ISLAMABAD: The powers of banking courts to grant injunctions against sales of mortgaged properties are significantly restricted under the proposed Financial Institutions (Recovery of Finances) Amendment Act, 2026.
According to a brief submitted before the National Assembly Standing Committee on Finance, no injunction shall be granted unless the Banking Court is satisfied that no mortgage exists, or there is proven fraud causing irreparable harm, or the secured amount has been fully paid, or the outstanding amount is deposited in court.
“Strong recovery law ensures risk mitigation for subsidized lending and encourages banks to increase loan disbursement under the government scheme,” officials explained the rationale behind the Financial Institutions (Recovery of Finances) Amendment Act, 2026.
READ ALSO: FIs (Recovery of Finances) Ordinance: Suit automatically turns into execution proceedings: LHC
The Financial Institutions (Recovery of Finances) Amendment Bill, 2026, seeks to strengthen and streamline the foreclosure and recovery regime under the Financial Institutions (Recovery of Finances) Ordinance, 2001, by introducing clearer procedures, enhancing enforcement mechanisms, and limiting delays in recovery proceedings.
Under the revised law, a definition of “Deputy Commissioner” is inserted to clarify the district authority with territorial jurisdiction over mortgaged property, thereby formalizing the district administration’s role in foreclosure and enforcement.
A structured, mandatory three-stage notice regime is introduced before sale of mortgaged property, requiring
(i) a first notice of at least 14 days,
(ii) a second notice of a further minimum 14 days, and
(iii) a final notice of not less than 30 days; sale may proceed only after expiry of these notices and at least sixty days from the first notice, or upon breach of mortgage terms.
As per Financial Institutions (Recovery of Finances) Amendment Act, 2026, the financial institutions are expressly empowered to take possession of mortgaged property where the mortgagor or any occupant fails to surrender possession; however, bona fide tenants are protected from eviction until expiry of lease or payment of agreed compensation, while leases created after the mortgage that prejudice the financial institution are presumed not to be bona fide unless proven otherwise.
New provisions empower financial institutions to seek assistance from the deputy commissioner or a designated authority to take possession of mortgaged property and related documents; such authority may use necessary force, and its actions are protected from challenge before any court or authority.
A statutory immunity is introduced, protecting financial institutions and their officers from suits or legal proceedings for actions taken in good faith under the Ordinance.
The proposed law further states that an application seeking to set aside a sale shall not be entertained by the banking court unless the applicant deposits an amount equal to 50 percent of the reserve price or furnishes security to the satisfaction of the court.
Copyright Business Recorder, 2026
Comments