The Non-Performing Loans (NPLs) of the banking industry continued to rise and surged by over Rs 13.6 billion in the first quarter of this calendar year (CY16). Bankers said that the massive increase in the NPLs may create new challenges for the highly profitable sector of the country. "Rising trend in NPLs is not a good sign and may pose some credit risk for the financial sector," they added.

Despite the fact the banks and financial sector''s major investment is in low risk government securities, the increase in NPLs is a caution for the banking sector, they said. "The continued upward trend suggests that banks are required to develop a long term policy to curtail the rising NPLs," they added.

According to State Bank of Pakistan (SBP), overall NPLs (domestic and overseas operation) of the financial sector including banks and Development Finance Institutions (DFIs) increased by Rs 12.989 billion during Jan-March of CY16. With current surge, cumulative NPLs of banks and DFIs reached Rs 633.437 billion as on March 31, 2016 compared to Rs 620.448 billion as on Dec 31, 2015.

The detail analysts revealed that NPLs of banking sector have witnessed upward trend, while NPLs of DFIs have posted a slight decline during the period under review. NPLs of all banks have reached Rs 619.086 billion end of first quarter of CY16 as against Rs 605.444 billion in December 2015, depicting an increase of Rs 13.642 billion.

During the period under review, NPLs of DFIs declined by Rs 653 million to Rs 14.351 billion in March 2016 down from Rs 15 billion in December 2015.

The sector wise analysis revealed that NPLs of Public Sector Banks (PSBs) and Local Private Banks (LPBs) witnessed upward trend, while NPLs of Specialised Banks (SBs) and Foreign Banks (FBs) moved downward during the period under review.

NPLs of PSBs swelled by Rs 11.243 billion to reached Rs 201.311 billion as in March 2016. NPLs of LPBs climbed up by Rs 5.06 billion to Rs 387.104 billion up from Rs 382.04 billion. Similarly, NPLs of FBs dipped by Rs 144 million to Rs 3.02 billion in end of first quarter of this year. NPLs of SBs declined to Rs 27.648 billion in March 2016 down from Rs 30.167 billion in December 2016, fell by Rs 2.519 billion. However, net NPLs to net loans ratio increased from 1.94 percent to 2.18 percent end of the first quarter of CY16.