The Supreme Court on Wednesday directed the Sate Bank of Pakistan (SBP) governor to consult all stakeholders and issue a new circular for the recovery of huge loans written off from 1971 to date.
A three-member Supreme Court bench of Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani was hearing a suo motu case regarding the writing off of loans amounting to Rs 256 billion between 1971 and 2009.
All parties involved in the case agreed to the court’s direction about the issuance of a new circular. The court said once the circular was issued, the matter of written off loans would be sent to a commission formed to examine all such cases and the commission would compile a report and submit it with the court after thorough examination. The chief justice observed that legislation was essential to make the people accountable for issuing loans against insufficient guarantees.“It seems the central bank does not want to exercise its powers,” he remarked.
He said it was the primary responsibility of the central bank to take care of each penny of the nation, adding that Circular 29, which deals with writing off loans, was still being used despite having been lapsed several years ago. The CJP said the SBP had not bothered to write even a single letter that Circular 29 had lapsed, which was criminal negligence on the bank’s 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, the procedure provided in Circular 25AA was not followed while writing off huge loans, he said.The court observed that Indus Sugar Mills and Redco Company were running their businesses despite getting their massive loans waived off.
Justice Muhammad Sair Ali said facilities were given in advance to those whose loans had to be written off, while the CJP questioned the effects on the country’s economy if Circular 29 were declared illegal. He said protection of interests of account holders was the SBP’s prime responsibility, but it did not issue even a single show cause notice to any borrower who got his loan written off.
The CJP said, “If our institution were delivering, our economy would have been flying. Huge loans were written off on a single phone call, while billions of rupees against income tax is being evaded each year. The rich is getting richer, while the poor is getting poorer.” “If you want to strengthen the economy, you will have to give equal rights to the people,” the chief justice observed. The court later adjourned proceedings until today (Thursday).
