The Public Accounts Committee (PAC) on Tuesday directed the government to carry out fresh legislation aimed at preventing influential individuals and groups getting hefty loans written off from public sector financial institutions.
To discuss the pros and cons of the proposed legislation, the committee has decided to summon the governor State Bank of Pakistan (SBP) and the president National Bank of Pakistan (NBP). The directive came after the auditor general of Pakistan told the committee that loopholes in laws provide resourceful people opportunities to escape in case of wilful default.
At a meeting here with MNA Malik Allah Yar Khan in the chair, the committee expressed concern over the 'influential' defaulters enjoying benefits of rescheduling and new loans from the financial institutions with impunity.
Secretary finance Tanveer Ali Agha, however, blamed the government intervention into banking system for this chronic problem.
The members of the committee came down heavy upon the National Bank of Pakistan (NBP) for sanctioning a loan of Rs 410 million in 2000, to Zahoor Textile Mills without following proper procedure and despite the company being already defaulter.
This loan was in fact extended by the then National Development Finance Corporation (NDFC) that has now been merged into the National Bank of Pakistan (NBP).
Syed Qurban Ali Shah said that it was very strange that the NBP had written of Rs 18 billion loans benefiting certain individual and it was not clear from its list of defaulters either they got loans from NDFC or IDBP or some other institutions now merged into the NBP.
MNA Rai Mansab Ali Khan stated it was very strange that during the last four years "we have witnessed many big and influential industrialists getting their loans written off without being blacklisted". "I am surprised if there is no law to check the malpractice," he added.
To this Younis Khan, the Auditor General of Pakistan, who was secretary finance during the year 2000-01, said that according to his experience bank officials usually over assess the pledged assets and collateral which ultimately results in default of loans leaving nothing for the banks to recover their money. Tanveer Agha responding to members' questions stated that since 1972, the year of inception of the NDFC and IDBP, there were continuous interventions from the government side resulting in bad loaning.