SBP permits charge-off of fully provisioned legacy NPLs

MG News | July 24, 2024 at 02:03 PM GMT+05:00

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July 24, 2024 (MLN): To address the issues concerning these legacy Non-performing loans/finances (NPLs), the State Bank of Pakistan (SBP) allowed banks to charge off the fully provisioned corporate/commercial and Small & Medium Enterprises (SMEs) NPLs, according to the circular issued to the Presidents and CEOs of all banks.

Such charge-offs shall not constitute any financial relief and banks’ rights to recover from their borrowers shall remain intact.

This measure will allow these NPLs to be removed from banks' financial statements and recorded in memorandum accounts, providing a cleaner balance sheet for the banking industry.

However, charged-off NPLs shall not appear on the bank’s financial statements and shall instead be kept in the memorandum accounts.

The circular further instructed that banks shall adhere to the following minimum prerequisites for charging off their NPLs.

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