Banks defer, restructure Rs910.7bln worth of loans

KARACHI: Banks and development finance institutions (DFIs) have deferred and restructured loans worth Rs910.7 billion in a year to help borrowers cope with economic distress amid the Covid-19 pandemic, according to the latest figures posted by the central bank on its website.

Loan Extension and Restructuring Package of State Bank of Pakistan also known as Debt Relief Scheme was launched on March 26, 2020 to facilitate borrowers in restructuring and deferment of their loans. The scheme aimed to preserve the solvency of the borrowers and enable them to combat the temporary economic disruptions.

The loan deferment scheme expired in September, while the loan restructuring scheme ended on March 31, 2021.

The SBP said deferred loans totalled Rs657 billion as of April 2, whereas Rs253 billion worth of loans were restructured by the financial institutions during March to April.

The deferred and restructured loans include Rs717 billion in corporate and commercial loans, Rs121 billion worth of microfinance, and Rs27 billion of small and medium businesses loans.

“Out of 1.883 million applications received, banks, DFIs and MFBs (microfinance banks) have approved 1.825 million applications (96.92 percent) up to April 2, 2021,” the SBP said. Since the launch of the scheme, individual borrowers, especially the customers of MFBs, have been the major beneficiaries of the scheme, it added.

The restructured and deferred loans include 1.717 million approved applications of customers of MFBs involving an amount of Rs121 billion, which approximately constitutes 50 percent of total net-loan portfolio of MFBs. Whereas, Rs717 billion out of total restructured and deferred amount of Rs910 billion relates to corporate and commercial borrowers; as corporate loan portfolio of the banking industry constitutes 69.9 percent of total loan portfolio of banks, DFIs and MFBs, SBP’ figures showed.

The SBP’s guidelines on loan repayment moratoriums allowed banks to defer loan principal amounts for up to 12 months and borrowers continue to service mark-up amounts as per agreed terms and conditions. Under the loan restructuring scheme, the borrowers whose financial condition require either deferment of principal loan amount for more than twelve months or the change in repayment terms of mark-up amount; SBP relaxed the regulatory criteria for restructuring of such loans. Moreover, the loans that are restructured within 180 days (the requirement may vary depending on category of loan) from the due date of repayment will not be treated as defaults. Banks would also not be required to suspend the unrealised mark-up against such loans. The profitability of listed commercial banks rose to 34 percent year-on-year in 2020 from 21 percent in previous year, despite the pandemic, said the commercial banks review 2021 issued by Taurus Securities Limited.

Banks’ advances increased to two percent, while non-performing loans increased nine percent last year.