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KARACHI: Financial institutions have deferred and restructured loans worth Rs 881 billion under the Loan Extension and Restructuring Scheme of State Bank of Pakistan (SBP) to facilitate the borrowers in Covid-19 pandemic.

The response to the SBP’s Debt Relief Scheme was overwhelmingly and all categories of customers including corporate, commercial and retail borrowers benefited from the scheme to manage their debt in a difficult period of pandemic.

On March 26, 2020, SBP announced the loan extension and restructuring scheme with an aim to preserve the solvency of the borrowers during temporary economic challenges. Under the scheme, two options were made available to the borrowers i.e. to get the loans deferred for up to twelve months or to get their loans restructured.

Since the launch of the scheme, the individual borrowers, especially the customers of microfinance banks, have been the major beneficiaries of the scheme and they approached their banks for decrement and restructuring of loans. According to SBP, under this scheme, since March 2020 to January 8, 2021, banks, DFIs and MFBs have received some 1.691 million applications to avail this scheme. Out of received application financial institutions have approved 1.629 million applications, which is the 96.41 of the total applications.

In term of value overall Rs 880.837 billion worth loans have been deferred or restructured during March to Jan 8, 2021. Most of loans of Corporate and Commercial sector have been rescheduled. Out of total restructured and deferred amount, some 80 percent was relates to corporate and commercial borrowers as corporate loan portfolio of the banking industry constitutes 70 percent of total loan portfolio of Rs 8.932 trillion of banks, DFIs and MFBs.

Overall some 3,153 application were received from Corporate and Commercial and Rs 706.221 billion worth loans were deferred or restructured since the launch of this debt relief scheme.

Some Rs 27.583 billion loans of SME, Rs 21.489 billion of Consumer Finance, Rs 8 billion of House Finance and Rs 11.571 billion of Agriculture Finance loans were deferred or restructured under the SBP’s scheme.

The restructured and deferred loans also include 1.525 million approved applications of customers of microfinance banks involving an amount of Rs 105 billion, which approximately constitutes 48 percent of total net-loan portfolio of MFBs.

Banker said that the SBP’s debt relief scheme enable the borrowers to combat the temporary economic disruptions during the Covid-19, which directly hit the economic activities globally. The scheme enabled the borrowers to deal with the adverse implications of the ongoing Covid-19 pandemic in a better manner.

Under the loan deferment scheme loan principal amount only can be deferred for up to twelve months and borrower continues to service mark-up amount as per agreed terms & conditions. However, the credit history of borrower will not be affected adversely.

While, for restructuring of loans, the principal amount can be deferred for more than twelve months and repayment terms of mark-up amount can also be relaxed. However, credit history of borrower will not be affected adversely.

In addition with a view to facilitate the customers of Islamic Banking institution (IBIs) and smooth implementation of relaxation provided in respective prudential regulations related to deferment of principal or rescheduling/ restructuring of financing facilities, State Bank of Pakistan on April 23, 2020 issued Guidelines for IBIs. These guidelines provided major mode wise general principles to enable IBIs to effectively deal with the requests of deferment of principal and/or rescheduling/ restructuring of financing facilities.

Copyright Business Recorder, 2021