Banks offered to Convert TFCs, loans into PIBs

Karachi: The government has offered banks to convert PKR 283bn of TFCs and PKR 114bn of loans taken for raising liquidity for the power sector into Long-term Pakistan Investment Bonds (PIBs).

According to Alfalah Securities Limited, as per the proposal, 50% of the PIBs will be of 10yrs, 30% will be of 5yrs and 20% will be of 3yrs tenure. In this regard, SBP has also raised the limit on PIB holdings of banks for SLR from 10% to 15%. The local banks may not have much reservation to go for this deal, as PIB is a tradable paper while such TFCs have a smaller market. However, some foreign banks are expected to have concerns because of the increased exposure on the country. Moreover, when the interest rates rise their balance sheets could be affected when they do mark to market of the bond for accounting purposes.

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