Upon learning that many of the big loans written off by commercial banks were approved on insufficient guarantees, the Supreme Court (SC) decided on Thursday to summon top bankers to determine how they had advanced these loans.
The court took strong exception to the State Bank of Pakistan (SBP)’s continued process of waiving bank loans worth billions of rupees on the basis of Circular 29, which had expired in 2003.
The court told Syed Iqbal Haider, counsel for the SBP, to seek instructions from the authorities concerned and tell the SC on Monday how such loans were waived recently despite the expiry of Circular 29 in 2003.
A three-member SC bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani was hearing a suo motu case about loan write-offs of Rs 256 billion by banks between 1971 and 2009.
“If the SBP was not aware, we inform you that during the last two years you have waived billions of rupees in loans on the basis of Circular 29, which expired in 2003,” the chief justice told Haider. The counsel replied that there were cases which had to be highlighted and identified on whose basis loans were written off.
The chief justice noted that some people had also got their loans written-off by declaring themselves bankrupt, and were now running their businesses on the names of others. Citing two cases of Indus and Redo Mills, the chief justice said the owners of both mills had been thriving on multiplied business after successfully having their loans written-off, whereas a common man in such a position was not even allowed to enter a bank.
Haider stated that it was for this very reason that the SBP wanted the commission to start work and scrutinise the loans. The chief justice asked him to tell the SBP governor to withdraw Circular 29 and let the commission decide the matter. “If you have genuine cases, we are with you,” the chief justice said.
“Get your statement recorded that Circular 29 had expired in 2003 and the benefits given under it to the borrowers were illegal,” Justice Muhammad Sair Ali told the counsel. The counsel, however, stated that while that was correct, banks had the right to write off loans through their boards of governors.
The chief justice said it had almost become a culture in the country that borrowers never bothered to return public money. “People are not as clean as they claim,” he added.
Later the hearing was adjourned till May 30.