Prior to 1978, under the Code of Civil Procedure (CPC), 1908, cases involving banking loans fell under the purview of regular civil courts. The Banking Companies (Recovery of Loans) Ordinance of 1978, a special law that was promulgated in 1978, provided a special process for the swift recovery of bank loans through a special forum. Following the repeal of the aforementioned legislation, it was reinstated through the Banking Companies (Recovery of Loans) Ordinance of 1979, which was then superseded by the Banking Tribunals Ordinance of 1984. In the 1990s, new legislation known as the Banking Companies (Recovery of Loans, Advances, Credits and Finances) Act, 1997, which was later abolished and replaced with the current law, was introduced because the Banking Tribunals Ordinance, 1984, had already become out-of-date. In 2013, the Pakistani Supreme Court ruled that Section 15 of the Recovery Act violated Articles 3, 10A, and 24 of the Pakistani Constitution. 1 As a result, the Financial Institutions (Recovery of Finances) (Amendment) Act of 2016 (also known as the “Recovery Amendment Act”) was presented, which made changes to other sections of the Recovery Ordinance in addition to adding a new section in place of the one that was quashed. 

The Federal Government issued the Financial Institutions (Recovery of Finances) Rules, 2018 (the “Recovery Rules”) as the most recent legislative development in the area, making use of the new authority granted to it by the revised Section 15 added by the Recovery Amendment Act. Its primary objective is to provide remedies to financial institutions for expeditious recovery of their outstanding loans in case of any dispute related to finance by adopting a special procedure through the Banking Court.
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