Financial Institutions Amendment Bill 2026 proposes property seizure for loan defaulters in Pakistan

The National Assembly Standing Committee on Finance has approved the “Financial Institutions Amendment Bill 2026”, under which banks could be granted expanded powers to take possession of properties belonging to loan defaulters in Pakistan.

According to details, the proposed legislation introduces stricter measures against individuals who fail to repay bank loans in Pakistan, including property seizure and public disclosure of defaulters’ identities.

Under the amendment bill, banks would be authorised to take possession of a borrower’s property in cases of loan default. However, financial institutions would first be required to issue three notices within a 90-day period before initiating any action.

Bilal Azhar Kayani clarified that banks would need to formally approach the government before taking possession of a property.

The bill also proposes stricter conditions for house financing customers. Properties acquired under house financing schemes would not be allowed to be rented out to third parties. In addition, the legislation proposes the publication of the defaulter’s name and residential address in newspapers.

Committee member Javed Hanif objected to the provision, arguing that publicly disclosing names and addresses was against human dignity.

The proposed law also includes a provision allowing borrowers an opportunity to settle their liabilities. If a defaulter manages to arrange the required funds, they may submit a written request to the bank within 30 days to seek resolution of the matter.

Commenting on the bill, the committee chairman observed that while the legislation offers extensive protection to banks, it appears to provide limited safeguards for consumers.

Committee members further warned that imposing tougher conditions on ordinary citizens seeking house financing could increase financial hardship for borrowers.