The government has decided to form a trust to resolve the issue of Non-Performing Loans (NPLs) to revive sick industrial units and increase economic activity.
The total NPLs in Pakistan soared due to the coronavirus pandemic due to a lack of economic activity and the government wants to channel them to use.
Many small and large industrial units remained unable to pay installments and therefore, the volume of NPLs swelled.
As per official figures, NPLs recorded in September 2020 increased by Rs 95 billion as compared to the corresponding period of the previous year.
With this addition, the total volume of the loans surged to Rs 868 billion from Rs 773 billion.
In December 2020, the volume of NPLs stayed at Rs 844 billion which is Rs 68 billion more than Rs 776 billion, the amount recorded in December 2019.
However, after the coronavirus pandemic abated a little, a slight improvement was witnessed and it decreased slightly to Rs 829 billion as recorded in March 2021.
Corporate Restructuring Amendment Bill 2020
To address the issue, Pakistan Tehreek-e-Insaf (PTI) government introduced the Corporate Restructuring Amendment Bill 2020.
The bill would pave way for payment of outstanding NPLs and utilize the recovered amount in the revival of sick industrial units and distressed entities.
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The finance ministry officials told News360 that NPLs currently stood at Rs 829 billion and among them, loans of Rs 638 billion were one year old.
The quick payment of the mammoth amount was thus a difficult task.
Therefore, the government wants to redress the issue and use the money for resuscitating distressed industries and factories to generate employment and economic activity.
Under the Act, a company comprising 10 banks will be established and they will form a trust.
The company was originally established in 2020 and it has been given legal cover with the Act.
The officials told News360 that a new restructuring scheme will be introduced after consultation with borrowers as well.