KARACHI, Aug 21: The State Bank has worked out new guidelines for irrevocable loans and advances write-off and set three criteria for the settlement of stuck-up loans now estimated at around Rs278 billion.

Top business leaders held a detailed meeting with the governor of the State Bank and his deputy on Wednesday to discuss the long pending issue of the stuck-up loans. The business team was led by the President of the Federation of Pakistan Chambers of Commerce and Industry Iftikhar Malik and included Dr Mirza Ikhtiar Beg chairman of the FPCCI Standing Committee on Banking, Mian Mohammad Usman and Sardar Mohammad Ashraf Khan. SBP Governor Dr Ishrat Hussain was assisted by Deputy Governor Taufiq Hussain.

The first of the three new criteria for settlement of outstanding loan pertains to half a million rupees outstanding loan. In this case the State Bank has advised the management of the bank or the financial institutions to obtain a resolution from the Board of Directors to get authorization for itself or its Committee to write-off such loans on case to case basis without going into litigation.

However, the banks and the financial institutions has been advised to formulate initial policy and guidelines to define criteria for such write-offs.

Where the outstanding amount is over half a million rupees but less than Rs2.5 million there is a clear instruction to obtain 75 per cent or more should be recovered in cash if the forced sale value of the security is found to be more than outstanding loan amount. In case the forced sale value is found to be less than the outstanding loan, the bank has been advised to recover at least forced sale value amount.

In case outstanding loan amount exceeds Rs2.5 million the banks have been advised to obtain 75 per cent cash or if assessed forced sale value is less then equal sum of this value be recovered.

Banks have been advised to appoint independent valuators listed on the Pakistan Banks Association.

The SBP governor was unhappy on the stuck-up loans portfolio and informed the business leaders of the new guidelines worked out for this purpose.

The FPCCI President pleaded for quick revival of the sick units to increase exports and generate employment.

Dr Mirza Ikhtiar Malik wanted a precise definition of the principal amount in resolving the issue of the outstanding loans.