QUETTA, Jan 19: Most of the nationalized and private banks have discontinued advance and loans to small and medium enterprises and traders without collateral.

It caused a serious crisis in the banking industry in Balochistan following sudden shift in the policy of banks to discontinue advancing small loans to traders up to Rs500,000. Business community was badly affected following the revision of policy by some of the banks to stop loaning to small traders and businessmen without collateral.

"Yes, most of the banks have stopped extending small loans to the traders and businessmen due to poor recovery of bad loans," a senior banker confirmed to Dawn. He said that huge amount of these bad loans was yet to be recovered as in most of the cases the guarantors were disappeared. "Billions of rupees bad loans were stuck up in Balochistan that results in withdrawal of this facility," he said.

"For decades, traders, small firms and medium enterprises have been enjoying this facility seeking loans by providing two persons as guarantors," a shoe trader said. Most of the banks in the province are seeking collateral from smaller traders and businessmen seeking loans between Rs100,000 and Rs500,000 to avoid future risk.

"This new system is affecting our small business and due to refusal of loans by the banks we were short of running capital," another small businessman told Dawn and demanded of the government to take notice this unwise decision.

Barring a few cities and townships, including Quetta, whole of Balochistan is unsettled in terms of revenue act. The government is yet to make settlements in 90 per cent parts of Balochistan. Thus, traders and small businessmen have no legal documents as their properties are not surveyed. The traditional documents of mediaeval age are not acceptable to the banks as collateral.

"The bad loans or non-performing loans are running tens of millions of rupees and usurped by big fishes in politics, industry and business and not the small traders who depend on banks and bank managers on day-to-day money transactions," another small businessman remarked.

The smaller traders and businessmen have also appealed to the finance minister and the governor of State Bank to reduce the mark-up of all loans in Balochistan to a single digit.