ISLAMABAD – Pakistan Banking Industry non performing loans hit one of thehighest level of history with Rs 782 billion mark.
Increasing interest rates, a slowdown in the economy and poor utilizationof loans have translated into high Non-Performing Loans (NPLs) of thebanking industry, swelling to Rs 782 billion by the end of the financialyear 2018-19.
According to the State Bank of Pakistan (SBP), the Non-Performing Loans ofbanks surged by Rs 144 billion in the outgoing financial year.
The lending of commercial banks to the private sector reached over Rs 1trillion in the financial year 2018-19. Loans to agriculture sector alsosurged to nearly Rs 1 trillion whereas lending to businesses under SMEs,subsidized schemes such as LTTF and Export Refinance also showedsustainable growth. However, a significant part of these loans did nottranslate into revenues, converting into Non-Performing Loans.
It is pertinent to mention here that interest rates of the loans grew withan accelerated pace with the addition in policy rates by 4.25% in 2018 and3.25% so far in 2019. Due to this, the cost of doing business has increasedsubstantially with reduced margins for the borrowers.
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The new loans are being disbursed at a higher rate in response to monetarytightening, while the existing portion of outstanding loans has beenrenegotiated by the financial institutions.
Industry experts believe that the rise in agriculture sector NPLs resultsfrom low crop yields owing to water shortage and drought conditions, andlate procurement of wheat by public procurement agencies.
In addition, the rise in input prices such as seed, fertilizers,pesticides, electricity and petroleum products due to Rupee’s depreciationhas also contributed to higher NPLs.
