Loan write-off cases: MoF attracts Cabinet annoyance for not sharing names, details

ISLAMABAD: The Federal Cabinet has reportedly expressed annoyance at the Ministry of Finance (MoF) for not sharing names and details of 39 beneficiaries of loan write-off cases of four banks including Zarai Tarqiati Bank Limited (ZTBL), well informed sources told Business Recorder.

On 22 June, 2021, Finance Division briefed the Cabinet that in terms of Section 25AA of Banking Companies Ordinance (BCD), 1962 the State Bank of Pakistan (SBP) was required to prepare and submit to the Federal Government a special report every year on cases of write off of loans, mark-up and other dues, or financial relief through rescheduling and restructuring of loans and subsidized loans provided by the banking companies, in which established banking practices or authorized procedures had been departed from with a view to causing wrongful loss to the bank or conferring wrongful gain on any constituent or such departure had caused wrongful loss to the bank or conferred wrongful gain on any constituent.

If the matters raised in the report relate to public interest, the Federal Government may submit the report, or such part of it as relates to public interest, to Parliament or to the Standing Committee of a House of Parliament dealing with Finance. Section 25AA of the Banking Companies Ordinance (BCO) 1962 was inserted in 1990 at a time when major banks were owned by the Federal Government. However, most of the banks had been privatized. Previously, the reports submitted by SBP related to private banks/companies and there was no direct public interest involved.

State Bank of Pakistan (SBP) had shared Special Inspection Report on write-off cases of following banks: (i) ZTBL has written off Rs 271.144 million in 28 cases from January 1, 2018 to December 31, 2018; (ii) Bank Al-Habib Limited, Rs 245.890 million in 5 cases, from January 1, 2018 to December 31, 2018; (iii) BankIslami Pakistan Limited, Rs 690.161 million in 4 cases from January 1, 2018 to December 31, 2018; and (iv) Habib Metropolitan Bank Limited, Rs 36.325 million 2 cases from January 1, 2019 to December 2019.

As far as public-owned organizations were concerned SBP while inspecting, had disagreed with two cases of write-offs worth Rs. 249.5 million and Rs. 4.8 million of Zarai Tarqiati Bank Limited. The banks were advised by the SBP to take remedial actions to address policy and control gaps that resulted in disagreement with the SBP Inspection Teams. In case of specific violations of SBP regulations, monetary penalties were imposed as per standard schedule. Special Inspection Report on write-off cases was submitted for information of Federal Cabinet/Federal Government in terms of Section 25AA of the BCO, 1962 with the proposal that the subject report relating to two cases of ZTBL is of public interest and, therefore, may be placed before the National Assembly's Standing Committee on Finance, Revenue and Economic Affairs. During a discussion, the members complained that the annexures carrying details of write-off cases were not legible and sought full details with names of write off beneficiaries. It was observed that Section 25AA, of the BCO, 1962 does not distinguish between privately-owned and banks owned by the Government, hence “selective” application of the said section is not in accordance with the prevalent law. It was also suggested that the BCO, 1962 may be appropriately amended as most of the banks had been privatized and the information pertaining to the write-off cases of private banks was not needed to be submitted to the Cabinet.

Copyright Business Recorder, 2021