Despite slow economic activity in the country, the banking sector's cash recoveries against Non-Performing Loans (NPLs) showed an improved picture, rising by 60 percent during the second quarter of current calendar year (CY19). According to the State Bank of Pakistan (SBP), banking sector (including all banks and DFIs) recovered some Rs 23.572 billion during April-June of CY19 compared to a cash recovery of Rs 14.759 billion in previous quarter (Jan-March) of this calendar year, showing an increase of Rs 8.813 billion. Overall cash recovery against NPLs, in the first half of CY19, stood at Rs 38.331 billion.

Banker said despite economic slowdown and high interest rate, a significant surge in cash recoveries against NPLs is very positive sign for the banking industry. The higher recovery reflects that banks and financial institutions are striving for maximum recovery of NPLs, they added.

The detailed analysis revealed that banks' cash recoveries against NPLs stood at Rs 22.627 billion during second quarter of CY19, up from Rs 14.148 billion in the first quarter of CY19. Similarly, with an increase of 54 percent, DFIs' cash recoveries surged to Rs 945 million in April-June of CY19 against Rs 612 million in Jan-Mar of CY19.

During the period under review, public sector banks' cash recovery against NPLs stood at Rs 2.556 billion, local private banks' Rs 10.767 and specialized banks some Rs 9.312 billion.

NPLs of banks and DFIs escalated by 12.75 percent to all-time high of Rs 783 billion in June 2019 compared to Rs 694.4 billion in December 2018. Bankers said that increase in NPLs is due to addition of fresh non-performing loans and lower cash recoveries owing to higher interest rate followed by tight monetary policy to curb inflation.

Copyright Business Recorder, 2019