Editorial

Easy come, easy go

The Supreme Court’s suo motu notice of loan write-offs worth Rs256 billion by banks is immensely significant.

Editorial September 30, 2010

Easy come, easy go

The Supreme Court’s suo motu notice of loan write-offs worth Rs256 billion by banks from 1971 to 2009 is immensely significant. As the court noted, loans have become a kind of joke — handed over easily and then written off, at least in the case of those with influence. In stark contrast, salaried and other middle class individuals who borrow from banks to build homes, buy cars or meet other small needs, report draconian measures taken to recover amounts that are miniscule when compared to the huge sums so blithely written off. The list of beneficiaries presented in court is likely to read like a timeline of political influence over various eras. The placing of the SBP in the dock for failing to regulate banks is also significant. Its argument about the waivers being granted under specific rules does not really hold weight.

For years, generous loan write-offs have acted as a key means to carry forward corruption. We need to end this. There is a requirement for tougher laws with few loopholes available for favours to be granted. The continuing case of the Punjab Bank and Hamesh Khan shows how discretionary powers can be used to hand out wads of notes. The central bank needs also to look into the process of appointing officials to key banking posts. Too often nepotism is involved. Transparent regulations need to be evolved.

The loan write-offs appear to involve both a failure to abide by rules and the absence of sufficient mechanisms to check wrong-doing. The SBP needs to put both aspects right. The task before it is not an easy one. But as the apex court has pointed out the matter is one of enormous significance. The facts that come forward during hearings may tell us a great deal about what is amiss. The challenge will be to remedy this by studying the means used in other countries to do this and adapting them to our own specific needs.

Published in The Express Tribune, October 1^st, 2010.

COMMENTS (1)

Meekal Ahmed | 14 years ago | Reply Very good Editorial. NPL's are another manifestation of a deeply corrupt society with no moral compass and no remorse. This is one reasons banks in Pakistan say spreads remain high (they have to provision). There is some truth to that but then why make such imprudent/political lending decisions in the first place. The SBP is also very much in the dock. They have greatly tarnished their image. How can they use moral suasion (or other means) to get banks to reduce spreads when they are a party to and hence responsible for the build-up of NPL's! In naming names, one hope's the SBP Governors and other senior executives dealing with supervision of banks will also be called to account. They cannot shirk responsibility. They are around. Get them before they leave the country.

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