'Bank defaulters enjoy
honour, reputation and no action can be taken against them'
From Shamim Ahmed
August 9 - 15, 1999
The much talked about bank loan recovery drive of the present
government which won the 1997 election with the solid commitment to the nation that
"every penny of the looted national wealth would be recovered," has almost
vanished. Nothing is being heard in this regard any more from official circles. There was
no mention of this staggering amount of about Rs. 200 billion in the budget speech of the
Finance Minister nor the Prime Minister on whose national agenda it was the 'No-1' issue,
has ever spoken about it in the recent past. One of the charges on which Benazir
government was dismissed in Oct 96 was that she had failed to recover the bank loans of
Rs. 140 billion (which have since risen to 200 billion) from the politically influential
The last time we heard about it from official circles was in the senate
when the Finance Minister Ishaq Dar, while replying to a question raised by a Senator in
April last said that the State Bank of Pakistan had opposed the publication of the list of
loan defaulters on the ground that "it would damage reputation and honour of loan
defaulters". Some senators had been insisting to know the names of the powerful
defaulters who were not paying back public money. They wanted to know who were the
defaulter and how much they owed to the state but the Finance Minister was avoiding any
direct answer to the question on one or the other excuse. One day he said that a task
force was being set up to expedite loan recovery and that will also consider the question
of publishing the list of loan defaulters. Another day when persistently goaded, the
Finance Minister cleared himself by reading out a letter from the State Bank of Pakistan
which said that the names of the defaulters could not be disclosed because the honour and
privilege" of the loan defaulter could not be breached.
For over a year after the PML came into power nothing more was heard of
this stern promise made by the Prime Minister. Then after the nuclear test of May last
year, when austerity and self-reliance were all the rage once again, the Prime Minister
made another solemn vow that defaulted bank loans would be recovered. Even a deadline was
given but it came and went without even a murmur of an apology from the government. What
to talk of recovering bad loans, the finance minister is shy even of disclosing the names
of the principal defaulters. Why is this so? Is Mr. Dar really so concerned about the
so-called honour of privilege of the loan-takers or he is trying to protect other
skeletons in the government's cupboard?
What the people would like to know is: Since when the State Bank
which failed in its duty as a trustee of the foreign currency accounts has become
the defender of honour and reputation? Since when the loan defaulters have started
enjoying honour and reputation and needed legal protection? Since when has the law started
working for the defaulters and against the people whose money has been plundered? And,
what moral or economic justification do such laws have?
Whatever the banking laws and their intent are, once default occurs the
contract between the lender and the borrower is breached. And when the funding bank goes
to court for recovery, the entire transaction enters the public realm. It is a simple
matter, then, to obtain copies of loan documents from the court and to "Tarnish"
the exalted reputation of the defaulter, that is how such details trickle out into the
independent press which, in fact, has published unofficially obtained lists of defaulters.
The only time when such a list was officially published was during the
caretaker setup of Moeen Qureshi. The step, which was widely acclaimed by the public,
remains a reference point and certainly did not shake or rattle the economy. It is
mind-boggling that a democratically elected government should need a secretive task force
to tell it that nothing would be more in the public interest than revealing the list.
During the past one-and-a-half-year the government gave various
deadlines to defaulters to clear their dues or face liquidation and imprisonment but each
was contemptuously ignored despite the fact that the government even offered to waive off
upto 80 per cent of mark-up. The last deadline announced by Dr. Hafiz Pasha in Nov. last
was upto 31.12.98. Twice in the past one year, similar warnings were issued first by the
Governor State Bank who pleaded the defaulters to pay the principal amount and only 10 per
cent of mark-up by Dec. 31, 1997 and, second by the Prime Minister himself warning
the defaulter to pay by June 30, 1998 or face imprisonment. To set an example, the Prime
Minister had pledged to liquidate his personal loans by transferring the collateral assets
to the creditor banks. There was some criticism that, instead of transferring overvalued
assets to his creditors, the Prime Minister should have made straight payment. Still, it
was seen as a long overdue stop in the right direction.
But, the deadline passed without any response from the defaulters.
Thereafter, some start-stop measures were taken by the Federal Investigation Agency
against a few selected defaulters, leading once again to charges of political
victimization. As the recovery drive stopped, the government diluted the promise made by
the Prime Minister, saying that coercive action will only be taken against "willful
defaulters". By this rather fluid definition, a major chunk of "engineered"
or "circumstantial" defaulters were excluded from the net. The drive ultimately
fizzled out altogether.