State Bank of Pakistan easing banking regulations to expand credit after flood disaster

Aug 31 2010 Daniel Seleanu in Abu Dhabi

The State Bank of Pakistan will temporarily relax banking regulations to allow financial institutions to expand credit facilities following the country's worst flooding disaster in living memory. Yaseen Anwar, acting governor of the SBP, told a meeting of bank chief executives and presidents that the central bank would reduce provisioning requirements, offer refinancing schemes at concessional rates, and provide credit guarantees to share losses with banks and encourage them to extend new loans in affected areas. The volume of NPLs in flood affected areas will increase substantially, Anwar said, adding that the central bank estimated total NPLs would exceed 48bn rupees.

Additionally, the SBP has organised three banking committees to address SME finance, agricultural finance, microfinance and general relief activities. The committees will recommend measures to facilitate the immediate flow of credit, while the Flood Relief Committee of the Pakistan Banks Association will coordinate with financial institutions to channel aid to flood-stricken communities. The composition of the banking committees are as follows:

SME finance committee: Senior managers from HBL, NBP, Faysal Bank, Standard Chartered Bank, Bank Al-Falah, Meezan Bank and NIB Bank.

Agriculture finance committee: Representatives from NBP, HBL, Faysal Bank, UBL, Askari Bank and ZTBL.

Microfinance committee: Representatives from HBL, NBP, Khushhali Bank, First Microfinance Bank, Tameer Microfinance Bank and Kashf Microfinance Bank.

Anwar underscored the need to increase lending among farmers and small businesses to help them restore their businesses. He urged banks to provide relief to existing borrowers and called for suggestions on additional central bank measures for helping borrowers. The SBP would provide broad assistance to help banks achieve a rapid expansion of credit, Anwar said. "We will do whatever we can within our regulatory domain to make available liquidity to the banking sector without jeopardising the stability of the financial system."

Anwar stressed that the vast magnitude of the catastrophe required unprecedented cooperation from the nation's financial sector: "We all must play our part in redressing the grievances of the affected people by extending all possible help to them."