Banks, DFIs asked to submit record of written-off loans: Supreme Court directive to SBP

The State Bank of Pakistan (SBP) will issue a new circular today (Friday) asking the banks/DFIs to submit entire record of loan transactions, ie, written off, remitted, reversed and/or waived off loans/advances/finances of Rs 2.5 million and above from 1971 to 1991 whereas Rs 25 million and above from 1992 onward.
All the details would be submitted to the commission, formed by the Supreme Court on March 14, 2011 with former judge of the apex court former Justice Jamshed Ali in the chair. A three-member bench comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Muhammad Sair Ali and Justice Ghulam Rabbani directed the SBP while hearing a suo motu case pertaining to Rs 256 billion written-off loans by commercial banks from 1971 to 2009.
The commission would examine all the written off loans cases whether these were allowed without validity and jurisdiction or in the pursuance of political considerations. The commission of former Justice Jamshed Ali will also analyse conditions under which the loans had been written off as well as determine authenticity of the waived off the loans.
On the directive of apex court, the SBP submitted draft of a new circular to the court on Thursday after developing consensus with all the parties involved in a suo motu case pertaining to Rs 256 billion written off loans by commercial banks for last forty years.
The bench observed that it would be difficult for a bank to hold responsible a banker for extending loan facility to borrowers on inadequate security, but an independent commission, headed by former Justice Jamshed Ali, will recommend steps on its legality or otherwise.
The bench was told that SBP will direct all the banks/DFIs to provide complete assistance and co-operation to facilitate commission as well as to comply with any general or special instructions of the Commission. Earlier, the Supreme Court directed representatives of all banks in the write-off loans case to draft guidelines for a commission looking into Rs 256 billion loans that have been extended and written off in the last 40 years.
It is pertinent to mention that SC took a suo motu notice in 2007 upon billion of rupees written-off loans by commercial banks which concluded after four years on the consent of issuance of the circular for 'Recovery of Written-off Loans and Advances from 1971 Onward.' The hearing was adjourned till today (Friday).