Non-Performing Loans (NPLs) of banks and DFIs rose to a historic level of Rs 594 billion at the end of June 2011 owing to slow economic activities and high interest rates. The State Bank of Pakistan (SBP) on Friday said NPLs continue to grow and registered a slight increase of one percent in April-June 2011 quarter as compared to Jan-March 2011 quarter.
Economists said high interest rate, power outage, worsening law and order and taxation policies are responsible for raise in NPLs. After a massive surge in the NPLs, the banking sector is reluctant to expand financing to the private sector and preferring to invest in the government papers.
According to the SBP, NPLs of banks and DFIs mounted to Rs 594.475 billion as on June 30, 2011 compared with Rs 588.933 billion as on March 31, 2011, depicting a surge of Rs 5.542 billion in second quarter of CY11. However, the increase in second quarter of current calendar year is much less than first quarter of CY11, as an incremental of over Rs 22 billion was registered in NPLs of banks and DFIs in the first quarter of CY11.
Major increase was witnessed in the NPLs of banks, while the NPLs of DFIs have registered some decline. NPLs of all banks recorded an increase Rs 5.673 billion in just three months. With current surge NPLs of banks reached Rs 579.197 billion in June 2011. Previously it stood at Rs 573.524 billion in March 2011. During the period under review, NPLs of DFIs declined by Rs 131 million to Rs 15.278 billion from Rs 15.409 billion.
The detailed analysis revealed that NPLs of Specialised Banks and Local Private Banks are on surge, while NPLs of foreign banks and public sector banks have posted some decline. During the period under review, NPLs of local private banks surged by Rs 5.218 billion to Rs 370.244 billion from Rs 365.026 billion. In addition, NPLs of specialised banks posted an increase of Rs 3.973 billion to Rs 35.337 billion June this year.
With a decline of Rs 3.43 billion, NPLs of local private banks reduced to Rs 166.915 billion in June 2011. During March-June quarter, NPLs of public sector banks and foreign banks declined by Rs 3.43 billion and Rs 88 million respectively. NPLs of public sector banks stood at Rs 166.915 billion at end of second quarter compared with Rs 170.345 billion in March 2011. NPLs of foreign banks declined to Rs 6.701 billion from Rs 6.789 billion.