agricultural, microfinance sector and SME financing, while some share of consumer financing is also expected in the overall estimated NPLs. Sources said three different committees of bankers, set up by the State Bank to evaluate the losses in flood effected areas, has estimated that some Rs 54 billion worth loans would be converted into NPLs. However, out of total NPLs, loan losses are not more than 50 percent, which need to be rescheduled.
Major rescheduling would be made in agricultural sector, in which loan losses stood at Rs 23 billion of 221,000 borrowers, they said and added that SME sector loan losses have been estimated at Rs 2.6 billion of 2000 borrowers. Some Rs on billion loans restructuring is expected in Microfinance sector by MFBs. "Cumulatively some Rs 27 billion worth loans and advances of 223,000 borrowers would be rescheduled/restructured in the flood-hit areas," they said.
Under the relief package, banks, DFIs and MFBs will reschedule/restructure agriculture, SME and microfinance loans/advances to such borrowers, as per existing Prudential Regulations for Agriculture, SME Financing and MFBs, where the possibility of recovery exists, they said. Sources said as per the SBP directives, banks and DFIs for all such rescheduled/restructured loans and advances may defer loan provisioning up to December 31, 2011.
However, only those loans and advances will be rescheduled or deferred which have become non-performing since July 1, 2010 in the affected districts identified by National Disaster Management Authority and loans/advances classified before this date shall not qualify for this relaxation.
To evaluate the losses of banking industry, the SBP set up three committees comprising SME Finance Committee, which includes senior level members from HBL, NBP, Faysal Bank, Standard Chartered Bank, Bank Alfalah, Meezan Bank and NIB Bank. The Agriculture Finance Committee comprised representatives from NBP, HBL, Faysal Bank, UBL, Askari Bank & ZTBL. The Microfinance Committee included representatives from HBL, NBP, Khushhali Bank, First Microfinance Bank, Tameer Microfinance Bank and Kashf Microfinance Bank.