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The reports of the likely drive against the bank officials by the NAB is causing concern and fear in the banking circles

From Shamim Ahmed Rizvi, Islamabad
Dec 06 - 12, 1999

The National Accountability Bureau (NAB) is quietly expanding its tentacles in different directions to unearth corruption and haunting those involved in corruption. The definition of corruption and corrupt practices in the new law is so wide and comprehensive that it covers almost all kinds and modes of corruption prevalent in the country. Besides chasing the bank defaulters, the NAB has also started probing against those bank officials who were instrumental in the sanction of huge loans without or against inadequate collaterals. Similarly those dealing with cases of "written off" loans are also being investigated against.

By bringing bank officials, along with defaulters, into their net, the NAB has met an old demand of the public. It was being demanded by the general public and endorsed by the national press that all those bank officials who sanctioned doubtful loans should also be hauled up along with the defaulters. All these loans were certainly sanctioned against huge commission and kickbacks. It will be unfair to chase only the defaulters and leaving all others responsible for doling out public money. As a matter of fact they deserve a more severe punishment as they were paid to protect the interest of bank and not the loan operators.

The reports of the likely drive against the bank officials by the NAB is causing concern and fear in the banking circles. Probe has already started against leading corrupts in he banking sector. One insider told page that the anxiety of corrupt bankers is further enhanced by the fact that most of them had not devised any formula to hide their assets. It is perhaps due to this fact that the banking circles believe that if only the SBP, which has been given the task to sniff out the corrupt, could collect the details of assets of those responsible for issuing credit, it would be saved from undertaking a laborious task of spotting corruption on case-to-case basis.

The argument these circles put forward is that since these well-connected bankers have not shown enough prudence to hide their assets as they all harboured a feeling of immunity, it will be easy to get to the facts leading to their corruption. Even details from the FIA against a few bankers can serve the purpose very well, they added. A well-placed banker underlined this fact when he said; If you go out substantiating, you will find grey areas everywhere and a hint of political pressure everywhere and a hint of political pressure on every loan too. But this is not true for every case. Bankers have been pretty independent too. If they abided by a telephone call from the capital, it was done in line with their wishes of retaining a particular slot than pleasing those at the helm of affairs.

On the defaulters front, the Banks are said to have actually recovered over Rs. 9 billion and rescheduled, under new arrangement after receiving some down payments, loans worth Rs. 25 billion. About 20 per sons are still in jails and their family members are arranging payment of at least 30 per cent of the total outstandings to get them released. Full picture on loan defaults will however be available by next week. When Banks and financial institutions will submit to State Bank of Pakistan (by Dec. 5) all the data of bad loan, recoveries made so far and the rescheduling, write offs and waiver offered to the borrowers since 1985.

Not only this, the banks and the DFIS have been asked to furnish particulars of all cases of write offs of Rs. 1 million and above from July 5, 1997. The State Bank also wants information on all the cases of rescheduling done outside original terms and conditions and also particulars of major write offs before July 1997 and from that date onwards. In the case of Industrial Development Bank of Pakistan, SBP has asked for information of all defaults, restructuring, rescheduling, write offs and waivers since its inception in 1961.

Bankers complain that the State Bank has been engaged in this endless exercise, which is apparently without any direction, since 1993 when the caretaker government of Moeen Qureshi made public for the first time the names of about 6,000 loan defaulters. Since then the loan default has become a hotly debated political issue and with every change of government, the State Bank gets panicky and comes out with a flurry of circulars that create more confusion.

A substantial number of our officers and employees are stuck up in responding to the State Bank's demands of the information", a top banker of a government controlled institution complained who said, "old and worn out files are being dug up, data being checked and rechecked and employees are working over time for last several weeks".

What is being termed as a knee-jerk reaction of the State Bank to the warning given by the present government to loan defaulters, more than a dozen circulars were issued to all the banks and the DFIs during the month-long recovery drive of the defaulted loans from Oct 17 to Nov. 16. The State Bank is demanding from the banks and the DFIs details of all the categories of borrowers who include the defaulters of Rs. 100 million and above, Rs. 10 million and above and Rs. 0.5 million and above for a period even before 1977.

Efforts are on to search the properties acquired by the 'wilful loan defaulters' in foreign countries and in Pakistan. Banks report revamping of their legal departments in Pakistan by way of engaging lawyers of repute and standing and doing away with those who were employed on recommendation of one ministry or the other. Banks now appear all set to effectively push forward their litigations against such bad account holders in the local courts.

Reports suggest that State Bank of Pakistan is also forming a committee of senior loan recovery officers of major banks to maintain the tempo of recovery drive and the government has been approached to frame foreclosure laws and improve the functioning of banking courts at lower and higher levels.

The National Accountability Bureau intends to initiate phase 2 of its crackdown on corrupts after being in possession of all the basic information. How big the operation is going to be can be judged that the Chief Executive Gen. Pervez Musharraf announced in Quetta that 100 courts are being established to try the cases of corruption and loan defaulters.