A three-member Supreme Court bench on Monday directed the State Bank of Pakistan (SBP) to ensure transparency while disbursing loans and avoid discrimination, as the loans were offered using taxpayers’ money.
The SC bench of Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani was hearing a suo motu case about the writing off of loans worth Rs 256 billion by commercial banks between 1971 and 2009. During the hearing, the chief justice observed that influential people had pocketed the money of taxpayers through huge bank loans and multiplied their businesses and industries after getting the loans waived off.
He said when ordinary people defaulted on meagre loans, their houses put up for auction, however, no one bothered to apprehend those who mortgaged their properties for getting bank loans. He said influential people had managed to get huge loans waived off, while common man was running from pillar to post. Resuming his argument, SBP’s lawyer Syed Iqbal Haider submitted that Circular 29 issued by the SBP for waiving off loans had become a law wherein no discriminatory treatment had been meted out to anyone. He said no court had so far challenged the legality of the law, besides nobody had challenged the vires of Circular 29. The chief justice said the circular had been questioned for the first time by the apex court. To a court query whether the SBP had the power to write off loans, Haider said Section 33-B of the Banking Companies Ordinance 1962 empowered the SBP to facilitate the recovery of bad loans by giving incentives to borrowers by making remission.
The lawyer for Allied Bank, Dr Pervez Hassan, submitted that Circular 29 was neither discriminatory nor was it issued for specific people or industries. He said the circular was in accordance with national, international and regional practices and had been endorsed by the board of directors of banks and companies. The lawyer added that writing off loans could be useful in the economic development of the country, adding that it was essential for good governance and accurate financial results of banks and companies.He said the power to write off loans was inherent to all banks under Section 196 of the Banking and Companies Act 1984 and Circular 29 regulated unfettered powers provided in Section 196. The court would resume hearing today (Tuesday).
Influential are let off but poor are punished, says CJP
