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ISLAMABAD

ISLAMABAD: Saeed A Kazi, Member, Pakistan Banking Council, has said that political pressure, corruption and unstability of government policies were the main factors for the massive infectious portfolio of the nationalised banks and DFIs in the country.

Talking informally to Business Recorder after he addressed participants of PBC's course on Working Capital Management, Kazi said unstable government policies regarding imposition of duty had much to do with the sickness of a large number of textile units.

Responding to a question he said that the amount of infected portfolio is likely to increase substantially rather than go down.

Asked if the political pressures continue or whether the managers were able to resist it, Kazi who has been president of National Bank said: "You are a journalist. You should know better."

Kazi said the over invoicing of the land, machinery high cost of building etc. make the help prospective entrepreneur to take away his equity from the project. Corruption, he said was the order of the day, he added.

Earlier in his address to the participants of the course held at the National Institute of Banking and Finance, Kazi said that now a days there are reports of heavy stuck-up loans. The prudent bankers have to keep a number of things in mind before granting a loan. The bankers, he said, concentrated on security but the security when put on forced sale brings a portion of the loan only.

The prudent banker has to calculate the cost of the project accurately. The price of the machinery should be competitive. The cost of the building and the land should be assessed properly. The banker should also estimate the interest during the project and the cash flows for at least three years.

Working capital should be processed on year to year basis if the banker is not to falter. Sound calculations and a prudent decision are central to the success of the loan.

He stressed again that the banker has not to see the security only but should work out the exact requirements of the project as well as of the market and go into the cash flows, profitability of the project and scrutinise balance sheet.

Usually he added the problem arises when decisions are not taken on merit. My experience is, Kazi added, that any loan not given on merit will would always land the banker in trouble.

The banker should also calculate the borrowers position and his profitability and capacity to pay back the loan. This required knowledge and hard work. They also calls for discipline as well.

Speaking from his long experience Kazi also said that hard work and discipline are key to a successful banker.