Proposed Law Would Curtail Banking Courts' Debt Recovery Powers
A proposed law governing financial institutions' debt recovery mechanisms would significantly reduce the powers of banking courts, transferring key adjudicatory functions and limiting the judiciary's independent role in enforcing creditor rights against defaulting borrowers.
The draft legislation, still under review, has drawn concern from legal practitioners and financial sector stakeholders who argue that weakening specialised banking courts would slow loan recovery, increase non-performing loan accumulation, and undermine lender confidence in Pakistan's credit enforcement framework.
Banking courts were established specifically to fast-track commercial debt disputes and provide creditors with a dedicated judicial forum equipped to handle financial sector litigation. Critics of the proposed reform contend that limiting their powers runs counter to internationally recognised best practices for financial sector governance.
The proposal comes at a time when Pakistan's banking sector is navigating elevated NPL risks and the government is under pressure from the IMF and international investors to improve the ease of doing business and credit environment.
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