Editorial - Commission on loans - Wednesday, March 16, 2011

Source : http://thenews.com.pk/TodaysPrintDetail.aspx?ID=36345&Cat=8

The two-member Supreme Court bench hearing the case on the Rs 256 billion loan write-offs by commercial banks over the last four decades, has agreed to a suggestion by the counsel for the State Bank of Pakistan that a commission be set up to examine the details of the waivers given to various industries and the powerful individuals behind them. It has also asked the SBP to publish suggestions for the setting up of the commission, for which banks would be charged, so that any borrower having an objection to the process would be able to come forward and approach the court. We must hope the process produces results. The loan write-offs have cost the exchequer huge amounts of money and have been a chief means of promoting corrupt practices of all kinds in the country. What is striking is the fact, as noted by the court, that only four of the beneficiaries on the list have come forward after their names appeared on widely publicised lists. This indifference to the plight of the nation by some of its richest sons is in many ways quite terrifying. A country abandoned by its own people stands little chance of moving ahead in any decisive direction.

For the same reasons, as has indeed been noted during the hearings of the case, we need to put in place tougher measures to deal with the loaning process by banks. It is an irony that while ordinary citizens who seek to build a house, obtain a car, or meet other needs have to go through a long and laborious process and then face immense pressure – or even threats – if they are even a few days late in paying an installment, people many times wealthier than them can get away with massive write-offs that quite often have little to do with the state of their finances. Some of the borrowing that takes place is based around the knowledge that this will happen. Today, no doubt, even as these words are being read, more loaning agreements are being negotiated at banks, with those wielding power eager to acquire sums they have no intention of returning. The findings of the commission to be constituted to look into these matters will be interesting. They should also aid in the vital process of setting up controls to prevent write-offs in the future. The SBP will almost certainly need to tighten its controls and ensure banks follow a set of rules laid down to prevent malafide write-offs and benefit those who seek funding for all the wrong reasons. Through the years many such cases have come forward; some like the case involving the Bank of Punjab remain before the courts. The SC’s vigilant suo motu action in the loan write-off case should help prevent other similar acts of crime and protect the interests of both the citizens and the state.

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