The National Assembly Standing Committee on Finance and Revenue has approved the Financial Institutions (Amendment) Bill 2026, granting banks wider authority to take action against loan defaulters, including the seizure of property and public disclosure of their identities.

Under the proposed law, banks will be empowered to begin recovery proceedings if borrowers fail to repay loans within the agreed schedule. However, financial institutions will be required to serve three formal notices over a 90-day period before initiating any enforcement action.

In cases involving property confiscation, banks must also obtain prior approval from the relevant government authority before moving ahead with seizure measures.

Minister of State for Finance Bilal Azhar Kayani said the legislation is designed to strengthen financial discipline and improve recovery of outstanding loans in the banking system.

The bill also introduces restrictions on renting out properties purchased under housing finance schemes, prohibiting borrowers from leasing such assets to third parties.

Additionally, it allows authorities to publish the names and addresses of loan defaulters as part of efforts to enhance transparency and discourage intentional default.