LAHORE, Nov 7: The Lahore Chamber of Commerce and Industry has demanded withdrawal of new prudential regulations for the classification of non-performing loans of commercial banks issued by the State Bank.
Voicing the demand in a statement issued here on Monday, chamber president Mian Shafqat Ali and other office-bearers said the withdrawal of the new regulations was necessary as these would not only keep the industry under pressure, but also prove a hurdle in smooth running of the businesses.
They said the new rules enforced to expedite the recovery of non-performing loans of commercial banks had not only dispensed with the grace period for the classification of loans, but also aimed at making stringent changes in the accounting standards.
They said the new regulations would not be applicable to the import-export bills, inland bills and credit cards which would continue to be classified as loss if not paid or adjusted within 180 days. The new standards were applicable on all types of financing facilities, short, medium and long term, SME and all types of consumer finances except credit cards.
They said the banking supervision department of the State Bank had directed the commercial banks to keep mark-up or interest in all cases of non-performing loans in memorandum account and not credit it to income account except when realized. It had also ordered reversing of the unrealized mark-up or interest already taken to income account and keeping it in the memorandum account.
They said the SBP had decided to classify the non-performing loans as overdue after 90 days and doubtful after one year without any justification. Textile, sugar and large manufacturing sectors were expected to be affected by the new classification of loans aimed at expediting the recovery process.
They said the SBP had also raised the percentage requirements of provisions under the three categories. Under the first classification, the substandard loan, the new provision requirement to be met by commercial banks had been enhanced to 25 per cent; under doubtful category loans, the banks had to make 50 per cent provision; and under the last category, the loss category, the banks were required to make 100 per cent provision.