ISLAMABAD, April 24: The State Bank of Pakistan has directed the commercial banks to gradually write off 75 to 100 per cent loans of thousands of sick industrial units.

“We have decided to financially revive the commercial banks so that their balance sheets could be improved, and this can only be done when they are allowed to write off loans of various sick industrial units,” said Governor State Bank Dr Ishrat Hussain.

He told Dawn here on Thursday that the banks had so far received 11,000 applications from various industrial units to have their loans written off. This decision, he said, would also help the banks reduce their intermediation cost and, thus helping the depositors. Writing off loans, he said, would create better industrial activity in the country.

The SBP governor said only deserving cases would be entertained by the banks for removing the loans. Dr Ishrat Hussain said the Corporate and Industrial Restructuring Corporation (CIRC) had set up a committee to look into the deserving cases.

He said the commercial banks had access liquidity to offer loans to small and medium enterprises (SMEs), housing and agriculture sectors.

To a question he said that he did not know whether there were 4,000 sick industrial units in the country. However, he said there number was not small.

The loan defaults continue to be one of the major problems of the country’s banking industry, in general and nationalized commercial banks and development finance institutions in particularly, adversely affecting their growth and profitability.