PESHAWAR, Jan 17: In an effort to recover over Rs210 million bad loans of the liquidated Frontier Cooperative Bank (FCB), the NWFP government on Friday announced to waive Rs170m interest payable by over 30,000 defaulters.

This facility would be available only to those defaulters who would repay their loans by March 31, 2003.

The relief package for the FCB defaulters involving a large number of small farmers was announced by the provincial finance minister Siraj-ul-Haq while talking to journalists at the press club.

“The decision has been taken to fulfil the Muttahida Majlis-i- Amal’s manifesto which asks for the abolition of the scourge of interest from the society,” the minister said.

Answering a question that why the Rs170 million interest had not been waived instead of announcing the waiver, the minister was quick enough to say that the deadline had been set as a window to recover maximum amount of the principal amount.

“This deadline is likely to encourage large number of small defaulters to clear their dues and get their land and assets back avoiding their liquidation,” he added.

Defaulters, the minister said, had been finding it difficult to clear their bad loans because of the heavy amount of interest they were required to pay over and above the principal amount, hence, waiver — even up to March 31, 2003 — was a major incentive.

“Had the interest amount abolished at this point of time, it would not have served the purpose of recovering the principal amount,” claimed Siraj.

He said the NWFP government would shortly come up with a comprehensive plan to introduce interest-free banking system. However, he did not prefer to deliberate upon the subject.

The provincial government has a plan to utilize the amount, if recovered, in repaying the Rs200 million federal government’s loan which was payable by the liquidated entity.

Officials of Bank of Khyber (BoK) — the liquidator of the FCB — told Dawn that apart from the Rs200 million federal government loan a sum of over Rs70 million would be paid to the staff of the bank and over Rs20 million to the NWFP government.

Currently, the officials said, the BoK had a cash balance of Rs120 million recovered from the defaulters by liquidating their assets and land.

The bad loans portfolio, said the sources, of the abandoned entity had been brought down to Rs380 million (inclusive of Rs210 million principal amount and Rs170 million interest) from an all time high of Rs1.5 billion.