By Iftikhar Hussain Naqvi
RAWALPINDI, Feb 13 (APP):As Pakistan and Gulf economies strive to stabilise growth amid persistent inflation, currency volatility and tightening regulatory regimes, banks across the region face the critical task of expanding credit without creating future financial stress, a senior banking analyst said on Friday.
Speaking to journalists, Mir Bakhtiar Ali Khan, a senior banking professional with experience across Gulf Cooperation Council (GCC) and South Asian markets, said the challenge was particularly evident in the GCC–South Asia corridor, where strong linkages in trade, remittances and cross-border corporate activity connect economies moving through different business cycles.
“When one market slows and another continues to expand, risks do not disappear — they shift, demanding sharper credit judgment and stronger oversight,” he said.
Bakhtiar said credit discipline should be treated as a daily operating framework shaped by structure, judgment and accountability rather than a slogan.
Drawing on his background in credit risk, structured lending and trade finance, he noted that loan portfolios rarely weaken due to a lack of lending opportunities; stress typically builds when risk assessments become inconsistent, facilities lack adequate safeguards, or monitoring becomes a box-ticking exercise.
He said cross-border lending was especially unforgiving because headline financial statements often conceal underlying vulnerabilities. Effective credit evaluation, he added, “begins with understanding how a business generates cash, its demand durability, customer concentration, working-capital cycle and management credibility”.
Sector dynamics are equally critical, particularly for trade-linked businesses that can be quickly affected by freight costs, import restrictions, commodity price swings and abrupt changes in buyer behaviour and payment cycles, he said.
Bakhtiar emphasised that disciplined credit structuring must align facility tenor with cash-flow realities, avoid habitual rollovers and include clear triggers for corrective action.
Covenants, he said, “add value only when they are relevant, measurable and actively monitored rather than copied from templates and ignored”.
He identified governance as the second pillar of sustainable credit discipline, stressing that banks operating across jurisdictions required robust approval hierarchies, consistent documentation standards and transparent review mechanisms. Strong credit committees and rigorous credit papers help surface assumptions, reduce reliance on individuals and create institutional memory beyond staff turnover, he added.
The third pillar, he said, “is early risk recognition. In stable periods, delayed warning signals may go unnoticed, but in volatile cycles they can quickly translate into losses. Monitoring covenant performance, utilisation patterns and behavioural shifts — such as repeated extension requests or unexplained delays in trade documentation — enables lenders to intervene before problems escalate into defaults”.
He noted that regulators across multiple jurisdictions are tightening supervisory expectations, placing greater emphasis on prudential oversight, governance and portfolio monitoring, reflecting a growing consensus that credit growth must be sustainable rather than merely rapid.
For borrowers, disciplined credit practices offered tangible benefits, he said, adding that when “financing structures reflect business realities, clients are less likely to face abrupt credit contractions after a weak quarter. Banks with a deep understanding of cash cycles can provide more stable limits, improved trade-finance support and quicker decisions backed by confidence in their underwriting and monitoring frameworks.”
Bakhtiar concluded that credit discipline was not an obstacle to growth but a prerequisite for durable expansion. “In regions where policy shifts and market volatility can rapidly reprice risk, banks that standardise judgment, strengthen governance and invest in early warning systems are better positioned to support small and medium enterprises as well as larger corporates without undermining financial stability.
“In a corridor where confidence is as valuable as capital, disciplined credit is emerging as a competitive edge, protecting balance sheets, reassuring regulators and ensuring financing supports the real economy beyond a single economic cycle.”