| GEO Business|
| Banks start giving due stress on provisioning of stuck up loans|
| Updated at: 1253 PST, Friday, September 05, 2008|
KARACHI: The banks in Pakistan, bearing the losses in their profits, have started giving due stress on the provisioning of their stuck up loans.
Central Bank said that following the December 2007 change in laws, this situation was seen emanating, as until last year the banks used the leased property of the borrowers for provisioning, but now they were allowed use cash or shares only. Loans, on which interest is not paid for three consecutive months, are considered stuck up loans. This year, in the first quarter, the stuck up loans of the banks were seen at the high-level of Rs18 billion and in a bid to keep the situation under control, the banks spent their income on their provisioning, which triggered cut in their this year first quarter profit by 18 percent.
Central Bank said that the banks’ sufficient incomes have borne out this burden. AKD banking expert, Raza Jaffery said that provisioning was not the solution of the problem and underscored the need of not letting the stuck up loans rise.