In a joint statement issued here on Monday, the LCCI office-bearers said that the new rules are one of the stringent changes made by the SBP in its accounting standards.
Under the new regulations, they said the SBP has also eliminated the grace period in classifying the NPLs. The SBP on Tuesday last enforced new rules to speed up the recovery of stuck-up loans or NPLs of commercial banks. The banking supervision department (BSD) of the SBP issued new prudential regulations for classification of NPLs, granting one sweeping exception of not requiring provision by commercial banks to such loans, guaranteed by the federal government.
The new provisions requirements would not be applicable to import-export bills, inland bills and credit cards which would continue to be classified as loss if not paid or adjusted within 180 days. But the new standards would be applicable to all types of financing facilities, short-term, medium-term, long-term, corporate, SME and all types of consumer finances, except of credit cards.
The BSD directed commercial banks that in all cases of NPLs the unrealised mark-up or interest to be kept in memorandum account and not to be credited to income account except when realised in cash, unrealised mark-up or interest already taken to income account to be reversed and kept in memorandum account.
Now it has been decided that after the passage of just 90 days the loan would be classified as overdue and after one year as doubtful, which is unjustified by all means, the LCCI office-bearers said.
By elimination of first stage of classification the central bank has forced commercial banks to speed up their recovery process. The net impact of imposition of these restrictions would be available after the reaction of big organisations like Aptma or Sugar Mills Association.
The SBP has also raised percentage requirements of provisions under new three categories. Under first classification, the substandard loan, the new provision requirement, to be met by commercial bank has been enhanced to 25 percent, under doubtful category of loans, the banks have to make 50 percent provision and under the last category the loss category banks have to make 100 percent provisions, they concluded.