The government is likely to restructure a whopping debt of Rs80.4 billion that the Zarai Taraqiati Bank Limited (ZTBL) owes to the State Bank of Pakistan (SBP) as the former’s bad debts rise alarmingly to 21% of its total lending portfolio.
The revelation came in a meeting of the Public Accounts Committee (PAC) on Tuesday, when auditors disclosed that the country’s largest specialised bank ZTBL was unable to retire the debt of Rs80.4 billion, of which Rs54.5 billion is the principal amount.
The loan had been obtained for 15 years but the bank was neither paying the principal amount or even markup after entering into a dispute over the markup rate.
“A proposal has been floated to return Rs54.4 billion to the SBP, but it is not possible at the moment,” said Acting ZTBL President Rohi Raees Khan.
She said the bank had a total lending portfolio of Rs95 billion and it was impossible to return such a big amount.
To a question, she disclosed that the bank’s bad debts have increased to Rs20 billion while provisioning was made against some categories of the infected loans as per the central bank’s regulations.
Khan said the bank was trying to get a commercial banking licence to improve its deposits, but the central bank has set certain conditions.
SBP Executive Director Haroon Rashid said the ZTBL’s debt restructuring proposal has been rejected by both the finance ministry and the central bank.
However, Finance Secretary Abdul Wajid Rana pointed out that the government has called a meeting in the finance ministry to work out a proposal to restructure the debt in such a way that is acceptable to all parties.
Published in The Express Tribune, August 8th, 2012.