SC orders recovery of written off loans -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

SC orders recovery of written off loans

* Court directs SBP governor to issue new circular for recovery of loans
* CJP says legislation essential to make those accountable who issued huge loans on insufficient guarantees

By Hasnaat Malik

ISLAMABAD: The Supreme Court (SC) on Wednesday directed the Sate Bank of Pakistan’s (SBP) governor to consult with all the stakeholders and issue a new circular for recovery of huge loans written off from 1971 to date.

“If you want to strengthen the economy, you would have to give equal rights to the people,” Chief Justice of Pakistan (CJP) Iftikhar Muhammad Chaudhry said.

A three-member SC bench comprising the CJP, Justice Muhammad Sair Ali and Justice Ghulam Rabbani was hearing a suo motu case pertaining to Rs 256 billion loans written off by banks from 1971 to 2009.

During the course of proceedings, all the parties involved in the case agreed on the court’s direction about issuance of a new circular. The court said after issuance of the circular, the matter of loans written off from 1971 to date will be sent to the commission formed to examine the cases of written off loans and the commission, after examining these cases, would compile a report and submit it to the court.

The chief justice observed that legislation was essential to make those accountable who issued huge loans on insufficient guarantees. “It seems as if the central bank does not want to exercise its powers,” he said. Chaudhry said it was the prime responsibility of the central bank to take care of each paisa of the nation.

He said Circular 29, which deals with writing off of loans, was still being used despite the fact that it had lapsed many years ago. He said the State Bank had not bothered to write even a single letter that Circular 29 had lapsed, which was criminal negligence on its part.

The court said it had to examine whether the procedure provided in Circular 25AA about writing off loans was adopted in the waived off loans. Prima facie, he said the procedure provided in Circular 25AA was not followed while writing off huge loans.

The CJP said that the Indus Sugar Mills and Redco Company were running their businesses despite getting huge loans waived off. Justice Ali said that facilities were given in advance to those who want their loans to be written off. The chief justice asked what would the effects be on the country’s economy if Circular 29 was declared as illegal. He said the protection of interests of account holders was the prime responsibility of the SBP, but it had not issued even a single show cause notice to any borrower who had gotten his loans written off.

He said if our institution were delivering, our economy would have been booming. He said huge loans were written off on a single phone call, adding that billions of rupees in income tax were being evaded.
Source: Daily Times
Date:6/2/2011