Four Banks involve in write off loans worth Rs 842 million

SBP imposes a penalty on ZTBL, Bank Al-Habib, Bank Islami Pakistan, Habib Metropolitan Limited for violating policy guidelines

Aftab Ahmed

The State Bank of Pakistan (SBP) has imposed a penalty on Zarai Tarqiati Bank Limited (ZTBL) for writing off loans in violation of the Central bank’s policy guidelines.

The cabinet has sought a list of beneficiaries’ names whom banks have written off loans.

Sources told Newztodays.com that ZTBL had written off Rs 271.14 million loans in 28 cases. However, the State Bank of Pakistan (SBP) had raised concerns in two cases while inspecting the cases.

It had disagreed with two cases of write-off worth Rs. 249.5 million and Rs. 4.8 million of Zarai Tarqiati Bank Limited. SBP had advised the banks to take remedial actions to address the policy and control gaps that resulted in disagreement by SBP Inspection Teams. In case of specific violations of SBP regulations, the bank had imposed monetary penalties as per the standard schedule.

Four Banks write off Rs 842m loans

State Bank of Pakistan (SBP) had shared a Special Inspection Report on write-off cases of four banks.

Zarai Taraqiati Bank has written off Rs 271.14 million loans in 28 cases, Bank Al-Habib Rs 245.890 million, Bank Islami Pakistan Rs 690.161 million, and Habib Metropolitan Limited Rs 36.325 million.

Now, the finance division has proposed to send a matter to the parliamentary body on finance and revenue to look into it.

The Finance Division briefed the Cabinet that in terms of Section 25AA of Banking Companies Ordinance (BCO),1962 the State Bank of Pakistan (SBP) is required to prepare, and submit to the Federal Government, a special report every year on cases of write off of loans, mark-up and other dues.

It also required to submit a report on financial relief through rescheduling and restructuring of loans and subsidized loans provided by the banking companies, in which established banking practices or authorized procedures had been departed from with a view to causing wrongful loss to the bank or conferring wrongful gain on any constituent or such departure had caused wrongful loss to the bank or conferred wrongful gain on any constituent.

If the matters raised in the report relate to the public interest, the Federal Government may submit the report, or such part of it as relates to the public interest, to Parliament or to the Standing Committee of a House of Parliament dealing with Finance.

It inserted Section 25AA of BCO, 1962 in 1990 at a time when the government-owned major banks.

However, the government had privatized most of the banks. Previously, the reports SBP submitted related to private banks/companies, and there was no direct public interest.

SBP had submitted a special Inspection Report on Write-off cases for information of Federal Cabinet/Federal Government in terms of Section 25AA of BCO, 1962 with the proposal that the subject report relating to two cases of ZTBL is of public interest. Therefore, it suggested placing a matter before the National Assembly’s Standing Committee on Finance, Revenue, and Economic Affairs.

During the discussion, the members complained that the annexures carrying details of write-off cases were not legible and sought full details with names of write-off beneficiaries. They observed that Section 25AA, of Banking Companies Ordinance (BCO), 1962, does not distinguish between privately owned and banks governmetn owned, hence selective application of the said section is not in accordance with the prevalent law.

They also suggested amending BCO, 1962 may appropriately as the government had prioritized most of the banks. Therefore, it did not require to submit information pertaining to the write-off cases of private banks to the Cabinet.

As a counterpoint, they further suggested looking into all aspects while amending the said law as, at the time of enactment, most banks were in the private sector as is the case at present.

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However, it will submit cases of write-off cases of those private banks before the government privatized them to present to the Cabinet and thereafter to the National Assembly’s Standing Committee on Finance, Revenue, and Economic Affairs.

The Cabinet considered the summary titled ‘Special Inspection Report on Write-off Cases of Banks’ dated 1st June 2021, and deferred the case with the direction to resubmit, with legible annexures and in accordance with Section 25AA of the Ordinance.