KARACHI, April 26: The State Bank has asked all the banks and development finance institutions or DFIs to provide additional information regarding write-off of irrecoverable loans under a tailor-made scheme.
The Banking Policy Department of the central bank has advised all banks and DFIs through a letter to use the new format for reporting of write-offs under the SBP scheme announced in October 2002.
The new format annexed to the circular requires the banks and DFIs to provide information also about the amount of settlements and amounts of write-offs separately. Earlier banks and DFIs were supposed to reveal only the amount of outstanding loans along with recoveries or down payments made by the borrowers.
The new format also requires banks and DFIs to show separately the amount of loans that was to be written off under the SBP scheme and the actual amount of loans that they have written off.
Senior bankers say by requiring the banks and DFIs to provide such details the SBP wants to ensure that the scheme for settlement of irrecoverable loans are not misused by the borrowers in collusion with the banks and DFIs.
Banks and DFIs are supposed to send progress reports using the new format within seven days from the end of the reporting month. "The first such status report on revised format for the month of April 2004 should reach SBP by May 7, 2004."
The BPD letter says the reason for revising the format is that the present format provides limited information about the cases received and settled under the SBP scheme on write-off of irrecoverable loans. The new format would enable SBP to monitor the progress of such cases in all respects.
Banks and DFIs are supposed not only to provide the additional information about the write-off of loans but also continue to report month-wise and category-wise details.
Under the scheme there are three categories of irrecoverable loans. The first one covers the loans having outstanding amount up to Rs500,000 and above and the second one covers the loans having outstanding amount of Rs500,000 to Rs2.5 million.
In the third category fall all such loans the outstanding amount of which are more than Rs2.5 million. Different sets of guidelines are applicable on each of the three categories.
