Representational image. PHOTO: REUTERS
In the presence of SBP Governor Dr Reza Baqir, officials of Habib Bank, National Bank of Pakistan, United Bank, MCB Bank, Allied Bank, Meezan Bank, Bank Alfalah, Bank AL Habib, Habib Metropolitan Bank and Faysal Bank signed the agreement.
Under the provisions of the Corporate Restructuring Companies Act 2016 and with initial paid-up capital of Rs500 million, the above banks decided to establish the corporate restructuring company, which would be the first such company in Pakistan, the central bank said in a statement.
"The objectives of the company are well aligned with the initiatives of the government for reviving the sick industrial units," it said.
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Corporate restructuring companies, under the CRC Act 2016, are empowered to acquire, restructure and deal with non-performing assets of the financial institutions and re-organise and revive the commercially or financially distressed companies.
Corporate restructuring companies are specialised institutions with skills in coping with non-performing loans (NPLs) and corporate restructuring.
The SBP said these companies, through the aggregation of NPLs, would be well positioned to negotiate with the sick units and finalise the restructuring of loans vis-a-vis multiple lenders negotiating simultaneously with the borrower.
The SBP expected the corporate restructuring companies to evolve as vibrant economic agents, contribute to the revival of sick industrial units and generate employment opportunities.
Total non-performing loans of the banking industry stood at Rs758 billion as of September 30, 2019.
NPLs include loans against sick industrial units, which could be revived and rehabilitated, provided the NPLs are restructured promptly and sponsors of the units inject fresh equity to demonstrate willingness and commitment to the rehabilitation of the sick units.
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The Securities and Exchange Commission of Pakistan (SECP) had granted the licence to PCRCL on December 31, 2019.
The SBP appreciated the initiative of the banks and the supportive role of the SECP in the incorporation and licensing of PCRCL.
At present, the SBP is engaged with the federal government to introduce amendments to the relevant laws and to strengthen banking courts in order to take forward the government's agenda of institutional reforms.
Published in The Express Tribune, January 11th, 2020.
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