KARACHI, Oct 12: The State Bank has withdrawn benefit of Forced Sale Value (FSV) against all non-performing loans (NPLs) for calculating and provisioning requirement.

The State Bank introduced amendment in the prudential regulations on Friday with two major changes.

The banks and DFIs had been advised earlier that separate instructions for withdrawal of benefit of FSV of collateral will be issued in due course.

“The matter has been revisited and it has been decided to completely withdraw the benefit of FSV against all NPLs for calculating provisioning requirement with effect from Dec 31, 2007,” said a State Bank circular.

However, the benefit of FSV against NPLs of Housing Finance will be applicable.

For the first year, the benefit of FSV will be applicable on 50 per cent NPLs. For the second year, benefit of FSV against 50 per cent NPLs and for third year and onwards, benefit will be applicable for 100 per cent NPLs.

Another change in prudential regulations was made to bring change in the personal loans.

The SBP circular says that the time period for classifying personal loans as “Loss” has been reduced from one year to 180 days.

Bankers said that this amendment would add more default in their accounts as the time period has been shortened.

The immediate impact will be felt in the provisioning and finally the profits of the banking industry will be hit.