ISLAMABAD: The Supreme Court criticised the State Bank of Pakistan and other financial institutions on Wednesday for protecting powerful debtors with political influence, instead of recovering the money borrowed by them.
A three-judge bench comprising Chief Justice Iftikhar Mohammad Chaudhry, Justice Tariq Parvez and Justice Ghulam Rabbani observed that the circulars used to write off huge loans appeared to be contrary to Section 33B of the Banking Companies Ordinance (BCO), 1962, which laid down the criteria for waiving a loan.
The bench had acted on media reports that the SBP quietly allowed commercial banks to write off Rs54.6 billion loans under a scheme introduced by former president Pervez Musharraf.
Describing the matter as a test case for the SBP, the court ordered it to enquire financial institutions about pending proceedings against loan defaulters under Section 8 of the BCO. It observed that the SBP had failed to monitor commercial banks by making banking circulars a joke.
The chief justice said the defaulters should be encouraged to bring back the money parked in foreign banks to Pakistani banks and settle the principal amount.
He offered to constitute a larger bench to hand down a binding judgment requiring the defaulters to pay back the money and, in return, they would not be asked any question provided the SBP showed willingness to get such an order.
Syed Iqbal Haider, the counsel for the SBP, requested the court to constitute a commission to investigate how loans of a political nature had been waived in a whimsical manner.