Karachi, February 21, 2026 — Pakistan’s banking sector achieved significant progress in recovering non-performing loans (NPLs), with total recoveries reaching Rs28.76 billion during the quarter ended December 2025, according to the State Bank of Pakistan (SBP). This marked an increase from Rs25.77 billion recovered in the September 2025 quarter.
Official data, compiled from un-audited returns submitted to the SBP, shows that both commercial banks and development finance institutions (DFIs) contributed to these recoveries, reflecting sustained efforts to address the NPL burden.
Commercial banks lead recovery efforts
Commercial banks were the primary contributors, recovering Rs28.47 billion in the December quarter, up from Rs25.04 billion in September 2025. Within this segment:
• Local private banks recovered Rs19.82 billion, up from Rs16.16 billion in the previous quarter.
• Public sector banks recovered Rs2 billion, unchanged from the previous quarter.
• Foreign banks posted marginal recoveries of Rs2 million in both quarters, reflecting their limited exposure to domestic NPLs.
Specialized banks and DFIs also contributed to recovery efforts, though commercial banks dominated the progress.
NPL burden remains a concern
Despite higher recoveries, net NPLs remain elevated at Rs980 billion as of December 2025, with a net NPL-to-net loans ratio of 0.50 percent, highlighting ongoing stress in certain lending segments. Analysts emphasize that while rising recoveries are encouraging, structural reforms, improved credit appraisal, and faster resolution of bad loans are essential to sustainably reduce NPL levels and strengthen financial stability in Pakistan’s banking sector.
Rising recoveries signal a positive trend, but the sector continues to face challenges in fully resolving long-standing credit risks.