Industries are further in crisis due to lack of financial resources and slow judicial system
Islamabad: The State Bank of Pakistan has cited the slowness of the judicial process and the unavailability of new financial resources as the major reasons for the delay in the rehabilitation of sick industrial units, due to which these industries are sinking further into financial crisis.
The central bank has submitted a report to the federal government for the rehabilitation of sick industrial units, in which it has identified the main challenges faced in restructuring loans.
According to the report, the judicial process is very slow and time-consuming, which is putting sick industrial units under further pressure. Banks generally refrain from giving more loans to such entities that are under financial pressure.
Moreover, banks do not have the power to waive loans, due to which they remain hesitant in cleaning their balance sheets.
The report states that although the ratio of non-performing loans improved slightly in 2024, the total amount of bad loans is still at historical levels. The amount and ratio of NPLs in Pakistan increased continuously from 2006 to 2015. In 2006, this amount was Rs 177 billion, which increased to Rs 618 billion in 2012.
Later, it decreased slightly and stabilized at Rs 605 billion in 2014 and 2015. The Karachi Interbank Offered Rate also fluctuated during this period, reaching a high of 14.2 percent in 2008 and declining to 6.8 percent in 2015.
Under the guidelines proposed by the State Bank, all banks and development finance institutions operating in the country will be allowed to provide financing to sick industrial units. Through these guidelines, banks will be allowed to restructure the loans of sick industrial units, reduce the principal amount and provide a new schedule so that they can resume activities.
These measures will not only revitalize industrial capacity but will also help public sector banks in cleaning up their balance sheets and improving the lending system.
