All Sindh and Balochistan Rice Millers, Traders Association: Govt picks up 50pc of outstanding loans

Official documents exclusively available to Business Recorder show that the Finance Ministry recently had informed the Economic Coordination Committee (ECC) of the Cabinet that the said Association had requested the Government of Pakistan to write off their loans for 2009-10, along with mark-up, as the flood 2010 had caused heavy losses to their business.

The ECC was also informed that total amount of these loans as on August 15, 2011 was Rs.513 million, which included loans of Rs.363.497 million against the traders of Balochistan. The banks had a provisioning of Rs.421 million against these loans. Approval of the ECC was sought for writing off the outstanding loans for which budgetary provision of Rs.513 million will be required.

During ensuing discussions, it was observed that the State Bank of Pakistan (SBP), in pursuance of section 338 of the Banking Companies Ordinance 1962, issued guidelines to write off of non-performing loans (NPLs) vide its circulars of July 16, 1999, October 15, 2002 and June 5, 2007, whereunder Board of Directors (BoDs) of the bank/DFI concerned are competent to write off outstanding loans.

As such, the Finance Division, which had sponsored the summary, was advised by the Cabinet Division to place the proposal before the respective Board of Directors of the Bank/DFI concerned. Finance Division conveyed that ECC Chairman had desired placing of the summary before the ECC. According y, it has been tabled. However, the Cabinet Division still holds that ECC is not the competent forum to approve the proposal to write off the loans. It was clarified that practically it will not be writing off of the loans, rather the Government of Pakistan would pick up these loans for the benefit of traders and rice millers.

It was also stated that similar matters/requests had been placed from time to time before the Prime Minister, but he did not agree to write off any loans. Another view was that it was a transaction between the banks and the rice millers/traders, and the Government should not involve itself, as it would set a bad precedent. It was opined that complete details regarding the prospective beneficiaries and the amount of their outstanding loans should also be provided to the ECC before taking a decision in the matter. It was suggested that due to floods, there is a need to extend some relief to the affectees after adopting necessary safeguards.

It was also pointed out that small farmers of Balochistan in particular and other provinces in general whose agricultural loans were insured through insurance companies were also facing numerous problems and there was need to resolve their problems also.

The Economic Coordination Committee of the Cabinet considered the summary dated 2nd January, 2012, submitted by Finance Division on "write-off of loans against All Sindh Balochistan Rice Millers and Traders" and decided that 50 percent of the outstanding loans, including mark-up, of rice millers and traders should be picked up by the Government of Pakistan, for which necessary budgetary provision may be made. All necessary safeguards should be adopted to ensure that only the affectees of flood of 2010 get benefit out of this dispensation and the process to be monitored by the State Bank of Pakistan.

The ECC further directed the Finance Secretary to look into the problems of small farmers with regard to their insured loans and take up the matter with concerned banks/insurance companies.-MUSHTAQ GHUMMAN