Karachi: State Bank of Pakistan (SBP) has amended the prudential regulations for corporate and commercial banking, small and medium enterprises financing and consumer financing. The SBP circular issued to revise the instructions on provisioning against classified assets as follows:
• Allow benefit of Forced Sale Value (FSV) of eligible collaterals/securities held against Non-Performing Loans (NPLs) from the date of classification for calculating provisioning requirement with effect from 30-09-2011.
• Waive the condition that full-scope valuation shall not be more than one year old at the time of classification.
According to Alfalah Securities Limited, the banks/DFIs will have to classify their loans/advances and make provisions in accordance with the criteria, keeping in view that they are allowed to take the benefit of FSV of the pledged stocks, plant and machinery under charge and mortgaged residential, commercial and industrial properties held as collateral against NPLs for calculating provisioning requirement. The FSV benefit allowed from the date of classification for mortgaged residential, commercial and industrial properties (land and building only) at 75, 60, 45, 30, 20 % for first, second, third, fourth and fifth year respectively, for plant and machinery under charge at 30, 20 and 10 % for first, second and third year respectively while for pledged stock at 40 % for first, second and third year. The availability of FSV benefit is positive for the profitability of the commercial banks though the profit arising from availing the benefit shall not be available for the payment of cash or stock dividend. Further, details and impact of the FSV benefit in provisioning will have to be adequately disclosed in the notes to the financial statements.