KARACHI: The State Bank of Pakistan on Thursday issued a circular notifying the financial institution’s about new rules for recovering loans from defaulted mortgagees via a laid down procedure of hiring chartered accountancy firms and valuers to assess the liability within a given time.
Previously, the banks were only permitted to auction mortgaged property after the conclusion of the due process.
SBP said, “In exercise of the powers conferred by section 25 of the Financial Institutions (Recovery of Finances) Ordinance, 2001, the Federal Government has notified the Financial Institutions (Recovery of Finances) Rules, 2018.”
The rules laid down the mechanism for the sale of the mortgaged property under section 15 of the Ordinance for the assessment of liability.
According to the circular from the central bank, “Before sending the first notice to the mortgagor under sub-section (2) of section 1S of the Ordinance, the financial institution, in order to get the outstanding mortgage money determined, shall forward the case to a chartered accountant firm.
Such chartered accountant firm shall neither be nor have been, during the last three years, a statutory auditor of, or employed or engaged as a consultant by, the concerned financial institution or the mortgagor.”
As per the regulations, banks in case of there being more than one mortgagee of the mortgaged property will be asked to provide their respective claims for outstanding mortgage money to the selected chartered accountant firm or chooses by the financial institution alongside complete documents to support their claims.
Moreover, the SBP guidelines stated the chartered accountancy firm would move forward to assess the outstanding mortgaged money of the relevant financial institution only when the mortgagees were unable to submit their claims of mortgage money to the firm.
Also, the financial institution would engage the services of three valuers from the approved list of professional valuers maintained by the Pakistan Banks Association for valuation of the mortgaged property.
“After the valuation of the mortgaged property, the financial institution shall make a publication in terms of clause (b) of sub-section (4) of section 15 of the Ordinance; the public auction for the sale of the mortgaged property shall take place after fifteen days of the publication of the notice under clause (b) of sub-section (4) of section 15 of the Ordinance,”’ it added. The guidelines also empowered the Federal Investigation Agency to investigate all complaints filed by the financial institutions regarding willful default cases.
