The reports of the likely
drive against the bank officials by the NAB is causing concern and fear in the banking
From Shamim Ahmed
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.