Circular No.SD 2 / 99
July 16, 1999
The Presidents/Chief Executives
Of All Banks
WRITING OFF OF IRRECOVERABLE LOANS/ADVANCES
order to curb the rising trend of writing off of loans,
mark-up and other dues by banks, following guidelines are
issued for meticulous compliance: _
loans may be continued to be written off by banks
themselves with the approval of their respective Board
considering write off proposals placed before it the
competent authority will ensure:
That the write off proposal is duly audited by the
Internal Auditor who would be required to early
indicate whether any deviation from the credit policy
approved by the Board tool irregularity or slackness
that occurred during the disbursement, documentation
or subsequent monitoring of security or operations
should be distinctly spelt out. The names and designation
of officers/staff responsible for various lapses
in handling the advance, which has become bad leading
to its write off in full or part, and action taken
against them be also specified.
That the latest valuation of properties, stocks held
as security against advances indicating present market
value as well as forced sale value duly assessed by
an approved surveyor is produced. No write off be
allowed if the forced sale value of the security held
by the bank is more than the outstanding amount recoverable.
That all liquid assets including FDRs, Government
Securities, Share Certificates held under lien and
pledged goods etc., have been realized and sale proceeds
thereof appropriated towards adjustment of outstanding.
That the borrower/guarantor has no know means or repayment.
That borrowers have not created other business interests
and assets out of the non-performing loan proposed
to be written off.
That no criminal misappropriation of stock or other
movable.immovable securities by the borrower was involved.
issued in detail regarding debt restructuring and
rescheduling as contained in circular No.BID(Gen)/2470/601-04-90
dated 17-06-1990 be followed. Banks should note that
while rescheduling or restructuring is permissible,
it should not be done simply to break time frame and
to allow unwarranted improvement in the classified
category of loan.
write off of loans, if any, in the names of Directors
or their relatives/ dependents/concerns in which they
have any interest and in the names of Chief Executives
of the bank require prior approval of the State Bank.
particulars of loans written off should be reported
to the Credit Information Bureau of the State Bank.
above supersedes the instructions contained in BID Circular
No.4 dated 5th July, 1994.
with a view to ensuring good credit administration and minimize
the impact or writing off loans and advances banks are advised
to meticulously follow the credit policies framed by their
Board of Directors and approved by State Bank of Pakistan.
(ZAFAR HASNAIN SIDDIQUI)
forwarded for information to:-
Director, Banking Policy and Regulations Department/
BSD-III / Agricultural Credit Department/Foreign Exchange
Department/Credit Information Bureau, State Bank of
Pakistan, Central Directorate, Karachi.
to Governor, State Bank of Pakistan, Central Directorate,
to Deputy Governor-I, State Bank of Pakistan, Central
to Deputy Governor-II, State Bank of Pakistan, Central
to Chief Economic Adviser, State Bank of Pakistan, Central
to Chief Foreign Exchange Adviser, State Bank of Pakistan,
Central Directorate, Karachi.
to Executive Directors, State Bank of Pakistan, Central