The Sub-Committee of the Public Accounts Committee (PAC) was informed that through different amnesty schemes introduced by State Bank of Pakistan and Government of Pakistan loans worth Rs 260 billion were written off. Out of Rs 260 billion written loans, Rs 106 billion was principal amount, Rs 54 billion was mark up and Rs 100 billion other amount, the Sub-Committee headed by Zahid Hamid, Convenor was informed.
The Sub-Committee of PAC met here on Thursday. The Committee reviewed the Audit Para of the State Bank of Pakistan (SBP) regarding the Rs 54 billion written off loans. The Committee directed the Ministry of Finance and State Bank of Pakistan (SBP) to sit together and give suggestions for legislation to make the recovery of written off loans possible. The SBP and Ministry of Finance were directed to come up with suggestions within a month.
"There is no law existing to reverse the written off loans and it is need of hour that institutions should work on fast track to bring a legislation to avoid the loan write off in future and ensure the recovery of the previously written off loans", Zahid Hamid said, adding that the Sub-Committee will apprise the main PAC about the situation.
Under incentive scheme introduced by SBP for Non Performing Loans (NPLs), Banks and DFIs settled over 50,000 cases involving outstanding amount of Rs 74,879 million and only 15.5 per cent of the total amount valuing Rs 11,611 million was recovered while Rs 53,499 million were written off, the committee was informed, adding that this practice resulted in an encouragement to defaulters with an extraordinary financial burden on the public exchequer.
It is imperative to bring amendments in the Banking Companies Ordinance (BCO) 1962 so that the reversal of the written off loans be ensured and money will be recovered, the Convenor of the Special committee said.
The Special Committee was given the limited Terms of Reference (TOR) to look into the existing law and expedite the process for recovery of loans, Zahid Hamid said, adding that it is strange that no law is currently existing. The PAC Special Committee also directed the SBP to submit the complete list of beneficiaries and recovery position of the loans.
The Banks should also identify persons responsible for these irregularities, and, if considered necessary/desirable, propose legislation for preventing such irregularities in future, the Committee observed. The Special Committee directed the SBP to ask all the Banks to review the written off loans themselves to identify those cases which have not been decided strictly in accordance with the prescribed criteria and also identify persons responsible for these irregularities was not complied with by the department.
Deputy Governor SBP informed the Special Committee of the PAC that a Security and Exchange Commission of Pakistan (SECP) in 2009 took a step to introduce Corporate Rehabilitation Act (CRA). Task Force was constituted and stakeholders were taken into confidence after many brain-storming sessions the draft was submitted before the cabinet but it is still pending there.
The Supreme Court of Pakistan has nominated Justice (Retd) Jamshed Ali to head the three-member commission to probe the written off bank loans worth billions of rupees. The Audit Authorities pointed out that prudent banking practices and prudential regulations issued by SBP required securing of loans through best guarantees, viable credit approvals, proper documentation and effective monitoring and follow-up to avert flow of cases of non-performing loans (NPLs).
The Bank has allowed the cases of NPLs be accumulated and instead of recovery of such loans SBP issue an incentive scheme to the Banks and DFIs in October 2002 for writing off non-performing loans (NPLs) of the organisations showing "Loss for three years or more, the auditors stated.
They informed the committee that the NPLs under this scheme were divided into three categories such as A-category included NPLs upto Rs 0.5 million, B-category from Rs 0.5 million to Rs 2.5 million whereas, C-category more than Rs 2.5 million.
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