Mar 8 - 14, 2010

Non performing loans (NPL) increased by Rs11 billion to Rs432 billion in the 4th quarter of 2009, according to the latest statistics.

On full calendar year basis 2009, bank sector's NPLs were up by Rs86 billion. However this is lower than the number accumulated in 2008 i.e.Rs136 billion relaying the banking sector's choosiness about borrowers in certain areas.

It may be interesting to note that the highest number of infected portfolio of the banking sector was related to the agriculture loans and the textile sector. However, the banks are cautious to extend advances to the power generation as well as transportation sector in view of the bitter experiences of the past.

The commercial banks which have been reluctant to provide loans to public transport sector are now likely to be lured with the government offer of providing grant of Rs300,000 per bus to the banks that are inclined to extend loans to the transporters. No doubt, this is bound to ease the transportation problems in the urban centers in the country.

In this respect, the State Bank of Pakistan has advised commercial banks, willing to advance loans under Shaheed Benazir Bhutto CNG Bus Project, to approach SBP Banking Services Corporation for receiving upfront payment of Rs300,000 grant per bus.

The banks were advised to complete due diligence based on the concession agreement signed by operators/investors with city district government, Karachi (CDGK) before approaching SBP-BSC Karachi office for grant.

It may be mentioned that the federal cabinet recently approved a scheme for launching dedicated CNG buses in major urban cities of Pakistan for efficient environment friendly and affordable public transport. The pilot phase of the scheme would start in Karachi during the current year in collaboration with the government of Sindh and CDGK, followed by other major cities.

The government of Pakistan will contribute a total of Rs677,181 as subsidy over 5 years towards the cost of one bus, which shall comprise of Rs300,000 upfront grant as part of down payment and Rs 377,181 as mark-up subsidy payable in 5 years (on monthly basis). It has been made mandatory for the operators/investors to ply at least 25 buses on a single route. The total amount, initially subscribed by the federal government for this pilot project, is Rs300 million.

The commercial banks were also advised to immediately inform SBP, BSC Karachi about the financial closure/deal with the operators/investors enabling them to provide for the requisite amount from the pool of Rs300 million. This provision of amount once pledged shall remain valid for 7 working days only as this scheme would run till the exhaustion of Rs 300 million, it added.

The State bank also advised the banks to approach BSC for reimbursement of markup subsidy on monthly basis, calculating 30 days, from the date of first disbursement. In this regard, the first monthly installment of markup subsidy shall be disbursed by BSC, 30 days after the placement of order with the supplier for procurement of buses, says a circular.

Banks are also required to immediately inform BSC to enable them to stop payment of markup subsidy in case where markup or principal is overdue by 90 days or more from the due date by the operators/investors. State bank also informed banks that the period required to procure buses would be 45 days from the date of financial closure.

It may be pointed out that any operator/investor ready to ply buses on different green routes has to sign a concession agreement with CDGK through Karachi Mass Transit Cell. The operators/investors may file more than one application (in multiple of 25 buses) desirous to operate buses on different routes.