Expanding losses in the textile industry will affect Pakistan’s financial stability
According to Pakistan’s “Dawn” report on June 29, the latest financial stability report released by the Central Bank of Pakistan pointed out that due to the declining competitiveness of Pakistan’s textile industry exports, the textile industry’s losses have intensified, and textile companies are the main recipients of bank loans in Pakistan. Borrowers, if the losses of Pakistan’s textile industry continue to expand and corporate debt defaults increase, it may affect Pakistan’s financial stability.
At present, a total of 29 of Pakistan’s 35 commercial banks have issued loans to textile enterprises. Among them, the loan amount of textile enterprises of 9 banks exceeds 100% of the capital, and 13 exceeds 50%. The top 20 textile enterprises have a total loan amount of 1260 billion rupees. As of September 2015, the bad debt rate of Pakistan’s textile industry loans reached 29%. According to estimates, if loan defaults by textile companies increase by 20%, the capital adequacy ratio of Pakistani banks will drop to 14.55%, which requires vigilance. Expanding losses in the textile industry will affect Pakistan’s financial stability
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