ISLAMABAD: To curtail Non-Performing Loans (NPLs) of banks and to revive sick industrial units the government has decided to launch a Corporate Restructuring Company (CRC).
In a meeting of the National Assembly’s Standing Committee on Finance presided by Faiz Ullah, Secretary Finance Kamran Ali Afzal informed the committee that because of a substantial rise in the NPLs of banks the government has decided to outsource it and formed another company to deal with this issue. “Our financial sector is quite shallow and it neither has the capacity or expertise to deal with defaulted sick companies,” he said.
The State Bank and SECP officials briefed the committee as to how the CRCs, under the CRC Act 2016, is empowered to acquire, restructure and resolve the non-performing assets (NPAs) of financial institutions and thereby reorganise and revive commercially or financially distressed companies.
They said the CRCs are specialised institutions with expertise in NPL resolution and corporate restructuring. These companies through the aggregation of NPLs will be well-positioned to negotiate with sick units and finalise restructuring of loans from multiple lenders negotiating simultaneously with the borrower.
On this occasion, Deputy Governor State Bank Jameel Ahmad told that NPLs of banks has reached a level of Rs 829 billion and the Central Bank after realizing the gravity of the situation decided to launch this company. “Unfortunately our banking system is not in a position to deal with such a huge stock of NPLs,” he observed.
When the Corporate Restructuring Company Amendment Bill 2020 Bill (Government Bill) presented before the committee, Nafisa Shah of PPP said that this bill has big significance and its very unfortunate that Finance Minister Dr Abdul Hafeez Shaikh is not present in the meeting despite the fact that he is in the Parliament. On this Faiz Ullah said that the finance minister is right now busy in his election campaign for the Senate seat.
The Chairman committee asked the members of the committee to approve the bill, but Nafisa Shah and Qaiser Sheikh of PML(N) seek more time to review the amendments. The committee deferred the bill till the next meeting.
It may be mentioned here that in January top 10 banks signed an agreement to establish a Corporate Restructuring Company with an initial paid-up capital of Rs500 million.
The shareholder agreement was signed by presidents and representatives from 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 at the State Bank of Pakistan (SBP) headquarters. The Securities and Exchange Commission of Pakistan (SECP) has granted a license to the PCRCL on December 31, 2019.