SBP Guidelines 2025: A Lifeline for Sick Industrial Units Amid Rising NPLs
ISLAMABAD, July 2025 — The State Bank of Pakistan (SBP) has released the Revival Guidelines 2025 for sick industrial units, flagging judicial delays and rigid audit structures as critical barriers to industrial recovery. The guidelines aim to create a formal, accountable framework that empowers public sector banks to participate in debt restructuring, loan settlements, and principal haircuts.
Key Challenges Identified
According to the SBP’s report submitted to the federal government:
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Judicial delays make restructuring lengthy and ineffective, pushing industries deeper into financial distress.
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Banks are hesitant to offer new loans to struggling borrowers due to upfront provisioning costs.
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Lending without collateral remains rare and discouraged.
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Public sector banks avoid debt write-offs due to audit fears, which hinders balance sheet cleanup.
NPLs Still a Major Burden
Despite a slight improvement in the NPL ratio in 2024, the volume of non-performing loans remains historically high:
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NPLs rose from Rs177 billion in 2006 to a peak of Rs618 billion in 2012, stabilising at Rs605 billion in 2014–2015.
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The NPL ratio hit 16% in 2011, up from 7% in 2006—an indicator of weakening credit quality.
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Meanwhile, Kibor fluctuated, peaking at 14.2% in 2008 and falling to 6.8% in 2015, reflecting changing monetary policy trends.
What Do the New Guidelines Offer?
The SBP’s Revival Guidelines 2025 apply to all scheduled banks and development finance institutions (DFIs), with a special focus on government-owned financial institutions.
Key Features:
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Enabling debt restructuring and principal haircuts with audit protection.
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Compliance with legal provisions from Companies Ordinance 1984, Companies Act 1997, and Companies Rules 1999.
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Out-of-court settlements encouraged through banker committees.
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Promotion of idle capacity reactivation and economic productivity.
Eligibility Criteria for Revival
To qualify, a company must:
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Be engaged in registered industrial or commercial activity (e.g., manufacturing, logistics, agribusiness, energy, services).
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Be classified as a sick industrial unit, having:
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Defaulted on loans for at least four consecutive quarters, and
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NPL classification for over 12 months.
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Operated at below 30% of capacity or remained idle for at least one year.
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Submit a comprehensive revival plan including:
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Financial forecasts
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Demand analysis
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Working capital needs
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Business viability strategy
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Note: Units or borrowers involved in fraud or willful default are excluded from eligibility.
Why These Guidelines Matter
A large portion of Pakistan’s industrial capacity remains unutilized due to persistent financial constraints and lack of structured revival mechanisms. While private banks have written off some toxic assets, public sector institutions remain risk-averse, primarily due to audit-related hesitancies.
These SBP guidelines aim to eliminate ambiguity, introduce transparency, and support the resumption of industrial operations—a necessary step toward economic recovery, employment generation, and export growth.
Conclusion
The SBP’s Revival Guidelines 2025 come at a critical time when Pakistan’s economy needs structural support for industrial rehabilitation. By addressing systemic barriers—legal delays, audit fears, and balance sheet inflexibility—the central bank hopes to unlock billions in idle capacity, support struggling enterprises, and reignite sustainable industrial growth.