LAHORE, June 2: Industrial Development Bank of Pakistan (IDBP) has declined to settle the loans of its four delinquent borrowers under the State Bank’s guidelines on the write-off of irrecoverable loans and advances, saying it will continue the legal process against them.

In a letter sent to the SBP Committee for Resolution of Cases in response to the latter’s request for details of the cases, IDBP has referred to the SBP guidelines/scheme, which say that the scheme would not affect in any way the (legal) right of financial institutions to recover the loans if “they still wished to pursue them legally”.

The IDBP letter also states that the cases of M.S. Enterprises Limited, Jet Era Textile, Sandalbar Textile, and Textile Asia “do not fall under the purview of the central bank’s scheme and hence are not entitled to avail any benefit under the said guidelines.” IDBP maintains that M.S. Enterprise had been offered a settlement package on simple interest basis other than the SBP scheme.

“We understand that the company should be advised to adhere to the package, which is in accordance with its earlier request. Otherwise, the bank will proceed legally,” says the IDBP letter.

IDBP further states: “Other three delinquent borrowers are not responding to any reasonable settlement proposal. Hence we will continue with the legal process as allowed by the central bank guidelines.”

However, the SBP’s dispute resolution committee — established on the demand of the business community to sort out the disputes that may crop up between the lenders and the delinquent borrowers — has taken a different view of the provision referred to it by IDBP. The committee says the said “provision applied to those delinquent borrowers, who fail to avail the scheme within the stipulated period (that is, June 30, 2003).”

Therefore, the committee wrote back to IDBP, the said four “borrowers are ready to settle their non-performing accounts under the write-off of irrecoverable advances/loans scheme and the IDBP refusal to entertain their requests was unjustified.”

The central bank had issued the guidelines on October 15, 2002, to facilitate banks and development financial institutions (DFIs) to settle irrecoverable loans and advances of their delinquent borrowers to clean up their infected portfolios.