BIG LOAN DEFAULTERS WENT SCOT-FREE, LASH ON SMALL!

SHAMIM AHMED RIZVI
Apr 14 - 20, 2008

The present chief justice of Pakistan Abdul Hamid Dogar has taken Suo-Moto notice of a report published in the daily news alleging that loans worth Rs 54 billion were written off by Shaukat Aziz Government during the last five years. According to the report the beneficiaries of the write-off included top guns of the previous government, civil and military business houses and business tycoons having a political clout.

The shocking disclosure made by the newspaper was based on a secret report submitted before the public accounts committee in October last by the Auditor General of Pakistan. The AGP had revealed that a total of 50,000 persons including politicians and civil and business houses with a political backup were the direct beneficiaries of the massive favour. Two chief Ministers of the provinces and their families having big business concerns are also included in the list.

Taking suo moto notice the Supreme Court has issued notices to the state Bank of Pakistan, the Finance Ministry, the auditor general of Pakistan and the reporter of daily news who had contributed the said report to appear before the Supreme Court on April 10, 2008.

The latest report confirms that the elite and politically powerful are enjoying public money through massive write off. Two years back the then opposition senator, Enver Baig who is now a part of the government had made a shocking disclosure on the floor of the house that 5 banks of the country including the National Bank of Pakistan had written of loans amounting to Rs 22.4 billion outstanding against influential industrialists and businessmen during the year 2005.

According to him the beneficiaries included Choudhris of Gujrat, Chief Minister of Balochistan Jan Muhammad Yousuf, Altaf Saleem, Chairman Earthquake Rehabilitation and Reconstruction Authority, Fateh Textile Mills of crescent group, Sehgols and Adamjee Groups - all belong to the elite class of the county.

Giving details of the written off amounts he later told newsmen that Rs. 4.7 billion belonged to National Bank of Pakistan, 4.76 billion to UBL, Rs 6.7billion to HBL, Rs 5.3 billion to Allied Bank.

As against this, Senator Enver Baig bemoaned that the House Building Finance Corporation has notified the names of 107 borrowers only through big advertisement in the newspaper with a threat that their houses would be auctioned if the outstanding loans were not cleared within a months. All these 107 defaulters of Rs 10 million belonged to Haripur and Abbottabad, while an influential politician of the same area Gohar Ayub and family including Umar Ayub, the defecto Finance Minister are defaulting on loans amounting to Rs 440 millions, which is outstanding against Rehana woolen Mills (owned by Gohar Ayub and family since 1982. Senator Baig lamented that he wanted to bring all these facts to the notice of the house but the Senate Chairman did not allow him to speak and switched off his mike.

According to another report the Industrial Development Bank of Pakistan (IDBP) has written off huge loans amounting to Rs 3.417 billion of seven defaulters including six textiles mills. The Board of Directors of the bank has declared these loans as non-performing loans (NPL) and asked the bank to recover an amount of Rs 742.836 million from the companies.

According to the documents, Sandabar Textile Mills has been written off an amount of Rs 420.887 million, Murtaza Haseeb Textile Mills Rs 749.057 million out of total debts of Rs 845.227million, Textile Asia Ltd. Rs 408.081 million of total liability of Rs 539.479 million, Ravi Spinning Mils Rs 452.302 million out of Rs 581.928 million, Reshi Textile Mills Ltd Rs 854.167 million out of a liability of Rs 934.167 million, Jet Era Textile Mills Ltd. Rs 416.858 million out of Rs 514.045 million and Massive Attack Ltd an amount of Rs 115.599 million out of total liability of Rs 225.699 million.

The former Minister of State for Finance Omar Ayub had then strongly defended the policy of the government to introduce a scheme to help the borrowers settle their non-performing loans (NPLs) with the banks including the National Bank. He had stated that these NPLs were settled in the light of circular No.29 issued by the State Bank. Omer said a total of 50,414 borrowers availed the facility of settling their loans under this scheme, which he confirmed was introduced in October 2002 after general elections.

Omar said that these decisions were taken by the boards of these banks which were quit independent and were not under the influence of the government. He said actually these non-performing loans were becoming a burden on the banks so the decision was taken to rather settle them by offering a package.

Senator Enver Baig revealed the figure of loans written of up to year 2005. The Auditor General has reported figures up to July 2007; it means that amount involved in these favours and political bribes has risen from Rs 24.4 billion in 2005 (as disclosed by Senator Baig) to Rs 54 billion by July 2007 (as presented in the AGP report) showing an increase of about 150 percent.

Default of loans and their writing off was one of the reasons quoted by the policy makers for privatization of the nationalized commercial banks. However, the details given by the Opposition parliamentarian clearly show that the situation has hardly changed as privatized banks are at the top of the list in writing off loans. It is all the more painful to learn that majority of the defaulters are big wigs. It is quite obvious that their liabilities have been waived off under political or bureaucratic pressure. All this happening despite claims by the State Bank of Pakistan and governmental authorities to discontinue of this kind of corruption reflects poorly on the oft-repeated slogans of good governance. It also shows that there are no laws and rules for the big and influential while the poor is netted here and there.

The Senator had a point in saying that while these influential people have escaped with billions of rupees, the House Building Finance Corporation is publishing confiscation notices against small defaulters who obtained loans for construction of their homes and also paid a portion of the same as bribe to the officials concerned. In fact, there is need for comprehensive reforms in the banking sector because of its nontransparent working that goes against the interests of the people. The banks are virtually fleecing the general public through unjustifiably high service changes and abysmally low interest rates offered to the savers whereas they themselves are lending money on high rates.

There should be accountability of both the banks as well as those who have digested billions of rupees of different banks. The politicians" lust for loans has almost become part of Pakistani folklore. There has been list after list showing how they plundered the wealth of the people they were supposed to be protect. But none of these lists is ever complete, it will do well to come up with a law that takes the scandal out of a write off and stick by that law. Let us hope that Supreme Court intervention would make some difference.