SC seeks details on loans written off since 1971

ISLAMABAD: The Supreme Court on Tuesday questioned the authority and jurisdiction of State Bank of Pakistan (SBP) to waive off Rs256 billion bank loans during the period from 1971 to 2009 under Banking Companies Ordinance.

A three-member bench of the Supreme Court comprising Chief Justice Iftikhar Muhammad Chaudhry, Justice Tariq Parvez and Justice Ghulam Rabbani while hearing a suo motu case, directed SBP Counsel Syed Iqbal Haider to submit today (Wednesday) details of at least 10 cases from each year which met two conditions set in section 33B Banking Companies Ordinance and which were pre-requisites for writing off loans.

The chief justice said in his remarks that national wealth should be saved even if relations with any country are affected. He told the SBP counsel that the SC would check the bank’s authority and examine the circulars while keeping in view Article 25 of the constitution.

He said under section 33B of the Banking Companies Ordinance, the SBP could write off loans of borrowers under two conditions, i.e., security and rehabilitation of sick units. He said the SBP powers depended upon these two conditionalities. The court would examine constitutionality of the Circular 29 of the 2002 under which banks waived off loans out of public money, he added. Justice Iftikhar Chaudhry observed that the SBP policy appeared open ended with everybody explaining it to his or her own interests.

Justice Tariq Parvez remarked that the section 33B did not give you a blanket power. At the outset of proceedings, Abdul Hafeez Pirzada, appearing as amicus curae, stated that few days back a report was presented by the finance minister before a National Assembly committee showing another amount of Rs50 billion loans written off during last two years.

He said they were aware that the apex court was already seized with the matter but another huge amount was written off by the private banks. He said these banks were making tremendous profits but were not paying taxes to the government.

Iqbal Haider replied that private banks had done it and the SBP had not instructed them. The chief justice said that no bank could operate without obtaining license from the SBP.