KARACHI: The State Bank of Pakistan (SBP) Thursday relaxed the criteria for classification of assets and provisioning requirements for Deferred and Restructured Portfolio (DRP) to enable the Microfinance Banks (MFBs) to extend relief measures to the affected borrowers of Covid-19.

In order to dampen the adverse effects of Covid-19 and to enable the MFBs to continue to fulfill their role in funding the real economy, in March 2020, MFBs were allowed to defer repayment of principal loan amount by one year; provided that the obligor will continue to service the mark-up amount as per agreed terms & conditions.

Now, the SBP has announced some more relaxations for classification of assets and provisioning requirements to facilitate the borrowers as well as MFBs.

According to a circular issued by the SBP, in order to enable MFBs in extending relief measures to the affected borrowers, the criteria for classification of assets and provisioning requirements has been relaxed for Deferred and Restructured Portfolio (DRP).

For Other Assets Especially Mentioned (OAEM) Category, the existing determinant was that loans (principal/mark-up) are overdue for 30 days or more but less than 60 days. While as per new Determinant (DRP), loans (principal/mark-up) are overdue for 60 days or more but less than 90 days.

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For Substandard Category, fresh determinant was that loan (principal/mark-up) is overdue for 90 days or more but less than 120 days.

For Doubtful Category some 30 days relaxation also has been granted and as per new determent, loan (principal/mark-up) is overdue for 120 days or more but less than 210 days. Under the loss category means, loans (principal/mark-up) are overdue for 210 days or more.

Accordingly, as per the SBP directives, outstanding DRP loans will be re-classified as per the new categories with immediate effect.

With a 30-day increase in OAEM category, unrealized interest/profit/mark-up/service charges on NPLs of DRP shall now be suspended and credited to interest suspense account on the 60th day.

Accordingly, interest/profit/mark-up/service charges already suspended will be allowed to be reversed if a loan does not fall under a classified category due to increased time in OAEM category on the date of issuance of this circular.

The relaxation will be available for DRP uptill March 31, 2022, while all other instructions on the matter will, however, remain unchanged.

Copyright Business Recorder, 2021