Banking Khabar / There was a time when banks and financial institutions freely extended loans against strong collateral, often with the intention of acquiring the pledged assets themselves for profit. However, the situation has now changed significantly. Non-banking assets held by banks have increased sharply, while the sale of such assets has slowed, leading to a decline in collateral valuations.
Earlier, the central bank had taken steps to curb the tendency of banks and financial institutions to target good collateral with the aim of seizing it. As a result, banks are now less interested in acquiring collateral assets. Instead, their primary concern is ensuring that borrowers repay loans on time, rather than earning through the auction of pledged property.
Recently, the central bank amended its Unified Directives, requiring banks to make maximum efforts to sell collateral before acquiring it themselves. Previously, banks were allowed to take ownership of collateral if it failed to sell in a single auction. Under the revised regulation, banks and financial institutions must now auction the pledged property at least three times before they are permitted to take ownership.
