The State Bank of Pakistan (SBP) has released a draft framework titled Revival and Debt Resolution of Sick Industrial Units (RDRSIU-2025), aimed at addressing chronic financial distress in Pakistan’s industrial sector. The proposed policy introduces a structured mechanism to rehabilitate non-performing and dormant industrial units by enabling targeted debt restructuring, principal concessions, and rescheduling of liabilities based on each unit’s commercial viability.
The move comes as part of SBP’s broader effort to reduce the burden of non-performing loans (NPLs), restore industrial capacity, and stimulate fresh credit flows within the formal economy. The framework outlines clear eligibility criteria and a multi-pronged strategy to support units that have remained idle or underutilized, with the objective of bringing them back into active production and employment generation.
According to the guidelines, eligibility is restricted to registered industrial or commercial entities that have defaulted on loan repayments for at least four consecutive quarters and have operated at less than 30 percent production capacity for over a year. Borrowers identified as fraudulent will be explicitly excluded from the framework. Entities falling within the defined parameters will be classified into four categories—viable, marginally viable, dormant, and fraudulent—each receiving tailored restructuring plans.
Key relief options under the policy include interest rate reduction, loan tenor extensions of up to 10 years, working capital injections, and early repayment options without penalties. For viable units, principal haircuts of up to 60 percent can be approved by bank boards. These waived amounts will be maintained as “shadow entries” for internal monitoring, ensuring accountability while offering genuine borrowers a realistic path to revival.
The program also includes a structured settlement timeline, allowing borrowers to resolve outstanding obligations over a 12 to 24-month period. A significant incentive includes the tax deductibility of written-off amounts under Section 29 of the Income Tax Ordinance. Protections against audit actions have also been built into the framework, contingent upon validation by external auditors and oversight by board-level subcommittees.
Importantly, all government-owned financial institutions (GOFIs) are mandated to implement this framework, with added responsibility to submit monthly progress reports. These will track the volume of approved cases, restructuring details, haircut values, and economic recovery indicators. Performance incentives for bank staff will be directly tied to NPL resolution success.
In parallel, the Securities and Exchange Commission of Pakistan (SECP) has proposed revisions to the Corporate Rehabilitation Act, 2018, aimed at accelerating out-of-court settlements and streamlining debtor mediation. The proposed amendments reinforce judicial authority, redefine eligibility standards, and provide clarity on administrator roles in corporate turnaround processes.
The textile sector, one of Pakistan’s largest export contributors, has been specifically highlighted as suffering from a regional cost disadvantage of up to 10 percent due to high energy tariffs, delayed tax refunds, and elevated borrowing rates. The new framework could serve as a critical support structure for such industries, enabling them to regain competitiveness and revive exports.
The RDRSIU-2025 framework will remain in effect for a ten-year term, with a mid-course review scheduled after 18 months. SBP’s initiative is expected to restore idle industrial capacity, reduce bad loans, boost employment, and unlock productive lending in Pakistan’s industrial ecosystem.