The SBP has advised the Commercial banks and other financial institutions to devise strategies to curtail the rising Non Performing loans (NPLs). Increasing trend in NPLs is causing difficulties to promising business on macroeconomic level. According to the SBP’s quarterly report the NPLs reduced in first two quarters has shown a growth by 7.4 percent and has reached to the level of Rs 494 billion. On the other hand, the lending portfolio has declined and this rise in NPLs has affected the economy badly. As a result, the decrease in infection ratio is being amplified. As this increase in NPLs requires partial provision, hence, the base line earning indicators has remained positive. As expected keeping view the trend of July-Sep quarter the asset base has contracted 2.3% and reached to the level of Rs 6.6 billion. Large withdrawals and increase circulation of money has also reduced the deposit base. The Risk weighted assets (RWAs) have also decreased due to contraction in asset base. The Tier-1 capital is reduced due to the higher regulatory deduction, this resulted into decrease in both the eligible capital as well as risk based capital adequacy ratio (CAR); this has reached to the level of 13.8% but remained above the 10% level of regulatory requirement.
According to the report, additional bank credit will be needed to support the kharif based industry. However, this demand could only be met by the fresh deposit mobilization by commercial banks and retirement of commodity finance by government owned agencies. Banks will need to shift their focus from investing in government based securities and investment in public sector towards the private sector for economic growth and increasing revenue of the banks .