Concerns About Bank Loans – Journal

THE combined gross portfolio of non-performing loans of the country’s banks and DFIs edged up 2.6% or 22 billion rupees to 866.7 billion rupees at the end of March on a quarterly basis, from 844.7 billion rupees at the end of March. December, according to new data from the State Bank. This appears to be in line with the broader trend seen in the recent past – a result of the restrictive monetary policy pursued by the SBP until Covid-19 forced it to reduce the cost of credit by 625 basis points to 7% from March to June of last year to support the economy. and businesses. The central bank also announced other measures, including a debt relief plan, to “preserve the creditworthiness of borrowers and enable them to cope with temporary economic disruptions” caused by Covid-19. These concessions have allowed companies to remain liquid, avoid potential defaults and keep the financial results of banks and DFIs healthy. Banks and DFIs have also taken aggressive steps to cover their infected portfolios by increasing the provisioning of their bad debts. As a result, net provisioning by banks and DFIs increased to 88.3% of the infected portfolio in December, from 81.4% a year ago. Some lenders have also performed heavy “subjective classification” to the detriment of their profits to protect against potential future defaults caused by Covid-19.

This indicates the fear of banks over the ability of borrowers to repay their loans when deferred payments become due from next month. While there is little evidence on the possibility of major defaults, the growing number of infections is already preventing lenders from aggressively pursuing defaults. SBP data shows recovery declined to 21.2 billion rupees in the January-March period from 49.2 billion rupees in the previous quarter as the ongoing pandemic and slow vaccinations exacerbated global economic uncertainty due to the pandemic. How things will play out over the next few months, and how the pandemic will affect the economy and the behavior of borrowers who have successfully deferred or restructured their loans is a puzzle. It is hoped that the country’s financial sector will go through the worst without major injury.

Posted in Dawn, le 11 May 2021

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