ZTBL audit exposes Rs10b default

AGP flags poor scrutiny, fake borrowers plague credit portfolio at agri-bank

KARACHI:

The Zarai Taraqiati Bank Limited (ZTBL), the country's leading agricultural financing institution, has come under serious scrutiny after the Auditor General of Pakistan (AGP) unearthed massive financial irregularities, loan defaults, and governance failures amounting to over Rs10.2 billion during the financial year 2023-24.

The revelations, detailed in the Consolidated Audit Report of the Federal Government for FY2024-25, expose deep-rooted weaknesses in credit management, recovery systems, and oversight mechanisms within the state-run bank mandated to uplift Pakistan's farming sector. According to the report, ZTBL's management failed to recover billions of rupees disbursed under various agricultural credit schemes, resulting in the accumulation of non-performing loans and losses to the national exchequer. Out of the total Rs10.2 billion in identified irregularities, Rs6.8 billion pertained to non-recovery of loans from borrowers who defaulted despite having mortgaged assets or pledged guarantees. Audit officials observed that in many cases, the bank neither initiated timely recovery proceedings nor enforced collateral, allowing defaulters to evade repayment. Another Rs1.26 billion was linked to irregular loan renewals and unauthorised rescheduling, where defaulters were granted fresh financing without reappraisal or board approval, actions that directly contravened the State Bank of Pakistan's (SBP) prudential regulations and the Public Sector Companies (Corporate Governance) Rules of 2013.

The AGP also flagged serious mismanagement in government-subsidised agricultural lending initiatives, including the Kisan Package and Kissan Dost Scheme, where loans worth Rs923 million were distributed without verification of land ownership, project feasibility, or even the authenticity of borrower identities. Several cases involved incomplete documentation or the use of fake Computerised National Identity Cards (CNICs), suggesting potential misuse of public funds and deliberate manipulation of beneficiary lists. In addition, the report noted unjustified loan write-offs and waivers totalling Rs563 million, granted without proper documentation or approval from the board of directors, in what auditors described as "arbitrary decisions taken in disregard of financial prudence."

Auditors further uncovered unverified advances and missing documentation amounting to Rs341 million, citing the absence of loan files, collateral papers, and risk assessment records in several regional branches, particularly in Punjab and Sindh. Operational irregularities worth Rs290 million were also observed in procurement, vehicle purchases, and branch renovations carried out without transparent bidding processes or approval from the competent authority. Collectively, these findings paint a grim picture of weak internal control, ineffective risk management, and poor governance at an institution responsible for channelling billions in concessional credit to Pakistan's rural economy.

The AGP's report stated that the ZTBL management "did not exercise due diligence in assessing borrower creditworthiness, resulting in the conversion of performing loans into non-performing categories." It further noted that the bank's Agricultural Credit and Risk Management divisions failed to ensure proper monitoring of loan performance, with regional offices submitting delayed or inaccurate recovery data. The internal audit wing, which is mandated to flag discrepancies in real time, was also found to have ignored early warning indicators of default. Moreover, the Board of Directors was criticised for its passive role in addressing recurring governance lapses. Several internal audit reports highlighting serious irregularities were either ignored or acted upon with delay, while management responses to the Auditor General's preliminary observations remained incomplete or unsatisfactory.

The report also revealed that the Departmental Accounts Committee (DAC), which oversees the implementation of audit recommendations, had not convened meetings on ZTBL's audit paras despite multiple reminders issued between November 2024 and January 2025. The AGP warned that the continued neglect of audit recommendations and recovery failures posed "a significant risk to the sustainability of agricultural credit operations" and called for immediate corrective action.

The audit recommended a high-level investigation to identify officers responsible for poor loan scrutiny, unauthorised renewals, and wilful negligence in recovery. It further advised the initiation of legal and recovery proceedings against defaulting borrowers and their guarantors, while urging the Ministry of Finance to ensure stricter enforcement of corporate governance and credit risk standards. The report emphasised that ZTBL must revamp its internal audit and compliance frameworks, improve documentation systems, and strengthen board-level oversight to restore financial discipline and public confidence in the institution.

ZTBL, formerly known as the Agricultural Development Bank of Pakistan, has long been considered the backbone of rural credit operations, with a nationwide network of over 500 branches serving small and medium farmers. However, the bank has faced recurring criticism for its mounting non-performing loans, politically influenced lending practices, and weak accountability mechanisms. Despite several restructuring efforts, including capital injections and recovery drives in recent years, ZTBL continues to struggle with chronic inefficiencies and governance challenges that have eroded its credibility.