Corruption Barometer: Supreme Court Commission fails to trace Loan Sharks
"Unknown" sharks swallowed over one trillion rupees under 'Write-Off' terms
ISLAMABAD:
Saeed Minhas
Islamabad: The Supreme Court’s appointed special commission has
revealed chilling details of an evil nexuses between successive military
and political governments and banking sector of the country from 1971
till 2009 whereby loans worth over a trillion rupees (1.153 trillion)
stand eaten up by 22,000 high profile loan sharks which include
politician-cum-businessmen, army and civilbureaucrats, industrialists
and investors.
Interestingly , the voluminous report reveals all what has been eaten up by our national leaders and their henchmen from both side of the divide
According to three volumes of report, copy of which is available with
The Spokesman, Rs. 438 billion have been written off straight away in
740 documented cases, and over Rs. 215 billion is pending solicitation
with banking and High courts of the country. Sources privy to these
developments hailing from banking and legal sectors revealed that
another Rs. 500 billion stand vanished in the system because banks
failed to find any record and commission failed to solicit any
information for missing cases.
A steering committee comprising of presidents of National Bank, Habib
Bank, United Bank, NIB Bank, and Standard Chartered Bank, formed by
State Bank of Pakistan in 2009 on the directions of the Supreme court to
help the commission revealed in its findings accepted that load of Rs.
256 billion of bad loans was lessened for banking books between
1971-2009.
banking experts believe that the written off loans could well exceed
one trillion rupees and majority of the cases pending for over ten years
will ultimately end up in the dark-holes soon. Multiple reasons cited
in the report include lackluster approach of banks to get their loans
back, collaborative approach of State Bank of Pakistan to check over
invoicing of collaterals, procedures and controls besides heavy
dependence of regulators and banks on political mood of the ruling
elite.
Questioning the multiplicity of judicial system and banking courts, the
Commission has revealed that more than eleven thousand cases are
pending adjudication involving a whooping amount of over Rs. 215 billion
for the past ten years or so. It reveals that about 6800 cases
involving over Rs. 75 billion were initiated with the banking and High
courts in the country only in 2008-09. “Enabling laws and better
empowered banking courts are certainly need of the day,” commented the
commission in its report. Castigating the policies and procedures of
banks to divulge into such rip offs, Commission has observed: “it also
transpired that accurate and fine-tuned policies and procedures were
either not laid down or not efficiently followed.”
Careful reading of the report reveals that loan sharks have swelled in
number from a mere 200 families in 1970s to 22,000 in 2009, about whom
commission believes many are in politics or sitting in the assemblies.
Commission’s report reveals that during 1971-96 (26 years) only 1424
‘parties’ were facilitated by banks to get their loans worth Rs. 11.225
billion wiped out while during 1997-2009 (13 years) 22021 ‘parties’
managed to get the same facility from banking sector to get their loans
worth Rs. 202 billion written off to make sure that they get back in the
queue for another deal.
The amount involved is almost double the development portfolio of
federal government while three times that of provincial governments. Yet
the Commission has expressed surprise that all the banks have shown
huge profits for their shareholders throughout this period for which the
commission believes banks are playing with the average countrymen by
luring them in deposit schemes without any security for their deposits
and hard earned money.
The commission was given details of a total of 792 cases involving
912259 individuals and companies for examination by various national and
international banks/DFIs operating with the permission of State bank of
Pakistan. Another 1328 cases involving Rs. 157 billion were given
merely as information to the commission for which no record was
furnished. The commission failed to get access to all those write off
loans which were waived off by various public sector and private banks
after the privatization started during first tenure of Benazir Bhutto.
The commission has revealed in its report that only during the first two
years (2008-09) of current Peoples Party government various public
sector and privatized banks waived off Rs. 74 billion loans. Incumbent
Peoples Party regime is learned to have adjusted over eight thousand
‘big sharks’ to get more than Rs. 38 billion written off from various
banks/DFIs while another four lakh small sharks were allowed to go scot
free with Rs. 36 billion only in its initial two years in office.
Interestingly, 49 per cent of these write-offs came from private sector
banks while 40 per cent from the foreign banks operating in Pakistan and
only 11 per cent from public sector banks/DFIs during 2008-09.
The commission in its detailed report has raised harrowing questions
about the functioning and responsibilities of State bank of Pakistan by
giving the dates that how SBP facilitated with various regimes starting
from Zulfiqar Ali Bhutto, to ZiaulHaq and from Benazir Bhutto to Nawaz
Sharif and from Musharraf till now to let the loan bonanza flow
unchecked. More importantly, experts believe that the commission has
triggered a debate about the sovereignty of the State Bank of Pakistan
and the privatization process through which various profitable banks and
some sick industrial units were sold out in connivance with the banks.
The banks which tops of the list of benevolent for loan sharks include
Habib Bank (218 cases for Rs. 31 Billion), National Bank of Pakistan
(214 for Rs. 28 billion), IDBP (98Rs. 7 billion), ZTBL (45 for Rs. 7
billion), NIB (49 for Rs. 6.5 billion), UBL (31 for Rs. 3.2 billion),
Pak Libya (14 for Rs. 1.15 billion), SME (9 for Rs. 0.32 billion), Saudi
Pak (6 for Rs. 0.33 billion), Pak Kuwait (6 for Rs. 0.14 billion), Bank
of Khyber (5 for Rs. 1.34 billion), Bank of Punjab (2 for Rs. 0.43
billion).
The Corporate and Industrial Restructuring Corporation (CIRC) created
in 2000 was supposed to revive the sick industrial units under SBP
instructions but instead started working as a debt discounting agency
facilitating the influential borrowers to have bargain deals. During its
six years of operations out of 248 cases where Rs. 57 billion was
outstanding against the borrowers, it ended up writing off Rs 53 billion
of it showing a recovery of just three billion in six years.
Ironically having done all the spade work, the commission seems to have
backed the recommendations of technocrats and bankers by stating that
“all the written off loans be treated as past and closed transactions
and instead of looking backwards, better laws should be put in place to
process the write-offs through courts. (page 92)”
